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s  pronging  to  this 
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LAW  LIBR 

kras  colli 


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CASES 


ON 


THE  LAW  OF  BILLS 
AND  NOTES 

SELECTED  FROM  DECISIONS  OF 

ENGLISH  AND  AlvteCAN  COURTS 
HOWrAED  'L  SMITH     " 

PROFESSOR  OF  LAW  IN  THE  UNIVERSITY  OF  WISCONSIN 
AND 

WM.  UNDERHILL  MOORE 

PROFESSOR  OP  LAW  IN  THE  UNIVERSITY  OF  WISCONSIN 


AMERICAN  CASEBOOK  SERIES 
JAMES  BROWN  SCOTT 

GENERAL  EDITOR 


ST.    PAUL 

WEST  PUBLISHING  COMPANY 
1910 


'i":'        ■   COPTBIQHT,     1910 
,   ■       BY 

WEST  PUBll/lSHINiG  COMPANY 
rSM.&  M.B.&  N.) 


19/0 


THE  AMERICAN  CASEBOOK 
SERIES 


For  years  past  the  science  of  law  has  been  taught  by  lectures,  the 
use  of  text-books  and  more  recently  by  the  detailed  study,  in  the 
class-room,  of  selected  cases. 

Each  method  has  its  advocates,  but  it  is  generally  agreed  that  the 
lecture  system  should  be  discarded  because  in  it  the  lecturer  does 
the  work  and  the  student  is  either  a  willing  receptacle  or  offers  a 
passive  resistance.  It  is  not  too  much  to  say  that  the  lecture  system 
is  doomed. 

Instruction  by  the  means  of  text-books  as  a  supplement  or  sub- 
stitute for  the  formal  lecture  has  made  its  formal  entry  into  the  educa- 
tional world  and  obtains  widely ;  but  the  system  is  faulty  and  must  pass 
away  as  the  exclusive  means  of  studying  and  teaching  law.  It  is  an 
improvement  on  the  formal  lecture  in  that  the  student  works,  but  if  it 
cannot  be  said  that  he  works  to  no  purpose,  it  is  a  fact  that  he  works 
from  the  wrong  end.  The  rule  is  learned  without  the  reason,  or  both 
rule  and  reason  are  stated  in  the  abstract  as  the  resultant  rather  than 
as  the  process.  If  we  forget  the  rule  we  cannot  solve  the  problem;  if 
we  have  learned  to  solve  the  problem  it  is  a  simple  matter  to  formulate 
a  rule  of  our  own.  The  text-book  method  may  strengthen  the  mem- 
ory; it  may  not  train  the  mind,  nor  does  it  necessarily  strengthen  it. 
A  text,  if  it  be  short,  is  at  best  a  summary,  and  a  summary  presup- 
poses previous  knowledge. 

If,  however,  law  be  considered  as  a  science  rather  than  a  collection 
of  arbitrary  rules  and  regulations,  it  follows  that  it  should  be  studied 
as  a  science.  Thus  to  state  the  problem  is  to  solve  it ;  the  laboratory 
method  has  displaced  the  lecture,  and  the  text  yields  to  the  actual 
experiment.  The  law  reports  are  in  more  senses  than  one  books  of 
experiments,  and,  by  studying  the  actual  case,  the  student  co-operates 
with  the  judge  and  works  out  the  conclusion  however  complicated 
the  facts  or  the  principles  involved.  A  study  of  cases  arranged  his- 
torically develops  the  knowledge  of  the  law,  and  each  case  is  seen  to 
be  not  an  isolated  fact  but  a  necessary  link  in  the  chain  of  develop- 
ment. The  study  of  the  case  is  clearly  the  most  practical  method, 
for  the  student  already  does  in  his  undergraduate  days  what  he  must 
do  all  his  life;  it  is  curiously  the  most  theoretical  and  the  most  prac- 
tical. For  a  discussion  of  the  case  in  all  its  parts  develops  analysis, 
the  comparison  of   many   cases   establishes  a   general  principle,   and 

(iii) 


735982 


IV  PREFACE. 

the  arrangement  and  classification  of  principles  dealing  with  a  sub- 
ject make  the  law  on  that  subject. 

In  this  way  training  and  knowledge,  the  means  and  the  end  of 
legal  study,  go  hand  and  hand. 

The  obvious  advantages  of  the  study  of  law  by  means  of  selected 
cases  make  its  universal  adoption  a  mere  question  of  time. 

The  only  serious  objections  made  to  the  case  method  are  that  it  takes 
too  much  time  to  give  a  student  the  requisite  knowledge  of  the  sub- 
ject in  this  way  and  that  the  system  loses  sight  of  the  difference  be- 
tween the  preparation  of  the  student  and  the  lifelong  training  of  the 
lawyer.  Many  collections  of  cases  seem  open  to  these  objections, 
for  they  are  so  bulky  that  it  is  impossible  to  cover  a  particular  sub- 
ject with  them  in  the  time  ordinarily  allotted  to  it  in  the  class.  In 
this  way  the  student  discusses  only  a  part  of  a  subject.  His  knowl- 
edge is  thorough  as  far  as  it  goes,  but  it  is  incomplete  and  frag- 
mentary. The  knowledge  of  the  subject  as  a  whole  is  deliberately 
sacrificed  to  training  in  a  part  of  the  subject. 

It  would  seem  axiomatic  that  the  size  of  the  casebook  should  cor- 
respond in  general  to  the  amount  of  time  at  the  disposal  of  instructor 
and  student.  As  the  time  element  is,  in  most  cases,  a  nonexpansive 
quantity,  it  necessarily  follows  that,  if  only  a  half  to  two-thirds  of  the 
case* -in  the  present  collections  can  be  discussed  in  class,  the  pres- 
ent casebooks  are  a  third  to  a  half  too  long.  From  a  purely  practical 
and  economic  standpoint  it  is  a  mistake  to  ask  students  to  pay  for 
1,200  pages  when  they  can  only  use  600,  and  it  must  be  remembered 
that  in  many  schools,  and  with  many  students  in  all  schools,  the  mat- 
ter of  the  cost  of  casebooks  is  important.  Therefore,  for  purely 
practical  reasons,  it  is  believed  that  there  is  a  demand  for  casebooks 
physically  adapted  and  intended  for  use  as  a  whole  in  the  class-room. 

But  aside  from  this,  as  has  been  said,  the  existing  plan  sacrifices 
knowledge  to  training.  It  is  not  denied  that  training  is  important, 
nor  that  for  a  law  student,  considering  the  small  amount  of  actual 
knowledge  the  school  can  hope  to  give  him  in  comparison  with  the 
vast  and  daily  growing  body  of  the  law,  it  is  more  important  than 
mere  knowledge.  It  is,  however,  confidently  asserted  that  knowledge 
is,  after  all,  not  unimportant,  and  that,  in  the  inevitable  compromise 
between  training  and  knowledge,  the  present  casebooks  not  only  de- 
vote too  little  attention  relatively  to  the  inculcation  of  knowledge, 
but  that  they  sacrifice  unnecessarily  knowledge  to  training.  It  is  be- 
lieved that  a  greater  effort  should  be  made  to  cover  the  general  prin- 
ciples of  a  given  subject  in  the  time  allotted,  even  at  the  expense  of 
a  considerable  sacrifice  of  detail.  But  in  this  proposed  readjustment 
of  the  means  to  the  end,  the  fundamental  fact  cannot  be  overlooked 
that  law  is  a  developing  science  and  that  its  present  can  only  be  un- 
derstood through  the  medium  of  its  past.  It  is  recognized  as  im- 
perative that  a  sufficient  number  of  cases  be  given  under  each  topic 


PREFACE.  V 

treated  to  afford  a  basis  for  comparison  and  discrimination ;  to  show 
the  development  of  the  law  of  the  particular  topic  under  discussion ; 
and  to  afford  the  mental  training  for  which  the  case  system  neces- 
sarily stands.  To  take  a  familiar  illustration:  If  it  is  proposed  to 
include  in  a  casebook  on  Criminal  Law  one  case  on  abortion,  one  on 
libel,  two  on  perjury,  one  on  larceny  from  an  office,  and  if  in  order  to 
do  this  it  is  necessary  to  limit  the  number  of  cases  on  specific  intent  to 
such  a  degree  as  to  leave  too  few  on  this  topic  to  develop  it  fully 
and  to  furnish  the  student  with  training,  then  the  subjects  of  abor- 
tion, libel,  perjury,  and  larceny  from  an  office  should  be  wholly  omit- 
ted. The  student  must  needs  acquire  an  adequate  knowledge  of  these 
subjects,  but  the  training  already  had  in  the  underlying  principles  of 
criminal  law  will  render  the  acquisition  of  this  knowledge  compara- 
tively easy.  The  exercise  of  a  wise  discretion  would  treat  fundamen- 
tals thoroughly :  principle  should  not  yield  to  detail. 

Impressed  by  the  excellence  of  the  case  system  as  a  means  of  legal 
education,  but  convinced  that  no  satisfactory  adjustment  of  the  con- 
flict between  training  and  knowledge  under  existing  time  restrictions 
has  yet  been  found,  the  General  Editor  takes  pleasure  in  announcing 
a  series  of  scholarly  casebooks,  prepared  with  special  reference  to 
the  needs  and  limitations  of  the  class-room,  on  the  fundamental  sub- 
jects of  legal  education,  which,  through  a  judicious  rearrangement 
of  emphasis,  shall  provide  adequate  training  combined  with  a  thor- 
ough knowledge  of  the  general  principles  of  the  subject.  The  collec- 
tion will  develop  the  law  historically  and  scientifically;  English  cases 
will  give  the  origin  and  development  of  the  law  in  England;  Ameri- 
can cases  will  trace  its  expansion  and  modification  in  America;  notes 
and  annotations  will  suggest  phases  omitted  in  the  printed  case. 
Cumulative  references  will  be  avoided,  for  the  footnote  may  not  hope 
to  rival  the  digest. 

The  law  will  thus  be  presented  as  an  organic  growth,  and  the  neces- 
sary connection  between  the  past  and  the  present  will  be  obvious. 

The  importance  and  difficulty  of  the  subject  as  well  as  the  time  that 
can  properly  be  devoted  to  it  will  be  carefully  considered  so  that  each 
book  may  be  completed  within  the  time  allotted  to  the  particular  sub- 
ject. 

It  is  equally  obvious  that  somie  subjects  are  treated  at  too  great 
length,  and  that  a  less  important  subject  demands  briefer  treatment. 
A  small  book  for  a  small  subject. 

In  this  way  it  will  be  alike  possible  for  teacher  and  class  to  com- 
plete each  book  instead  of  skimming  it  or  neglecting  whole  sections; 
and  more  subjects  may  be  elected  by  the  student  if  presented  in  short- 
er form  based  upon  the  relative  importance  of  the  subject  and  the 
time  allotted  to  its  mastery. 

Training  and  knowledge  go  hand  in  hand,  and  Training  and  Knowl- 
edge are  the  keynotes  of  the  series. 


VI  PREFACE, 

If  it  be  granted  that  all,  or  nearly  all,  the  studies  required  for  ad- 
mission to  the  bar  should  be  studied  in  course  by  every  student — and 
the  i'oundness  of  this  contention  can  hardly  be  seriously  doubted — it 
follows  necessarily  that  the  preparation  and  publication  of  collections 
of  cases  exactly  adapted  to  the  purpose  would  be  a  genuine  and  by 
no  means  unimportant  service  to  the  cause  of  legal  education.  And 
this  result  can  best  be  obtained  by  the  preparation  of  a  systematic 
series  of  casebooks  constructed  upon  a  uniform  plan  under  the  super- 
vision of  an  editor  in  chief. 

For  the  basis  of  calculation  the  hour  has  been  taken  as  the  unit.  The 
General  Editor's  personal  experience,  supplemented  by  the  experience 
of  others  in  the  class-room,  leads  to  the  belief  that  approximately  a 
book  of  400  pages  may  be  covered  by  the  average  student  in  half  a 
year  of  two  hours  a  week;  that  a  book  of  600  pages  may  be  discussed 
in  class  in  thr^e  hours  for  half  a  year ;  that  a  book  of  800  pages  may 
be  completed  by  the  student  in  two  hours  a  week  throughout  the  year ; 
and  a  class  may  reasonably  hope  to  master  a  volume  of  1,000  pages 
in  a  year  of  three  hours  a  week.  The  general  rule  will  be  subject  to 
some  modifications  in  connection  with  particular  topics  on  due  con- 
sideration of  their  relative  importance  and  difficulty,  and  the  time 
ordinarily  allotted  to  them  in  the  law  school  curriculum. 

The  following  subjects  are  deemed  essential  in  that  a  knowledge  of 
them  (with  the  exception  of  International  Law  and  General  Juris- 
prudence) is  universally  required  for  admission  to  the  bar: 

Administrative  Law.  Insurance. 

Agency.  International  Law. 

Bills  and  Notes.  Jurisprudence. 

Carriers.  Mortgages. 

Contracts.  Partnership. 

Corporations.  -  Personal  Property,  including 

Constitutional  Law.  the  Law  of  Bailment. 

Criminal  Law.  -d     i  -d  *.     I  ^^*  "'^^^'■• 

n  .    .     ,  -n         1  Real  Property.  ]  2d     " 

Crimmal  Procedure.  1 3d 

Common-Law  Pleading.  Public  Corporations. 

Conflict  of  Laws.  Quasi  Contracts. 

Code  Pleading.  ,  Sales. 

Damages.  Suretyship. 

Domestic  Relations,  Torts. 

Equity.  Tr.T^ts. 

Equity  Pleading.  Wills  and  Administration. 

Evidence. 

International  Law  is  included  in  the  list  of  essentials  from  its  in- 
trinsic importance  in  our  system  of  law.  As  its  principles  are  simple 
in  comparison  with  municipal  law,  as  their  application  is  less  technical, 


PREFACE.  Vll 

and  as  the  cases  are  generally  interesting,  it  is  thought  that  the  book 
may  be  larger  than  otherwise  would  be  the  case. 

As  an  introduction  to  the  series  a  book  of  Selections  on  General 
Jurisprudence  of  about  500  pages  is  deemed  essential  to  completeness. 

The  preparation  of  the  casebooks  has  been  intrusted  to  experienced 
and  well-known  teachers  of  the  various  subjects  included,  so  that  the 
experience  of  the  class-room  and  the  needs  of  the  students  will  fur- 
nish a  sound  basis  of  selection. 

While  a  further  list  is  contemplated  of  usual  but  relatively  less  im- 
portant subjects  as  tested  by  the  requirements  for  admission  to  the 
bar,  no  announcement  of  them  is  made  at  present. 

The  following  gentlemen  of  standing  and  repute  in  the  profession 
are  at  present  actively  engaged  in  the  preparation  of  the  various  case- 
books on  the  indicated  subjects: 

George  W.  Kirchwey,  Dean  of  the  Columbia  University,  School  of 
Law.    Subject,  Real  Property. 

Nathan  Abbott,  Professor  of  Law,  Columbia  University.  (Formerly 
Dean  of  the  Stanford  University  Law  School.)  Subject,  Per- 
sonal Property. 

Frank  Irvine,  Dean  of  the  Cornell  University  School  of  Law.  Siib- 
ject.  Evidence. 

Harry  S.  Richards,  Dean  of  the  University  of  Wisconsin  School  of 
Law.    Subject,  Corporations. 

James  Parker  Hall,  Dean  of  the  University  of  Chicago  School  of  Law. 
Subject,  Constitutional  Law. 

William  R.  Vance,  Dean  of  the  George  Washington  University  Law 
School.     Subject,  Insurance. 

Charles  M.  Hepburn,  Professor  of  Law,  University  of  Indiana.  Sub- 
ject, Torts. 

William  E.  Mikell,  Professor  of  Law,  University  of  Pennsylvania. 
Subjects,  Criminal  Laiv  and  Criminal  Procedure. 

George  P.  Costigan,  Jr.,  Professor  of  Law,  Northwestern  University 
Law  School.    Subject,  Wills  and  Administration. 

Floyd  R.  Mechem,  Professor  of  Law,  Chicago  University.  Subject, 
Damages.     (Co-author  with  Barry  Gilbert.) 

Barry  Gilbert,  Professor  of  Law,  University  of  Illinois.  Subject, 
Damages.     (Co-author  with  Floyd  R.  Mechem.) 

Thaddeus  D.  Kenneson,  Professor  of  Law,  University  of  New  York 
Subject,  Trusts. 

Charles  Thaddeus  Terry,  Professor  of  Law,  Columbia  University. 
Subject,  Contracts. 


Vlll  PREFACE. 

Albert  M.  Kales,  Professor  of  Law,  Northwestern  University.  Sub- 
ject, Persons. 

Edwin  C.  Goddard,  Professor  of  Law,  University  of  Michigan.  Sub- 
ject, Agency. 

Howard  L.  Smith,  Professor  of  Law,  University  of  Wisconsin.  Sub- 
ject, Bills  and  Notes.    (Co-author  with  Wm.  Underhill  IMoore.) 

Wm.  Underhill  Moore,  Professor  of  Law,  University  of  Wisconsin. 
Subject,  Bills  and  Notes.    (Co-author  with  Howard  L.  Smith.) 

Edward  S.  Thurston,  Professor  of  Law,  George  Washington  Univer- 
sity.   Subject,  Quasi  Contracts. 

Crawford  D.  Hening,  Professor  of  Law,  University  of  Pennsylvania. 
Subject,  Suretyship. 

Clarke  B.  Whittier,  Professor  of  Law,  University  of  Chicago.  Sub- 
ject, Pleading. 

Eugene  A.  Gihnore,  Professor  of  Law,  University  of  Wisconsin. 
Subject,  Partnership. 

Joshua  R.  Clark,  Jr.,  Assistant  Professor  of  Law,  George  Washington 
University.    Subject,  Mortgages. 

Ernst  Freund,  Professor  of  Law,  University  of  Chicago.  Subject, 
Administrative  Law. 

Frederick  Green,  Professor  of  Law,  University  of  Illinois.  Subject, 
Carriers. 

Ernest  G.  Lorenzen,  Professor  of  Law,  George  Washington  Univer- 
sity.   Subject,  Conflict  of  Lazvs. 

William  C  Dennis,  Professor  of  Law,  George  Washington  University. 
Subject,  Public  Corporations. 

James  Brown  Scott,  Professor  of  Law,  George  Washington  Univer- 
sity ;  formerly  Professor  of  Law,  Columbia  University,  New 
York  City.  Subjects,  International  Law ;  General  Jurisprudence ; 
Equity. 

James  Brown  Scott, 
Washington,  D.  C,  Decembeo*,  1910.  General  Editor. 


Following  are  the  books  of  the  Series  now  published,  or  in  press : 

Administrative  Law  Damages 

Bills  and  Notes  Partnership 

Carriers  Persona 

Conflict  of  Laws  Suretyship 

Criminal  Law  Trusts 

Criminal  Procedure  Wills  and  Administration 


TABLE  OF  CONTENTS 


INTRODUCTION. 

Section  Page 

Neqotiabilitx   1 


PART  I. 
Form  and  Inception. 

CHAPTER  I. 
Form  of  Bill  and  of  Note. 

1.  Negotiable  and  Nonnegotiable  Bills  and  Notes — Words  of  Negotiability  20 

2.  Writing 36 

3.  The  Promise 38 

4.  The  Order 49 

5.  Character  of  the  Order  or  Promise 55 

I.     As  to  Conditions 55 

n.     As  to  Certainty 74 

III.     As  to  Medium  of  Payment 109 

6.  Parties 122 

I.     Maker  and  Drawer 122 

II.     Payee  143 

in.     Drawee 171 

CHAPTER  II. 

Acceptance. 

1.  General  and  Qualified  Acceptances ISO 

2.  Form  of  Acceptance 187 

3.  Constructive  Acceptance 203 

CHAPTER  III. 
Delivery 214 

CHAPTER  IV. 
CONSIDEEATION    254 


PART  II. 
Negotiation. 

CHAPTER  I. 

Transfer. 

1.     Who  may  Transfer 276 

.2.     Form  of  Indorsement 283 

Sm.&  M.B.&  N.  (ix) 


X  TABLE   OF  CONTENTS. 

Section  Pag» 

3.  Transfer  by   Indorsemont 297 

I.     Blank  and  Special  Indorsements 297 

II.     Restrictive  Indorsement 305 

III.     Qualified  Indorsement .' : .  316 

IV.     Conditional  Indorsement 317 

4.  Transfer  by  Delivery 318 

CHAPTER  II. 

Holder  in  Due  Course. 

1.  Value  341 

2.  Notice 380 

3.  Equities 424 


PART  III. 
Liability  of  Parties. 

CHAPTER  I. 
Maker  and  Acceptor 453 

CHAPTER  II. 

Drawer  and  Indorser. 

1.  In  General 510 

2.  Presentment  for  Acceptance 539 

3.  Presentment  for  Payment 553 

I.     Day  553 

II.     Hour 584 

IIT.     Place 589 

4.  Protest 000 

5.  Notice  of  Dishonor G03 

6.  When  Presentment  and  Notice  of  Dishonor  Unnecessary 626 

CHAPTER  III. 
Tbansferbob 639 


PART  IV. 
Discharge. 

1.  Payment  and  Renunciation 651 

2.  Cancellation     689 

3.  Alteration    694 


APPENDIX. 
Negotiable  Instruments  Law 711 


TABLE  OF  CASES 


[cases  cited  in  footnotes  are  indicated  by  italics,     where  small  capitals 
abe  used,  the  case  is  eeferked  to  in  tue  text] 


Page 

Adams  v.  Kinrj 163 

Alexander  &  Co.  v.  Hazelrigg.  . . .  447 

Allaire  v.  Hartshorne 366 

Allen  V.  Sea,  Fire  &  Life  Assur. 

Co 176 

Allison  V.  Eollenlicak 58 

Almy  V.  Winslow 177 

American    Exch.     Nat.     Bank    v. 

American  Hotel   Victoria  Co.. .  618 

Anonymous    2S,'> 

Atlas  Bank  v.  Doyle 374 

Attenborough  v.  Mackenzie 65!) 

Awde  V.  Dixon 247 

, Ayrey  v.  Feamsides 74 

Bacon  v.  Burnham 532 

Bailey  v.  Bidwell 438 

Baker  v.  Walker 261 

Bank  of  England  v.  Vagliano 

Bros 506 

Bank    of    Metropolis    v.     New 

England  Bank 307,  308 

Bank  of  Orleans  v.  Wliittemore. .  591 
Bank  of  Sandusky  v.  Scoville . .  .  344 
Bank  of  Syracuse  v.  Hollister...   586 

Bank  of  Troy  v.  Topping 262 

Bank  of  Utica  v.  Bender 614 

Bank  of  Utica  v.  Davidson....  614 

Bank  of  Utica  v.  Phillips 613 

Bank  of  Wilmington  v.  Houston,.  284 

Barough  v.  White 383 

Barron  v.  Vandvcrt 163 

Barrow  v.  Bispliam 3 

Barton  v.  Baker 626 

Bavins  v.  London,  etc..  Bank....     73 

Baxeudale  v.   Bennett 241 

Baxter  v.  Little 426 

P.ay  V.  Coddington 341 

Bicknall  &  Skinner  v.  Waterman  639 

Bishop  V.   Hay  ward 510 

Bitzer  v.  Wagar 27 

Black  V.  Bank 373 

Black  V.  Ward 115 


Page 
Blaine,  Gould  &  Short  v.  Bourne 

&   Co 307 

Blanckenhagen  V.  Blundell 154 

Blenn  v.   Lyford 680 

Bloomingdale  v.  Bank 27 

Boehm  v.  Garcias 180 

Bogue  v.  Melick 534 

Bolles  V.  Stearns 278 

Boot  &  Bentley  v.  Franklin 589 

Borne  v.  First  Nat.  Bank 549 

Borough  of  Montvale  v.  Bank...  215 
Boston  Steel  &  Iron  Co.  v.  Steuer  248 

Boicers  v.  Hurd 254 

Boylston  v.  Greene 676 

Bradley  v.  Davis 61S 

Braincrd  v.  Railroad  Co 33 

Bray  v.  Hadwen 604 

Brewster  v.  McCardell 384 

Bright  V.  Furrier 539 

Bromage  v.  Lloyd 297 

Brooklyn  City  &  N.  R.  Co.  v.  Na- 
tional Bank  of  the  Republic. . .  355 

Brooks  V.  Blauey 595 

Brown,  In  re 31 

Brown  v.  Davies 380 

Brown  v.  Harraden 553 

Burbridge  v.   Manners 604,  651 

Burch  V.  Daniel •  299 

Burson  v.  Huntington 2]  6 

Caldwell  v.  Oassidy 457 

Callow  v.  Lawrence 684 

Campbell  v.  Pettengill 18:3 

Canal  Bank  v.  Bank  of  Albany. ,  489 

Carlos  V.  Fancourt 56 

Carrier  v.    Sears 429 

Caulkius  v.  Whisler 240 

Central   Trust   Co.   v.   First   Nat. 

Bank   288 

Ciieever  v.  Pittsburgh  R.  Co...  409 
Chicago    Heights   Lumber    Co.    v. 

]\Iiller 20'£ 

Clark  V.  Pease  43(> 


SM.&  M.B.&  N. 


(xi) 


Xll 


TABLE  OF  CASliS. 


Page 

Clark  V.  Walkor    2as 

Clarke  v.  Johnson     2:21 

Gierke  v.  Martin 21 

Glutton  V.  George  Attenborough  & 

Son  481 

Coggill  V.  American   Exch.   Bank  404 
CocjGiLL  V.  American  Excu.  Bank  507 

Collins  v.  Martin 343 

Columbian  Banking  Go.  v.  Bowen 

576,  5S9 

Commercial  Bank  v.  French 1G5 

Commercial    Bank    v.    Norton    & 

Fox 259 

Commercial  Bank  of  Kentucky  v. 

Tamum  602 

Commercial  Bank  of  Kentucky  v. 

William  H.  BarkFdale  &  Co....  600 
Commercial  Nat.  Bank  v.  Zimmer- 
man      579 

Cooke  V.  Colehan S3 

Cooke  V.  Horn 105 

Goolidge  v.  Payson 190 

Cowan  V.  Hallack 44 

Creamer  v.  Perry 628 

Crnchley  v.  Clarance 244 

Currie  v.  Misa 350 

Dame  v.  Baldwin 8 

Dana  v.  Sawyer 585 

Deahy  v.  Choqnet 536 

De  Silva  v.  Fuller 051 

Dicken  v.  Hall 616 

Dickinson  v.   Marsh 208 

Dike  v.  Drexel 409 

DiMON  V.  Keert 675 

Dollfus  V.  Frosch 302 

Douglass  V.  Matting 223 

Downey  v.  O'Iveefe 538 

Drayton  v.  Dale 466 

Drum  V.  Drum 697 

Drummond  v.  Drummond 123 

DuGAN  V.  United  States 303 

Dunavan  v.  Flynn 206 

Dunbar  Co.  v.  Martin 140 

Duncan  v.  Scott 439 

Dunham  v.  Grant 163 

Eakin  v.  Bank 197 

East  V.  Essington 283 

Easterly  v.  Barber 512 

Easton  v.  Pratchett 256 

Eckert  v.  Cameron 401 

Edie  &  Laird  v.  East  India  Go 305 

Epler  V.  Funk 316 


Page 
Equitable   Mabtne   Ins.    Co.    v. 

Adams  538 

F^reskine  v.  Murray 187 

Essex  Co.  V.  Edmauds 523 

Estabrook  v.  Smith 279 

European  Bank,  In  re 441 

Evans  V.  Freeman    292 

Evans  v.  Underwood    83 

EvEBTSON  V,  Miles 645 

Fake  v.  Ssmn 643 

Farmers'  Nat.  Bank  v.  Venner...  459 

Farris  v.  Wells 336 

Far  Rockaway  Bank  v.  Norton..  535 

Fearing  v.  Clark 214 

Ferns  v.  Harrison 647 

Fillebrown  v.  Haywai'd 413 

Firftt  Bank  v.  Bank 112 

First  Bank  v.  Hall 107 

First  Bank  v.  Slette 112 

Fii-st  yat.  Bank  v.  Butterij 89 

First  Nat.  Bank  v.  Leach 547 

First  Nat.  Bank  v.    Lightner 68 

First  Nat.  Bank  v.  Wallis 138 

Fisher  v.  Ellis 161 

Forward  v.  Thompson 172 

Foster  v.  Dawber 670 

Fox  V.  Citizens*  Bank  &  Trust  Co.  417 

Fultz  V.  Walters 334 

Funk  V.  Bahhitt 178 

Gaar  v.  Louisville  Bunking  Co...  77 

Gage  V.  Kendall 320 

Gabnett  v.  Woodcock 587 

Garrabd  v.  Haddan 704 

Gaul  V,  Willis 369 

Gay  V.  Rooke 47 

Geary  v.  Physic 36 

Gemport  v.  Babtlett 644 

Geo.  Alexander  &  Co.  v.  Hazelrigg  447 

Gerard  v.  McCormick 409 

Germania  Nat.  Bank  v.  Mariner..  293 

Gifford  V.  Ilardell 570 

Gill  V.  Cubit 390 

GlIXET    V.    AVERILL 589 

Gilley  v.  Itarrell 33 

Goodman  v.  Simonds 393 

Gordon  v.  Lansing      State      Sav. 

Bank    143 

Gordon  v.  Levine    573 

Goupy  V.  Harden 543 

Governor  &  Co.  of  Bank  of  Eng- 
land V.  Vagliango  Bros 470 

Grange  v.  Reigh 572 


TABLE   OF   CASES. 


Xlll 


Page 

Grant  v.  Vaughan 24 

Greenfield   Sav.   Bank   v.    Sto- 

WELL   706 

Greve  v.  Schweitzer 661 

Griffin  v.  Erskine 167 

Grist  V.  Backhouse 164 

Grocers'    Bank    of    City    of    New 

York  V.  Penfield 273,  366 

Grover  v.  Grover 324 

Haines  v.  Dubois 285 

Halifax  v.  Lyle 468 

Hall  v.  Conder 647 

Halstead  v.  Skelton 181,  457 

Hamilton  v.  Aston 163 

Hamilton  v.  Spottiswoode 50 

Hammond  v.   Messenger 1 

Harger  v.  Worrall 420 

Harrison  v.  Ruseoe 606 

Hart  V.   Smith 556 

Harvey  v.  Martin 203 

Hatch  V.  Barrett 200 

Hatch  V.  First  Nat.  Bank 119 

Hays  V.  Hathorn 321 

Heenan  v.  Nash 184 

Hegeman  v.  Moon 176 

Heeeick  v.  Carman 531 

Hewitt   V.   Thomson 605 

Hiawatha      Iron     Co.      v.      John 

Strange  Paper  Co 411 

Hill  V.  Shields 445 

Hilton  V.  Waring 371 

Hinclcley  v.  Union  Pac.  R.  R 6.53 

Hodge  V.  Wallace 3S6 

Hodges  V.  Clinton 109 

Hodges  V.  Shuler    109 

Hodges  V.  Steward   20 

Hogue  V.  vrilliamson 117 

Holmes  v.  Jaques    158 

Holmes  v.  Kerrison    454 

Holtz   V.    Boppe 593,  633 

Hook  V.  Pratt 310 

Hooper  v.  Willia.ns 151 

Ilussey   V.   Winslcw 43 

Huyck  V.   Meador 41 

Ingham  v.  Primrose 691 

Ingham  v.  Primrose 220 

Isnard  v.  Torres  &  Marquez.  ...  704 

Israel  v.  I'srael 38 

Jarvis  v.  Wilson 29,  199,  261 

Jeffrey  v.  Rosenfeld 699 

Jeune  v.  Ward 203 


Page 

Jex  V.  Tureaud 558 

Johnson  v.  Bank 167 

Johnson  v.  Windle 653 

Jones  V.  Council     Bluffs     Branch 

Bank   198 

Jones  V.  Eislei^ 84 

Jordan  v.  Htjrst 5G4 

Josselyn  v.  Lacier 5-1 

Jury  V.  Barker 59 

Kaufman  v.  State  Sav.  Bank 281 

Keidan  v.  Winegar 136 

Kerr  v.  Anderson 423 

King  V.  Crowell 596 

King  v.  Thorn 277 

Kirk  v.  Blueton 185 

Knoxville  Nat.  Bank  v.  Clark  707 

Lambert  v.  Heath 647 

Lancaster  Nat.  Bank  v.  Taylor.  .  330 

Lay  V.  Wissman 376 

Leadbitter  v.  Farrow 126 

Leader  v.  Plante 100 

Leask  v.  Dew 672 

l/ewin  V.  Greig,  Jones  &  Wood ....  190 

Linn   v.   Horton 610 

Littauer  v.   Goldman 041 

Little  V.  Slackford 50 

LoBDELL  V.  Baker 646 

Lombard  v.  Byrne 274 

London   &    River   Plate   Bank    v. 

Bank   491 

Louisville  Banking  Co.  v.  Gray..     91 

Lowe  V.  Bliss 75 

Luff  V.  Pope .52 

Lugrue  V.  Woodruff 196 

Lunt  V.  Adams 584 

Mabie  v.  Johnson 61 

Macbeth  v.  North  &  South  Wales 

Bank    484 

McBroom  v.  Corporation  of  Leba- 
non    167 

McFarland  v.  Sikes 233 

Macleed  v.  Snee 55 

Madison  Square  Bank  v.  Pierce.  .  682 

Mann  v.  Second  Nat.  Bank 378 

Manufacturers'  &   Traders'   Bank 

V.  Love 128 

Marling  v.  Jones 450 

Marshall  v.  Sonneman 622 

Martens-Turner  Co.  v.  Mackintosh  268 
Massachusetts  Nat.  Bank  v.  Snow  229 
Master  v.  Miller 694 


XIV 


TABLE  OF  CASE3. 


Page 

.Mauran  v.  Tjanib 318 

Mechanics'  Bank  v.  Hazard..,.  G85 
Mechanics'    d    Farmers'    Bank    v. 

Schuyler 245 

Mecorney  v.  Stanley r)21 

Megowan  v.  Peterson 140 

Merritt  v.  Todd 580 

Meyer  v.  Ilihshcr 5'.H 

Mci/er  V.  Ixichinds <>49 

Miller  v.  Finley  C 

Miller  v.  Race   9 

Minet  v.  Gibson 404 

Miser  v.  Troviniirer's  Ex'rs 030 

Mitchell  V.  Culver 245 

Mohaick  Bank  i\  Brodeiuk 547 

Montclair  v.  Ranifi^cll 424 

Montrose  V.  Claiissen 380 

Moody  V.  Tlirelkeld 102 

Moore  v.  Cross 527 

Moore  v.  Cross 532 

Moore  v.  Ryder 348 

Morley  v.  Culverwell 055 

MoRLEY  V.  Culverwell 403 

Morrison  v.  McCartney 565 

MUILMAN  V.  De  Eguino 545 

Murphci/  V.  lUinois  Bank 267 

Myers  &  Son  v.  Friend  &  Scott. ..  300 

Na  nce  v.  Lart 229 

Nash  V.  De  Freville 663 

Nathan  v.  Ogden-s 74 

National  Exch.  Bank  v.  Lester...   702 
National  Newark   Banking  Co.  v. 

Second  Nat.  Bank 567 

National  Park    Bank    v.   German- 
American  Mut  Warehousing  & 

Security    Co 404 

National  Sav.  Bank  v.  Cable 58 

Xclson  V.  Kelson 196 

New  London  Credit  Syndicate  v. 

Neale   235 

Nichols  V.  Ruffsles 04 

yorthficld  Bank  v.  Arndt 3S0 

O'Keefe  v.  Dunn 540 

Oriental    Commercial    Bank,    Ex 
parte   441 

Packard  v.  Windliolz 049 

Pahlraan  v.  Taylor 533 

Parker  v.  Gordon .587 

P.\RKEB  V.    Stallings 446 

Patterson  v.  Todd  &  Lemon 561 

Patton  V.  Melville 159 

Peacock  v,  Rhodes 11 


Page 

Peaslee  v.  Robbins 429 

Peck  V.  Cochran 182 

Perry  v.  Bigelow 232 

Petit  V.  Benson 180 

Peto  V.  Reynolds 173 

Phelps  V.  Vischer 529 

Phillips    v.     Mercantilb    Nat. 

Bank    508 

Picker  v.  London  &  County  Bank- 
ing Co 12 

Pierce  v.  iNLann 520 

PiLLA.Ns  &  Rose  v.  Van  Mierop 

&   Hopkins 192,  193 

Pinkham  v.  Macy 620 

President,     etc.,     of     Commercial 

Bank  v.  French 165 

Prevot  V.  Abbott 324 

Price  V.  Neal    461 

Price  V.  Sharp   677 

Prouty  V.  Roberts 428 

Purtel  V.  Morehead 41 

Putnam  v.  Crymes    29 

Putnam  v.  Sullivan    237 

Quimby  v.  Varnum G86 

Ranger  v.  Cary 327,  426 

Rann  v.  Hughes 204 

Itaper  v.  BirkI  eck 089 

Raymond  v.  Middleton 29 

Reed  V.  Spear 634 

Rees  v.   Headtort 439 

Regiua  v,  Bartlett    148 

Regina  v.  Hawkes 171 

Requa  v.  Collins 612 

Rice  V.  Rice 84 

Rider  v.  Taintor .^04 

Hiker  v.  Corby 298 

Rindge  v.  Kimball 633 

Roach  V.  Ostcr 176 

Roberts   v.   Smith Ill 

Roberts  v.  Snow 89 

Robertson  v.  Kensington 317 

Rochester  &  C.  Turnpike  Road  Co. 

V.  Paviour 406 

Roscow  V.   Hardy 539 

Ross  V.   Mather 645 

Ross  V.  Terry 643 

Rowe  V.  Tipper 609 

Rowley  v.  Bigelow 4 

Ruff  V.  Webb 49 

Rumball  v.  Ball 453 

St    Stephens    Branch    R.    Co.    v. 

Black  116 

Sanderson  v.  Bowes 454 


TABLE   OF   CASES. 


XV 


Pago 
Saulsbubt,     Respess    &    Co.     V. 

Blandy 200 

Saunderson  v.  Judge 588 

ScniNDLER   V.    MUHLHEISEB 234 

Schwartzman  v.  Post 667 

Scotland  County  Nat.  Bank  v. 

O'CONNEL    704 

Seaboard  Nat.  Bank  v.   Bank  of 

America    501 

Sears  v.  Lantz  &  Bates 287 

Sliaw  V.  Knox 511 

Shaw   V.   North   Pennsylvania   R. 

Co 15 

Shipley  v.  Carroll 222 

Shipman   v.    Bank   of    State   of 

New   York 509 

Siegel,   Cooper  &   Co.   v.   Chicago 

Trust  &  Savings  Bank 65 

Siffldn  V.  Walker  &  Rowlestone.  .  125 

Sison  V.  Kidman 270 

Smith  V.  Allen   38 

Smith  V.  Clarke    299 

Smith  V.  Crane    81 

Smith  V.  Kendall  28 

,'iniith  V.  Milton 187 

Smith  V.  Mullett 603 

Smith  v.   Philbrick 592 

Smith  V.  Willing 149 

Soltykoft,  In  re 441 

Spear  &  Patten  v.  Pratt 195 

Spies  v.  Gilmore 593 

Stagg  V.  Pepoon 39 

Starr  v.  Starr 254 

Stone  V.  Rawllnson 276 

Storm   V.    Stirling 155 

Stroessiger   v.    South   Eastern   R. 

Co 123 

Strong  V.   Sheffield 271 

Sturdivant  v.  Hull 132 

Sublette  v.  Brewington 339 

Sutherland  v.  Mead 361 

Swift  v.  Tyson .^56,  394 

Sylvester  v.  Crapo 385 

Tanner  v.  Bean 546 

Tarver  v.  Garlington 129 

Tatam  v.  Hasler 421 

Taylor  v.  Dobbins 122 

Taylor  v.  Wilson 575 

Ten  Eyck  v.  Vanderpoel 265 

Tcvis  V.  Young 123 

Thompson  v.  Clubley   257 

Thompson  v.  Gray    266 

Thompson  v.  Sloan   112 

Thorogood  v.  Clarke 652 

t 


Page 

Thorp  V.  Mindeman 96,  292 

Thorpe  v.  Coombe 456 

Thrall  v.  Xewell 646 

Title   Guarantee   &   Trust   Co.   v. 

Haven  464 

Titlow  V.  Hubbard 62 

Tolman  v.  American  Nat.  Bank..   168 

Tolman  v.  Eanrahan 186 

Torbert  v.  Montague 637 

Traders'    Bank    of    Rochester    v. 

Braduer    345 

Treuttel  v.   Barandon 312 

Trust  Co.  of  America  v.  Hamilton 

Bank   505 

United  States  v.  Carneal 589 

Venner  v.  Farmers'  Nat.  Bank...  459 

Walker  v.   Ebert 225 

Walters  v.  Neary 337 

Wardell  v.  Howell 340 

Warren  v.  Scott 27 

Webb  v.  Odell 643 

Wells  V.  Brigham 60 

Westlierg    v.   Chicago    Lumber   & 

Coal  Co 209 

West  Branch  Bank  v.  Haines. .. .  569 
Western  Grocery  Co.  v.  Lackman  140 

Weston  V.  Myers 38 

West  St.  Louis  Sav.  Bank  v.  Shaw- 
nee County  Bank 399 

Wheeler  v.  Webster  175 

White  V.  Continental    Nat.    Bank  498 

White  V.  Smith    86 

White  V.  Williams 149 

Whiteford  v.  Bvrck-Mi/er 618 

Whitehead  v.  Walker 424 

Wilkinson  &  Co.  v.  Unwin 516 

Williams,  Deacon  &  Co.  v.  Shad- 
bolt    313 

Wisconsin     Yearly     Meeting     of 
Freewill  Baptists  v.  Babler....     94 

Witte  V.  Williams 149 

WoLCOTT  V.  Van  Santvoord 457 

Woodbury,  Williams  &  English  v. 

Roberts  88 

Worcester    Co.    Bank    v.    Dor- 
chester &  Milton  Bank 221 

Wynne  v.  Raikes 187 

YocuM  v.   Smith 704 

Zander  v.  New   York   Security   & 
Trust  Co 31 


CASES  ON  BILLS  AND  NOTES 


INTRODUCTION 
NEGOTIABILITY 


SHEPPARD'S  TOUCHSTONE,  240. 

Things  in  action,  and  things  of  that  nature  as  causes  of  suit, 
rights  and  titles  of  entry  are  not  grantable  over  to  strangers  but  in 
special  cases.     *     *     * 

If  a  man  owe  me  money  on  an  obligation,  or  the  like,  I  cannot 
grant  this  debt  to  another;  but  I  may  grant  a  letter  of  attorney  to 
another  man  to  sue  for  it,  or  I  may  grant  the  writing  itself  to  an- 
other and  he  may  cancel  it  or  give  it  to  the  obligor. 


HAMMOND  V.  MESSENGER. 

(High  Court  of  Chancery,  1838.     9  Sim.  327.) 

The  plaintiff  was  the  assignee,  for  valuable  consideration,  of  a 
debt  of  iSO.,  due,  from  the  defendant  Charles  ]\Iessenger,  to  the  de- 
fendants William  Wilks  and  Henry  Thomas  Wooler,  who  had  been 
copartners  as  coal  merchants.^ 

ShadwelIv,  V.  C.  If  this  case  were  stripped  of  all  special  cir- 
cumstances, it  would  be,  simply,  a  bill  filed  by  a  plaintiff  who  had 
obtained  from  certain  persons  to  whom  a  debt  was  due,  a  right  to  sue 
in  their  names  for  the  debt.  It  is  quite  new  to  me  that,  in  such  a 
simple  case  as  that,  this  court  allows,  in  the  first  instance,  a  bill  to  be 
filed,  against  the  debtor,  by  the  person  who  has  become  the  assignee 
of  the  debt.  I  admit  that,  if  special  circumstances  are  stated,  and  it 
is  represented  that,  notwithstanding  the  right  which  the  party  has 
obtained  to  sue  in  the  name  of  the  creditor,  the  creditor  will  interfere 
and  prevent  the  exercise  of  that  right,  this  court  will  interpose  for 
the  purpose  of  preventing  that  species  of  wrong  being  done ;    and,  if 

'  The  statement  of  the  case  is  abridged,  and  the  arguments  and  part  of 
the  opinion  are  omitted. 

Sm.&  M.B.&  N.— 1 


2  INTRODUCTION. 

tlie  creditoi  will  not  allow  the  matter  to  be  tried  at  law  in  his  name, 
this  court  has  a  jurisdiction,  in  the  first  instance,  to  compel  the  debtor 
to  pay  the  debt  to  the  plaintiff;  especially  in  a  case  where  the  act 
done  by  the  creditor  is  done  in  collusion  with  the  debtor. 

If  bills  of  this  kind  were  allowable,  it  is  obvious  that  they  would  be 
pretty  frequent;  but  I  never  remember  any  instance  of  such  a  bill 
as  this  being  filed,  unaccompanied  by  special  circumstances. 

The  only  question  then  is  whether,  on  this  record,  there  are  any 
special  circumstances  which  create  a  ground  for  a  Court  of  Equity 
to  entertain  the  bill  against  the  debtor. 

The  bill  sets  out  with  a  statement  that  a  partnership  was  carried 
on  between  Wilks  &  Wooler;  and  a  variety  of  instruments  and  trans- 
actions are  stated,  the  result  of  which  was,  that  the  partnership  was 
to  be  dissolved,  that  the  plaintiff  was  to  pay  the  debts  due  from  the 
partnership,  and  to  be  entitled  to  the  partnership  assets.  Then  it 
represents  that  Messenger,  the  demurring  party,  at  the  time  of  the 
agreement  for  the  dissolution  of  the  partnership,  was  justly  indebted, 
to  the  firm,  in  the  sum  of  £80.  for  coal  and  coke  sold  and  delivered 
to  him  by  the  firm,  and  that  Messenger  is  now  indebted  to  the  plain- 
tiff in  the  said  sum  of  £80.  as  the  assignee  of  such  debt.  Therefore 
the  debt  in  question  was,  purely,  a  debt  recoverable  at  law.  Then 
the  bill  states  a  notice  given  to  Messenger  by  the  plaintiff  to  pay  the 
debt  to  him.  It  then  states  that  on  the  2d  of  October,  the  plaintiff 
called  on  Messenger,  and  applied  to  him  for  payment  of  the  sum  of 
£80.,  and  fully  apprised  him  of  the  plaintiff's  right  and  title  to  de- 
mand and  receive  payment  of  it  from  him;  that  Messenger,  for  the 
first  time,  pretended  that  the  plaintiff  was  not  entitled  to  receive 
the  debt,  but  that  he  was  bound  to  pay  it  to  Wilks  &  Wooler.  That, 
of  itself,  creates  no  equitable  ground. 

The  bill  then  alleges,  in  the  usual  manner,  that  the  plaintiff  had 
applied  to  Messenger  for  the  payment  of  the  debt,  and  that  Mes- 
senger, combining  and  confederating  with  Wilks,  had  refused  so  to 
do,  and  pretended  that  there  was  no  such  debt;  that,  however,  gives 
no  equity.  Then  it  charges  that  Messenger,  on  receiving  notice 
of  the  plaintiff's  right  and  title  to  the  debt,  became  and  still  was  a 
trustee  of  it  for  the  plaintiff.  That  again  does  not  make  him  a 
trustee,  that  is  to  say,  such  a  trustee  as  the  plaintiff  has  a  right  to 
sue  in  equity,  unless  the  whole  circumstances  of  the  case  taken  to- 
gether, do  show  that  the  plaintiff  has  a  right  to  sue  in  equity.    *    *    * 

When  I  come  to  the  prayer,  I  find  that  it,  first  of  all,  prays:  "That 
Messenger  may  be  decreed  to  pay  to  the  plaintiff  the  sum  of  £80. 
so  due  to  the  firm  of  Wilks  &  Wooler  as  aforesaid,  or,  if  necessary, 
that  an  account  may  be  taken."  Now  no  case,  whatever,  is  stated 
to  show  the  necessity  for  an  account,  and,  therefore,  it  must,  of  ne- 
cessity, stand  as  a  mere  prayer  that  Messenger  may  be  decreed  to 
pay  the  debt.  It  then  proceeds  as  follows:  "Or  that  the  plaintiff 
may  be  at  liberty  to  use  the  name  of  the  defendants,  Wilks  &  Wooler, 


NEGOTIABILITY.  3 

in  an  action  at  law  to  be  brought  by  him  against  Messenger."  There 
is,  however,  no  case  stated  which  shows  that  Wilks  &  Wooler  have 
at  all  interfered  to  prevent,  or  that  they  intend  to  prevent  the  plain- 
tiff from  using  their  names  at  law.  Then  it  goes  on  thus :  "And 
that  Messenger  may  be  restrained  from  pleading,  to  such  action, 
any  plea  or  pleas  of  payment  or  satisfaction  of  such  debt  of  £80.  to 
Wilks  &  Wooler,  or  in  any  manner  availing  himself  thereof."  I  do 
not  understand  what  is  meant  by  this  part  of  the  prayer;  because  the 
bill  nowhere  states  that  there  has  been  a  fictitious  payment  or  satis- 
faction, of  which  Messenger  intends  to  avail  himself  at  law.  Why 
then  does  it  ask  that  Messenger  may  be  restrained  from  pleading 
any  plea  or  pleas  of  payment  or  satisfaction  of  the  debt  to  Wilks  & 
Wooler,  or  in  any  manner  availing  himself  thereof. 

It  seems  to  me  that  this  case  is  altogether  denuded  of  those  special 
circumstances,  the  existence  of  which  is  the  only  ground  for  this 
court  to  lend  its  aid  to  a  party  who,  like  the  plaintiff,  has  taken  an 
assignment  of  a  debt;  and,  consequently,  the  demurrer  must  be  al- 
lowed. 

Demurrer  allowed,  with  liberty  to  the  plaintiff  to  amend  his  bill. 


BARROW  v.  BISPHAM. 
(Supreme  Court  of  New  Jersey,  1S29.    11  N.  J.  Law,  110.) 

Ford,  J.^  The  defendant  moves  to  set  aside  a  judgment  entered 
against  him  in  this  case,  on  bond  and  warrant  of  attorney,  upon  an 
allegation  that  the  bond  was  obtained  from  him  by  fraud,  and  for 
a  consideration  that  has  failed.  The  bond  and  warrant  were  given 
originally  to  Benjamin  McGinnis,  and  assigned  by  him  to  James 
Barrow,  the  plaintiff.     *     *     * 

The  counsel  for  the  plaintiff  insists  that  no  fraud  between  the 
original  parties  can  be  set  up  against  James  Barrow,  the  assignee, 
who  became  a  bona  fide  holder,  without  notice,  for  valuable  consider- 
ation, and  against  whom  no  fraud  is  proved  or  imputed.  In  sup- 
port of  this  doctrine,  he  cites  Somes  v.  Brewer,  2  Pick.  (Mass.)  184, 
13  Am.  Dec.  406,  Fletcher  v.  Peck,  6  Cranch,  133,  3  L.  Ed.  162,  and 
Parker  v.  Patrick,  5  Term  R.  175.  The  two  former  cases,  instead 
of  relating  to  bonds,  or  to  a  chose  in  action,  refer  exclusively  to 
transfers  of  real  estate.  If  one  obtain  a  deed  for  land  by  fraud  and 
imposition  on  the  owner,  and  afterwards  convey  the  same  to  a  pur- 
chaser, having  no  notice  of  the  fraud,  such  purchaser  will  hold 
against  the  original  owner.  The  reason  of  those  cases  is  that  the 
title  to  land,  which  passes  by  solemn  livery  of  seisin  or  conveyances 
amounting  to   it,   would  be   universally   endangered,   if   fraud   might 

2  Only  a  portion  of  the  opinion  is  printed- 


4  INTRODUCTION. 

be  set  up  in  any  remote  link  of  a  long  chain  of  title  (or  succession 
of  owners),  through  whom  it  had  passed  in  coming  to  the  last  pur- 
chaser. The  cases  have  nothing  to  do  with  the  assignment  of  a 
chose  in  action,  which  is  governed  by  widely  different  rules.  The 
case  of  Parker  v.  Patrick,  only  shows  that  goods,  taken  by  a  pawn- 
broker in  the  way  of  his  trade,  in  market  overt,  and  for  valuable 
consideration,  cannot  be  recovered  back  by  the  former  owner;  from 
whom  they  were  not  stolen,  but  obtained  by  false  pretences.  By 
the  common  law  goods  are  assignable,  but  bonds  are  not;  and  all 
reasoning  from  one  to  the  other  is  necessarily  fallacious.  The  law 
touching  the  assignment  of  bonds,  and  the  rights  of  an  assignee,  is 
settled  by  a  multitude  of  cases.  Thus  in  1  Eq.  Ca.  Ab.  44,  pi,  4,  it 
is  laid  down,  that  an  assignee  of  a  bond  must  take  it  subject  to  the 
same  equity  that  it  is  in  the  hands  'of  the  obligee.  In  Davis  v.  Aus- 
tin, 1  Ves.  Jr.  247,  the  Lord  Chancellor  says :  "A  purchaser  of  a 
chose  in  action  must  always  abide  by  the  case  of  the  person  from 
whom  he  buys,  that  I  take  to  be  an  universal  rule."  In  Wheeler 
V.  Hughes,  1  Dall.  23,  1  L.  Ed.  20,  the  court  says  the  assignee  of  a 
bond  takes  it  at  his  own  peril,  and  stands  in  the  same  place  as  tl:e 
obligee,  so  as  to  let  in  every  defalcation  which  the  obligor  had 
against  the  obligee  at  the  time  of  the  assignment  or  notice  of  it. 
Rundle  v.  Ettwein,  2  Yeates  (Pa.)  23,  is  to  the  same  effect.  So  in 
Clute  V.  Robison,  2  Johns.  (N.  Y.)  595.  Clute  gave  a  bond  for 
$1,200  to  Rawlins,  and  took  back  a  separate  agreement  that  the 
bond  should  be  surrendered  up  on  his  performing  certain  conditions. 
Rawlins  assigned  the  bond  to  Robison.  Kent,  Chancellor,  said: 
"There  can  be  no  doubt  that  Robison  took  his  assignment  subject  to 
all  equities  which  attached  to  it  in  the  hands  of  Rawlins."  Our 
statute.  Rev.  Laws,  305,  making  bonds  assignable  and  enabling  as- 
signees to  sue  in  their  own  names,  instead  of  shaking  this  doctrine, 
serves  to  confirm  it;  it  allows  all  just  set-offs  and  discounts  prior 
to  the  assignment.  In  the  case  of  Garretsie  v.  Van  Ness,  2  N.  J. 
Law,  23,  2  Am.  Dec.  333,  this  court  decided  that  the  assignment  of 
a  bond  transferred  no  more  interest  than  the  assignor  had  in  it  at 
the  time.  Hence  it  appears  that  every  defence  is  open  against 
James  Barrow  the  assignee,  that  the  defendant  could  have  had  against 
Benjamin  JMcGinnis.     *     *     * 


ROWLEY  V.  BIGELOW. 

(Supreme  Judicial  Court  of  Massachusetts,  Suffolk  and  Nantucket,  1S32.     12 
Pick.    307,    23    Am.    Dec.    607.) 

Trover  for  627  bushels  of  corn.  The  plaintiffs  proved  that  they 
were  the  owners  of  the  corn  on  the  24th  of  May,  1830,  and  had  it 
in  their  possession  in  New  York;  that  one  Martin,  living  there, 
pretending  to  purchase  it  for  cash,  obtained  possession  thereof  and 


NEGOTIABILITY.  5 

shipped  it  on  board  the  Lion  on  the  25th  of  May,  consigned  to  the 
defendants  in  Boston;  that  on  the  26th  Dunning,  one  of  the  plain- 
tiffs, demanded  payment  of  Martin,  but  not  receiving  payment,  pro- 
ceeded to  Boston,  where  he  arrived  before  the  Lion,  and  notified 
the  defendants  that  A'lartin  had  obtained  the  corn  fraudulently ;  that 
on  the  30th,  on  the  arrival  of  the  Lion  at  Boston,  Dunning  boarded 
her,  demanded  the  corn  of  the  master,  who,  notwithstanding,  de- 
livered it  to  the  defendants ;  that  Dunning  demanded  the  corn  of 
them,  offering  to  pay  the  freight  or  charges,  but  that  they  refused' 
to  deHver  it.  To  prove  Martin's  fraudulent  intent,  the  plaintiffs 
were  allowed,  against  the  objection  of  the  defendants,  to  give  in  evi- 
dence the  depositions  of  merchants  in  New  York,  that  Martin  had 
made  purchases  of  them  about  the  same  time,  under  circumstances 
tending  to  show  that  he  was  insolvent  and  that  he  knew  it,  and  had 
no  reasonable  expectation  of  paying  for  the  merchandise. 

The  defendants,  in  support  of  their  title,  produced  a  bill  of  ladin^, 
dated  May  17,  1830,  signed  by  the  master  of  the  Lion,  for  2,000 
bushels  of  corn  shipped  by  Martin  and  consigned  to  the  defendants. 
They  also  produced  invoices  to  correspond,  and  a  letter  of  even  dat^^ 
to  which  the  bill  of  lading  and  invoices  were  annexed,  stating  that 
Martin  had  drawn  on  the  defendants  for  $1,000.  They  further 
proved  that  such  a  bill  drawn  on  them  had  been  accepted  by  them^ 
on  the  20th,  and  had  been  paid  at  maturity.  The  defendants  received 
the  bill  of  lading  and  invoice  and  accepted  the  draft  in  the  regular 
course  of  business. 

The  court  ruled  in  favor  of  the  defendants,  to  which  ruling  the 
plaintiffs  excepted.  Verdict  for  the  defendants  by  consent,  subject 
to  the  opinion  of  the  court.* 

Shaw,  C.  J.     *     *     * 

2.  It  is  next  contended,  on  the  part  of  the  plaintiffs,  that  no  prop- 
erty passed,  by  the  fraudulent  purchase  of  Martin,  from  the  plaintiffs 
to  him,  so  as  to  enable  him  to  make  a  title  to  the  defendants. 

The  evidence  clearly  shows  that  there  was  a  contract  of  sale  and 
an  actual  delivery  of  the  goods,  by  their  being  placed  on  board  a 
vessel,  pursuant  to  his  order;  and  this  delivery  was  unconditional, 
unless  there  was  an  implied  condition  arising  from  the  usage  of 
the  trade  that  the  delivery  was  to  be  considered  revocable,  unless  the 
corn  should  be  paid  for,  pursuant  to  the  contract  and  to  such  usage. 
This  contract  and  delivery  were  sufficient  in  law  to  vest  the  property 
in  Martin  and  make  a  good  title,  if  not  tainted  by  fraud.  But  being 
tainted  by  fraud,  as  between  the  immediate  parties,  the  sale  was 
voidable,  and  the  vendors  might  avoid  it  and  reclaim  their  property. 
But  it  depended  upon  them  to  avoid  it  or  not,  at  their  election.  They 
might  treat  the  sale  as  a  nullity  and  reclaim  their  goods,  or  affirm  it 

3  The  statement  of  the  case  is  abridged,  and  a  portion  of  the  opinion 
omitted. 


6  INTRODUCTION. 

and  claim  the  price.  And  cases  may  be  imagined  where  the  vendor, 
notwithstanding  such  fraud  practiced  on  him,  might,  in  consequence 
of  obtaining  security,  by  attachment  or  otherwise,  prefer  to  affirm 
the  sale.  The  consequence  therefore  is  that  such  sale  is  voidable, 
but  not  absolutely  void.  The  consent  of  the  vendor  is  given  to  the 
transfer,  but  that  consent  being  induced  by  false  and  fraudulent 
representations,  it  is  contrary  to  justice  and  right  that  the  vendor 
should  suffer  by  it,  or  that  the  fraudulent  purchaser  should  avail 
himself  of  it ;  and  upon  this  ground,  and  for  the  benefit  of  the 
vendor  alone,  the  law  allows  him  to  avoid  it. 

The  difference  between  the  case  of  property  thus  obtained  and 
property  obtained  by  felony,  is  obvious.  In  the  latter  case  no  right 
either  of  property  or  possession  is  acquired,  and  the  felon  can  convey 
none. 

We  take  the  rule  to  be  well  settled  that  where  there  is  a  contract 
of  sale,  and  an  actual  delivery  pursuant  to  it,  a  title  to  the  property 
passes,  but  voidable  and  defeasible  as  between  the  vendor  and  ven- 
dee, if  obtained  by  false  and  fraudulent  representations.  The  ven- 
dor therefore  can  reclaim  his  property  as  against  the  vendee,  or  any 
other  person  claiming  under  him  and  standing  upon  his  title,  but  not 
against  a  bona  fide  purchaser  without  notice  of  the  fraud.  The 
ground  of  exception  in  favor  of  the  latter  is,  that  he  purchased  of 
one  having  a  possession  under  a  contract  of  sale,  and  with  a  title 
to  the  property,  though  defeasible  and  voidable  on  the  ground  of 
fraud;  but  as  the  second  purchaser  takes  without  fraud  and  with- 
out notice  of  the  fraud  of  the  first  purchaser,  he  takes  a  title  freed 
from  the  taint  of  fraud.  Parker  v.  Patrick,  5  Term  R.  175.  The 
same  rule  holds  in  regard  to  real  estate.  Somes  v.  Brewer,  2  Pick. 
184,  13  Am.  Dec.  406.     *     *     * 

Judgment  on  the  verdict. 


MILLER  V.  FINLEY. 

(Supreme  Ck)urt  of  Michigan,  1872.     26  Mich.  249,  12  Am.  Rep.  306.) 

Campbell,  J.*  Miller  sued  below  upon  a  joint  and  several  promis- 
sory note.  Both  defendants  pleaded  the  general  issue,  and  Hugh 
Finley,  jr.,  appended  to  his  plea  an  affidavit  denying  the  execution 
of  the  note  by  himself.  No  notice  of  any  kind  was  filed  or  served 
with  the  plea. 

Upon  the  trial  the  defense  was  rested  upon  several  grounds.  It 
was  claimed  that  Hugh  Finley,  sr.,  signed  the  note  without  the  con- 
sent of  Hugh  Finley,  jr.,  his  son,  who,  it  was  alleged,  refused  to 
assent  to  having  him  sign,  and  after  the  note  had  been  delivered  as 
the  sole  note  of  the  son.    It  was  further  claimed  that  when  he  signed 

*  A  portion  of  the  opinion  is  omitted. 


ISfEGOTIABILITT.  T 

it  he  was  in  such  a  state  of  drunkenness,  procured  by  the  origiiisl 
payee,  that  he  was  not  responsible  for  his  acts.  It  was  also  set  up 
that  the  note  was  one  of  several  obtained  by  fraud,  as  the  price  of  a 
worthless  patent,  for  a  horse-collar  fastener. 

Miller  claimed  as  a  bona  fide  holder.  Judgment  was  rendered 
for  defendants  below,  and  he  now  brings  error.     *     *     * 

The  testimony  of  defendants  tended  to  prove  that  the  elder  Finley 
knew  nothing  of  the  trade,  and  was  drunk  when  he  signed  the  note, 
and  that  the  payee  had  wholly,  or  in  part,  procured  it.  The  testimony 
for  plaintiff  tended  to  show  that  the  old  man  was  fully  aware  of  the 
transaction  between  his  son  and  the  payee,  and  took  some  part  in  it. 
The  evidence  of  the  son  does  not  indicate  any  extreme  intoxication 
on  the  part  of  the  father.  His  own  testimony  goes  further.  He 
seems,  however,  to  have  recollected  the  signing,  and  its  genuineness 
is  not  in  issue.  There  is  no  question  in  the  case  as  to  the  identity 
of  the  paper.  The  note  he  signed  was  the  one  the  son  supposed  he 
was  signing,  and  there  was  no  substitution  of  one  paper  for  another. 
The  defense  rests  upon  the  ground  of  fraud,  and  not  of  illegality, 
and  while,  if  the  old  man's  story  is  true,  the  note  would  be  voidable 
as  against  the  payee,  it  would  not  be  a  nullity  as  to  all  persons. 

There  is  nothing  on  the  face  of  the  paper  to  cast  suspicion  upon 
its  character,  and  it  can  only  be  impeached,  in  the  hands  of  a  holder 
for  value,  by  evidence  that  he  took  it  under  circumstances  which 
rendered  him  guilty  of  bad  faith.  Goodman  v.  Simonds,  20  How. 
343,  15  L.  Ed.  934;  Murray  v.  Lardner,  2  Wall.  110,  17  L.  Ed.  857; 
Goodman  v.  Harvey,  4  Ad.  &  El.  870 ;  Uther  v.  Rich,  10  Ad.  &  El. 
784;  2  Parsons  on  Bills,  280;  Redfield  &  Bigelow's  Leading  Cases 
on  Bills  and  Notes,  239,  257. 

The  proof  must  show  that  the  holder  for  value,  who  takes  a  note 
with  no  earmarks  of  fraud  or  illegality,  has  had  notice  of  such  a 
nature  that  he  could  not  honestly  take  the  paper  without  further 
inquiry.  The  facts,  of  which  he  must  have  either  knowledge  or  no- 
tice, must  be  such  as  go  to  the  defects  of  title.  The  defects  set  up 
here  were  the  fraud  alleged  to  have  been  practiced  on  the  elder 
Finley,  by  taking  advantage  of  his  drunkenness,  and  the  cheat,  if 
there  was  any,  whereby  the  younger  Finley  was  induced  to  purchase 
the  patent.  The  latter  we  have  intimated  was  not  properly  in  the 
case.  But,  if  it  had  been  admissible,  it  would,  perhaps,  be  of  no 
special  importance,  as  presented  by  the  record  as  it  stands.  We  have 
found  nothing  in  the  testimony  tending  to  show  that  Miller  had 
heard  or  known  anything  about  either  of  these  defenses.     *     *     * 

Judgment  reversed. 


8  INTRODUCTION. 

DAME  V.  BALDWIN. 
(Supreme  Judicial  Court  of  Massachusetts,  Suffollj,  1S12,  8  Mass.  518.) 

This  was  a  writ  of  replevin  for  40  firkins  of  butter,  which  had  been 
attached  by  the  defendant,  a  deputy  sheriflf  of  this  county,  as  the 
property  of  Daniel  Cook,  of  Corinth,  in  the  state  of  Vermont,  at 
the  suit  of  Robert  M.  Barnard,  of  Charlestown,  in  the  county  of 
Middlesex. 

The  cause  was  tried  at  the  last  November  term  in  this  county, 
before  Parker,  J.,  from  whose  report  the  following  facts  appear : 

These  firkins  of  butter  were  the  property  of  the  said  Cook  in 
November,  1810,  and  he  being  desirous  to  transport  them  to  Mr. 
Barnard,  with  whom  he  had  had  dealings,  caused  them  to  be  branded 
with  his  name,  and  agreed  with  one  Harlow  to  carry  them  to  Charles- 
town,  giving  him  written  directions  to  deliver  them  to  Barnard  at 
the  office  for  the  inspection  of  butter.  Harlow  proceeded  10  miles 
on  the  road,  and  then  engaged  one  Barron  to  take  the  butter  on, 
and  delivered  it  to  him  for  that  purpose,  giving  him  the  written 
directions  he  had  received  from  Cook.  This  was  done  without  the 
knowledge  of  Cook.  Barron  employed  one  Brown  to  carry  the  but- 
ter, giving  him  the  written  instructions  aforesaid,  which  he  repeated- 
ly read  to  him,  and  also  furnishing  him  with  some  money  to  bear  his 
expenses :  Cook  being  ignorant  also  of  Brown's  being  employed. 
Brown  sold  two  firkins  of  the  butter  on  the  way,  to  pay  his  travel- 
ing expenses,  as  he  said. 

When  Brown  arrived  in  Boston  with  his  load,  not  having  carried 
it  to  the  inspection  office,  nor  having  given  any  notice  to  Barnard, 
he  went  to  the  square  in  Boston,  which  is  the  usual  and  established 
market  place,  and  where  great  quantities  of  butter  and  other  articles 
of  country  produce  are  sold,  and  there  went  to  the  store  of  the  plain- 
tiff, and  offered  the  butter  for  sale,  assuming  the  name  of  Cook,  and 
claiming  to  sell  the  butter  as  his  own.  Dame  agreed  to  take  it  ac- 
cording to  the  inspection,  and  it  was  carried  to  the  inspection  office 
in  Boston,  and  Brown,  under  the  name  of  Cook,  returned  to  the 
store  of  Dame  with  the  certificate  of  inspection,  and  Dame  there  paid 
him  in  bank  bills  the  price  of  the  butter,  being  $231.27,  taking  a  bill 
of  parcels  therefor,  which  Brown  signed  with  his  mark,  the  name 
of  D.  Cook  being  added  to  the  mark  by  some  person  in  the  store. 

The  defense  was  put  upon  three  points ;     *     *     * 

(3)  That  there  was  no  authority  in  Brown  to  sell,  and  so  no 
transfer  of  the  property,  which  therefore  remained  in  Cook,  until 
the  attachment  made  by  the  defendant.  But  the  judge  instructed  the 
jury  that  the  trust  given  by  Cook  to  Harlow,  and  so  down  to  Brown, 
to  transport  the  butter  to  Charlestown,  although  violated  by  Brown, 
would  not  authorize  Cook  to  reclaim  the  property  from  a  bona  fide 
innocent  purchaser  for  a  valuable   consideration ;    the  sale  being  of 


NEGOTIABILITY.  U 

an  article  commonly  found  in  the  market  for  sale,  the  carriers  of 
sucfi  articles  generally  having  authority  to  sell,  and  the  property 
being  exposed  in  the  usual  manner  for  the  sale  of  such  an  article. 

The  jury  returned  a  verdict  for  the  plaintiff;  and,  a  new  trial 
being  moved  for  by  the  defendant,  the  action  stood  over  to  this  term 
on  the  motion.^ 

Per  Curiam.  It  is  beyond  a  question  that  the  taking  by  Brown 
was  felonious,  and  therefore  a  sale  by  him  could  not  transfer  the 
property.  We  have  no  markets  overt  in  this  commonwealth.  The 
verdict  must  be  set  aside  and  a  new  trial  granted. 


MILLER  V.  RACE. 

(Court  of  King's  Bench,  1758.     1  Burrows,  452.) 

It  was  an  action  of  trover  against  the  defendant,  upon  a  bank-note, 
for  the  payment  of  twenty-one  pounds  ten  shillings  to  one  William 
Finney,  or  bearer,  on  demand. 

The  cause  came  on  to  be  tried  before  Lord  Mansfield,  at  the  sit- 
tings in  Trinity  term  last  at  Guildhall,  London:  and  upon  the  trial 
it  appeared  that  William  Finney,  being  possessed  of  this  bank-note 
on  the  11th  of  December,  1756,  sent  it  by  the  general  post,  under 
cover,  directed  to  one  Bernard  Odenharty  at  Chipping-Norton  in 
Oxfordshire ;  that  on  the  same  night,  the  mail  was  robbed,  and  the 
bank-note  in  question  (amongst  other  notes)  taken  and  carried  away 
by  the  robber;  that  this  bank-note,  on  the  12th  of  the  same  Decem- 
ber, came  into  the  hands  and  possession  of  the  plaintiff,  for  a  full 
and  valuable  consideration,  and  in  the  usual  course  and  way  of  his 
business,  and  without  any  notice  or  knowledge  of  this  bank-note 
being  taken  out  of  the  mail. 

It  was  admitted  and  agreed  that,  in  the  common  and  known  course 
of  trade,  bank-notes  are  paid  by  and  received  of  the  holder  or  pos- 
sessor of  them,  as  cash,  and  that  in  the  usual  way  of  negotiating 
bank-notes  they  pass  from  one  person  to  another  as  cash,  by  delivery 
only,  and  without  any  further  inquiry  or  evidence  of  title  than  what 
arises  from  the  possession.  It  appeared,  that  Mr,  Finney,  having 
notice  of  this  robbery,  on  the  13th  of  December,  applied  to  the  Bank 
of  England  "to  stop  the  payment  of  this  note ;"  which  was  ordered 
accordingly,  upon  Mr  Finney's  entering  into  proper  security  "to 
indemnify  the  Bank." 

Some  little  time  after  this,  the  plaintiff  applied  to  the  Bank  for  the 
payment  of  this  note ;  and,  for  that  purpose,  delivered  the  note  to 
the  defendant,  who  is  a  clerk  in  the  Bank ;    but  the  defendant  re- 

5  The  statement  of  the  case  is  abridged,  and  the  arguments  of  counsel  are 
omitted. 


10  INTRODUCTION. 

fused  either  to  pay  the  note,  or  to  redeliver  it  to  the  plaintiff.  Upon 
which  this  action  was  brought  against  the  defendant. 

The  jury  found  a  verdict  for  the  plaintiff,  and  the  sum  of  i21.  10s. 
damages ;  subject  nevertheless  to  the  opinion  of  this  court  upon  this 
question — "Whether,  under  the  circumstances  of  this  case,  the  plain- 
tiff had  a  sufficient  property  in  this  bank-note  to  entitle  him  to  re- 
cover in  the  present  action  ?"  ' 

Lord  Mansfield  now  delivered  the  resolution  of  the  court. 

After  stating  the  case  at  large,  he  declared,  that  at  the  trial,  he 
had  no  sort  of  doubt,  but  that  this  action  was  well  brought,  and 
would  lie  against  the  defendant  in  the  present  case;  upon  the  general 
course  of  business,  and  from  the  consequences,  to  trade  and  com- 
merce: W'hich  would  be  much  incommoded  by  a  contrary  determina- 
tion. 

It  has  been  very  ingeniously  argued  by  Sir  Richard  Lloyd,  for  the 
defendant.  But  the  whole  fallacy  of  the  argument  turns  upon  com- 
paring bank-notes  to  what  they  do  not  resemble,  and  what  they  ought 
not  to  be  compared  to,  viz.  to  goods,  or  to  securities,  or  documents 
for  debts. 

Now,  they  are  not  goods,  not  securities,  nor  documents  for  debts, 
nor  are  so  esteemed :  but  are  treated  as  money,  as  cash,  in  the  ordi- 
nary course  and  transaction  of  business,  by  the  general  consent  of 
mankind ;  which  gives  them  the  credit  and  currency  of  money,  to 
all  intents  and  purposes.  They  are  as  much  money,  as  guineas  them- 
selves are ;  or  any  other  current  coin,  that  is  used  in  common  pay- 
ments, as  money  or  cash.     *     *     * 

It  has  been  quaintly  said,  "that  the  reason  why  money  cannot  be 
followed  is,  because  it  has  no  ear-mark:"  but  this  is  not  true.  The 
true  reason  is,  upon  account  of  the  currency  of  it :  it  cannot  be 
recovered  after  it  has  passed  in  currency.  So  in  case  of  money 
stolen,  the  true  owner  cannot  recover  it ;  after  it  has  been  paid  away 
fairly  and  honestly  upon  a  valuable  and  bona  fide  consideration:  but 
before  money  has  passed  in  currency,  an  action  may  be  brought  for 
the  money  itself.  There  was  a  case  in  1  Geo.  I,  at  the  sittings, 
Thomas  v.  Whip,  before  Lord  Macclesfield :  which  was  an  action 
upon  assumpsit,  by  an  administrator  against  the  defendant,  for  money 
had  and  received  to  his  use.  The  defendant  was  nurse  to  the  intestate 
during  his  sickness;  and  being  alone,  conveyed  away  the  money.  And 
Lord  Macclesfield  held  that  the  action  lay.  Now  this  must  be  es- 
teemed a  finding  at  least. 

Apply  this  to  the  case  of  a  bank-note.  An  action  may  lie  against 
the  finder,  it  is  true ;  (and  it  is  not  at  all  denied :)  but  not  after  it 
has  been  paid  away  in  currency.  And  this  point  has  been  determined 
even  in  the  infancy  of  bank-notes:  for  Anonymous,  1  Salk.  126.  M. 
10    Wm.    Ill,   at   nisi   prius,    is   in   point.      And   Lord    Chief   Justice 

«  The  arguments  of  counsel  and  a  portion  of  the  opinion  are  omitted. 


NEGOTIABILITY.  U 

Holt  there  says  that  it  is  "by  reason  of  the  course  of  trade;  which 
creates  a  property  in  the  assignee  or  bearer."  (And  "the  bearer" 
is  a  more  proper  expression  than  assignee.) 

Here  an  inn-keeper  took  it,  bona  fide,  in  his  business  from  a  per- 
son who  made  the  appearance  of  a  gentleman.  Here  is  no  pretence 
or  suspicion  of  collusion  with  the  robber:  for  this  matter  was  strictly 
inquired  and  examined  into  at  the  trial ;  and  is  so  stated  in  the  case, 
"that  he  took  it  for  a  full  and  valuable  consideration,  in  the  usual 
course  of  business."  Indeed,  if  there  had  been  any  collusion,  or  any 
circumstances  of  unfair  dealing,  the  case  had  been  much  otherwise. 
U  it  had  been  a  note  for  £1000.  it  might  have  been  suspicious:  but 
this  was  a  small  note,  for  £21.  10s.  only:  and  money  given  in  ex- 
change for  it.     *     *     * 

Rule  that  the  postea  be  delivered  to  the  plaintiff. 


PEACOCK  v.  RHODES. 
(Court  of  King's  Bench,  1781.    2  Doug.  633.) 

in  an  action  upon  an  inland  bill  of  exchange,  which  was  tried  be- 
fore Willes,  Justice,  at  the  last  Spring  Assizes  for  Yorkshire,  a  ver- 
dict, by  consent,  was  found  for  the  plaintiff,  subject  to  the  opinion 
of  the  court  on  a  special  case,  stating  the  following  facts: 

"The  bill  was  drawn  at  Halifax,  on  the  9th  of  August,  1780,  by  the 
defendants,  upon  Smith,  Payne  &  Smith,  payable  to  William  Ing- 
ham, or  order,  31  days  after  date,  for  value  received.  It  was  indorsed 
by  William  Ingham,  and  was  presented  by  the  plaintiff  for  acceptance 
and  payment,  but  both  were  refused,  of  which  due  notice  was  given 
by  the  plaintiff  to  the  defendants,  and  the  money  demanded  of  the 
defendants.  The  plaintiff,  who  was  a  mercer  at  Scarborough,  re- 
ceived the  bill  from  a  man  not  known,  who  called  himself  William 
Brown,  and,  by  that  name,  indorsed  the  bill  to  the  plaintiff,  of  whom 
he  bought  cloth,  and  other  articles  in  the  way  of  the  plaintiff's  trade 
as  a  mercer,  in  his  shop  at  Scarborough,  and  paid  him  that  bill,  the 
value  whereof  the  plaintiff  gave  to  the  buyer  in  cloth  and  othei 
articles,  and  cash,  and  small  bills.  The  plaintiff  did  not  know  the 
defendants,  but  had  before,  in  his  shop,  received  bills  drawn  by  them, 
which  were  duly  paid.  William  Ingham,  to  whom  the  bill  was  pay- 
able, indorsed  it;  John  Daltry  received  it  from  him,  and  indorsed  it; 
Joseph  Fisher,  received  it  from  John  Daltry;  and  it  was  stolen  from 
Joseph  Fisher,  at  York,  (without  any  indorsement  or  transfer  there- 
of by  him,)  along  with  other  bills  in  his  pocket-book,  whereof  his 
pocket  was  picked,  before  the  plaintiff  took  it  in  payment  as  afore- 
said.    The  plaintiff  declared  as  indorsee  of  Ingham."  ' 

7  The  arguments  of  counsel  are  omitted. 


12  INTRODUCTION. 

Lord  Mansfield.  I  am  glad  this  question  was  saved,  not  for 
any  difficulty  there  is  in  the  case,  but  because  it  is  important  that 
general  commercial  points  should  be  publicly  decided.  The  holder 
of  a  bill  of  exchange,  or  promissory  note,  is  not  to  be  considered  in 
the  light  of  an  assignee  of  the  payee.  x\n  assignee  must  take  the 
thing  assigned,  subject  to  all  the  equity  to  which  the  original  party 
was  subject.  If  this  rule  applied  to  bills  and  promissory  notes,  it 
would  stop  their  currency.  The  law  is  settled,  that  a  holder,  coming 
fairly  by  a  bill  or  note,  has  nothing  to  do  with  the  transaction  be- 
tween the  original  parties ;  unless,  perhaps,  in  the  single  case,  (which 
is  a  hard  one,  but  has  been  determined,)  of  a  note  for  money  won 
at  play.  Vide  Lowe  v.  Waller,  T.  21  Geo.  IH,  2  Doug.  736.  I  see 
no  difference  between  a  note  indorsed  blank,  and  one  payable  to 
bearer.  They  both  go  by  deliver)',  and  possession  proves  property 
in  both  cases.  The  question  of  mala  fides  was  for  the  consideration 
of  the  jury.  The  circumstances,  that  the  buyer  and  also  the  drawers 
were  strangers  to  the  plaintiff,  and  that  he  took  the  bill  for  goods 
on  which  he  had  a  profit,  were  grounds  of  suspicion,  very  fit  for 
their  consideration.  But  they  have  considered  them,  and  have  found 
it  was  received  in  the  course  of  trade,  and,  therefore,  the  case  is  clear, 
and  within  the  principle  of  all  those  Mr.  Wood  has  cited,  from  that 
of  Miller  v.  Race,  1  Burrows,  4.'32,  downwards,  to  that  determined 
by  me  at  nisi  prius. 

The  postea  to  be  delivered  to  the  plaintiff. 


PICKER  v.  LONDON  &  COUNTY  BANKING  CO.,  Limited. 
(Court  of  Appeal,  1887.     IS  Q.  B.  Div.  ol.o.) 

The  action  was  brought  by  the  plaintiff  to  recover  possession 
from  the  defendants  of  certain  Prussian  consolidated  -lio  per  cent, 
bonds  which  the  plaintiff'  alleged  to  belong  to  him.  The  defendants 
set  up  by  their  defense  that  these  bonds  were  negotiable  instru- 
ments of  which  they  were  bona  fide  holders  for  value. 

Judgment  for  plaintiff." 

Lord  EsHER,  M.  R.  In  this  case  the  plaintiff'  brings  his  action  of 
detinue  to  recover  from  the  defendants  certain  Prussian  bonds  of 
which  the  defendants  have  possession.  His  case  is  that  the  bonds 
were  stolen  from  him,  that  no  title  to  the  bonds  passed  to  the  thief, 
and  that  the  defendants  cannot  therefore  make  a  title  to  them.  The 
defendants  in  answer  say  that,  although  the  thief  had  no  property 
in  the  bonds,  yet  the  delivery  of  them  to  the  defendants,  who  took 
them  bona  fide  and  for  valuable  consideration,  passed  the  property 

8  The  statement  of  facts  is  abbreviated,  and  arguments  of  counsel,  part  of 
the  opinion  of  Lord  Esher,  M.  R.,  and  the  concurring  opinion  of  FRY,  L.  J., 
are  omitted. 


NEGOTIABILITY,  13 

in  them  to  the  defendants,  on  the  ground  that  they  were  what  are 
known  in  Enghsh  law  and  trade  as  negotiable  instruments.  This 
contention  raises  the  question  whether  these  bonds  without  the  cou- 
pons were  for  this  purpose  negotiable  instruments  according  to  the 
law  of  England.     *     *     * 

I  rather  think  that  the  evidence  of  the  Prussian  witnesses,  whose 
business  would  make  it  likely  that  they  should  know  the  custom  of 
trade  in  Prussia,  tended  to  show  that  these  bonds  without  the  coupons 
were  not  negotiable  instruments  by  the  custom  of  trade  there.  But 
I  will  assume  that  they  were  negotiable  instruments  in  Prussia  in 
the  fullest  sense  of  the  term.  The  question  is,  what  under  those 
circumstances  is  the  English  law  with  respect  to  them  ?  The  com- 
mon law  of  England  does  not  allow  a  party  to  a  contract  to  transfer 
his  right  under  the  contract  to  another  person  except  in  certain 
cases.  Such  a  transfer  of  a  chose  in  action  could  of  course  be  made 
under  the  provisions  of  a  statute,  and  in  the  case  of  instruments 
which  by  the  custom  of  merchants  recognized  by  the  law  of  England 
had  become  negotiable  instruments.  But  it  appears  to  me  that  in 
order  to  establish  such  an  exception  to  the  common-law  rule  some 
custom  of  merchants  obtaining  in  this  country  must  be  proved  or 
some  English  statute  must  be  relied  on.  If  all  that  can  be  proved 
is  that  by  the  law  or  custom  in  Prussia  the  instrument  is  negotiable, 
then,  as  it  seems  to  me,  the  answer  is  that  an  English  court  and 
English  merchants  are  not  bound  by  a  law  or  custom  of  trade  in 
Prussia.  To  prove  that  an  instrument  is  negotiable  in  the  sense  re- 
quired, there  must  be  something  to  make  it  so  by  English  law.  There 
is  no  question  here  of  any  statute;  nor  is  it  shown  that  there  is  any 
custom  of  merchants  in  this  country  to  treat  these  bonds  without 
the  coupons  as  negotiable. 

It  is  not  necessary,  I  think,  to  decide  in  this  case  what  would 
be  prima  facie  evidence  of  such  a  custom.  It  was  not  disputed  that 
the  evidence  in  this  case  justified  the  learned  judge  in  the  court  below 
in  saying  that  there  was  nothing  to  show  that  by  the  custom  of  trade 
in  England  these  bonds  were  negotiable,  so  as  to  be  negotiable  in- 
struments in  the  full  sense  of  the  term.  On  the  contrary  the  evi- 
dence was  that  they  were  not,  for  I  understand  the  effect  of  the 
evidence  of  the  plaintiff's  witnesses  not  to  be  confined  merely  to  the 
practice  of  the  London  Stock  Exchange,  but  as  referring  to  the  prac- 
tice among  merchants  and  business  men  in  general.  If  it  were  nec- 
essary to  say  what  would  be  prima  facie  evidence  of  the  negotiability 
of  an  instrument  in  this  or  in  a  foreign  country,  I  should  be  disposed 
to  say  that  evidence  that  an  instrument  is  by  the  custom  of  trade 
negotiable  here  would  be  strong  evidence  that  it  is  negotiable  in  the 
country  of  its  issue,  but  that  evidence  that  it  is  negotiable  by  the 
custom  of  trade  in  the  country  of  issue  would  not  be  evidence  that 
it  is  negotiable  here.  It  seems  to  me  that  these  considerations  are 
sufficient  to  decide  the  case. 


14  INTRODUCTION. 

None  of  the  cases  cited,  such  as  Goodwin  v.  Robarts,  1  App.  Cas. 
476,  Lang  v.  Smyth,  7  Bing.  284,  and  Wookey  v.  Pole,  4  B.  &  A.  1. 
seem  to  contravene  the  view  I  have  expressed,  viz.,  that,  to  render  a 
foreign  instrument  negotiable  here  in  the  full  sense  of  the  term,  it 
is  not  sufficient  to  show  that  by  the  foreign  law  or  custom  it  is  treated 
as  negotiable.     On  the  contrary  they  all  seem  to  me  to  support  it. 

For  these  reasons  I  think  this  appeal  must  be  dismissed. 

BowEN,  L-  J.  I  am  of  the  same  opinion.  These  bonds  having 
been  the  property  of  the  plaintiff  before  they  were  stolen  from  him, 
the  question  is  whether  the  defendants  have  nevertheless  a  good  title 
to  them,  having  taken  them  bona  fide  and  for  valuable  consideration. 
The  broad  principle  of  law  is  that  except  in  the  case  of  a  sale  in 
market  overt  no  person  can  acquire  a  title  to  a  personal  chattel  from 
a  person  who  is  not  the  owner.  There  is  an  exception  to  this  prin- 
ciple in  respect  of  certain  instruments  of  contract  well  known  to 
the  law  merchant,  in  the  case  of  which,  by  the  recognized  custom 
of  merchants,  the  property  in  the  instrument  and  all  rights  upon  it 
pass  by  the  delivery  of  the  instrument.  A  further  exception  to  the 
rule  would  be  where  an  instrument,  though  not  possessing  the  quality 
of  negotiability  at  common  law  or  by  any  custom  of  merchants,  has 
that  quality  attached  to  it  by  some  statute  of  the  realm.  Among 
the  rights  which  are  ordinarily  created  by  such  instruments  is  the 
right  of  suing  upon  the  contract  therein  contained.  At  common  law 
in  general  a  chose  in  action  is  not  transferable.  Therefore  the  right 
of  action  can  only  pass  by  delivery  of  the  instrument  where  the 
instrument  is  negotiable  or  clothed  by  statute  with  the  attributes  of 
a  negotiable  instrument. 

It  may  be  said  that  in  the  case  of  these  bonds  there  is  not,  strictly 
speaking,  a  chose  in  action,  because  the  bonds  only  import  a  promise 
by  a  foreign  government  which  could  not  be  sued  on ;  but  it  is  suffi- 
cient for  the  present  purpose  to  say  that,  in  my  opinion,  the  case 
for  the  defendants  cannot  be  put  higher  than  if  the  promise  which 
the  bond  imports  were  one  on  which  there  was  a  right  of  action. 
The  question  then  would  be  whether  this  right  could  be  passed  at 
law  so  far  as  English  law  is  concerned,  otherwise  than  by  virtue 
of  some  statute  or  some  custom  of  merchants  prevailing  in  this 
country.  I  do  not  see  in  this  case  any  evidence  that  these  bonds 
are  negotiable  by  any  custom  of  merchants  in  this  country;  there 
is  no  evidence  whatever  of  any  mercantile  custom  whereby  such  in- 
struments as  these  bonds  without  the  coupons  are  treated  as  part 
of  the  mercantile  currency  recognized  in  the  kingdom,  unless  the 
evidence  with  regard  to  Uieir  negotiability  in  Prussia  could  be  treat- 
ed as  amounting  to  such  evidence.  But  at  the  utmost  that  would 
only  amount,  as  it  seems  to  me,  to  evidence  that  such  instruments 
form  part  of  the  mercantile  currency  in  Prussia.  I  do  not  say  that 
the  evidence  does  amount  even  to  that,  but  I  will  assume  for  a  mo- 
ment that  it  does.     Then  is  evidence  that  an  instrument  or  piece  of 


NEGOTIABILITT.  15 

money  forms  part  of  the  mercantile  currency  of  another  country  any 
evidence  that  it  forms  part  of  the  mercantile  currency  in  this  coun- 
try? Such  a  proposition  is  obviously  absurd,  for,  if  it  were  true, 
there  could  be  no  such  thing  as  a  national  currency.  For  the  same 
reason,  as  it  appears  to  me,  that  a  German  dollar  is  not  the  same  thing 
as  its  equivalent  in  English  money  for  this  purpose,  and  that  the 
barbarous  tokens  of  some  savage  tribe,  such  as  cowries,  are  not  part 
of  the  English  currency,  evidence  that  the  instrument  would  pass  in 
Prussia  as  a  negotiable  instrument  does  not  show  that  it  is  a  ne- 
gotiable instrument  here.  For  these  reasons  it  appears  to  me  that  the 
defense  fails. 

Fry,  E.  J.     I  am  of  the  same  opinion.     *     *     * 

Appeal  dismissed. 


SHAW  V.   NORTH  PENNSYLVANIA  R.  CO. 

(Supreme  Court  of  the  United  States,  1879.    101  U.  S.  557,  25  L.  Ed.  892.) 

This  is  an  action  of  replevin,  brought  by  the  Merchants'  National 
Bank  of  St.  Louis,  Mo.,  against  Shaw  &  Esrey,  of  Philadelphia,  Pa., 
to  recover  possession  of  certain  cotton,  marked  "W  D  L"  One  hun- 
dred and  forty-one  bales  thereof,  having  been  taken  possession  of 
by  the  marshal,  were  returned  to  the  defendants  upon  their  entering 
into  the  proper  bond.  On  November  11,  1874,  Norvell  &  Co.,  of 
St.  Louis,  sold  to  the  bank  their  draft  for  $11,947.43  on  M.  Kuhn 
&  Bro.,  of  Philadelphia,  and,  as  collateral  security  for  the  payment 
thereof  indorsed  in  blank  and  delivered  to  the  bank  an  original  bill 
of  lading  for  170  bales  of  cotton  that  day  shipped  to  the  last-named 
city.  The  duplicate  bill  of  lading  was  on  the  same  day  forwarded 
to  Kuhn  &  Bro.  by  Norvell  &  Co.  The  Merchants'  Bank  forwarded 
the  draft,  with  the  bill  of  lading  thereto  attached,  to  the  Bank  of 
North  America.  On  November  14,  the  last-named  bank  sent  the 
draft — the  original  bill  of  lading  still  being  attached  thereto — to  Kuhn 
&  Bro.  by  its  messenger  for  acceptance.  The  messenger  presented 
the  draft  and  bill  to  one  of  the  members  of  that  firm,  who  accepted 
the  former,  but,  without  being  detected,  substituted  the  duplicate  for 
the  original  bill  of  lading. 

On  the  day  upon  which  this  transaction  occurred,  Kuhn  &  Bro. 
indorsed  the  original  bill  of  lading  to  Miller  &  Bro.,  and  received 
thereon  an  advance  of  $8,500.  Within  a  few  days  afterwards,  the 
cotton,  or  rather  that  portion  of  it  which  is  in  controversy,  was, 
through  the  agency  of  a  broker,  sold  by  sample  with  the  approval 
of  Kuhn  &  Bro.  to  the  defendants,  who  were  manufacturers  at  Ches- 
ter, Pa.  The  bill  of  lading,  having  been  deposited  on  the  same  day 
with  the  North  Pennsylvania  Railroad  Company,  at  whose  depot  the 
cotton  was  expected  to  arrive,  it  was  on  its  arrival  delivered  to  the 
defendants. 


16  INTRODUCTION. 

The  fact  that  the  Bank  of  North  America  held  the  duplicate  in- 
stead of  the  original  bill  of  lading  was  discovered  for  the  first  time 
on  the  9th  of  December,  by  the  president  of  the  plaintiiT,  who  had 
gone  to  Philadelphia  in  consequence  of  the  failure  of  Kuhn  &  Bro. 
and  the  protest  of  the  draft. 

The  defendants  below  contended  that  the  bill  of  lading  was  ne- 
gotiable in  the  ordinary  sense  of  that  word,  that  Miller  &  Bro.  had 
purchased  it  for  value  in  the  usual  course  of  business,  and  that  they 
thereby  had  acquired  a  valid  title  to  the  cotton,  which  was  not  im- 
paired by  proof  that  Kuhn  &  Bro.  had  fraudulently  got  possession 
of  the  bill. 

Verdict  for  the  plaintiff.  The  defendants,  Shaw  and  Esrey,  sued 
out  this   writ  of  error.s 

Mr.  Justice  Strong  delivered  the  opinion  of  the  court. 

The  defendants  below,  now  plaintiffs  in  error,  bought  the  cotton 
from  Miller  &  Bro.  by  sample,  through  a  cotton  broker.  No  bill  of 
lading  or  other  written  evidence  of  title  in  their  vendors  was  ex- 
hibited to  them.  Hence  they  can  have  no  other  or  better  title  than 
their  vendors  had.  The  inquiry,  therefore,  is,  what  title  had  Miller 
&  Bro.  as  against  the  bank,  which  confessedly  was  the  owner,  and 
which  is  still  the  owner,  unless  it  has  lost  its  ownership  by  the  fraud- 
ulent act  of  Kuhn  &  Bro.  ?  The  cotton  was  represented  by  the  bill 
of  lading  given  to  Norvell  &  Co.,  at  St.  Louis,  and  by  them  indorsed 
to  the  bank,  to  secure  the  payment  of  an  accompanying  discounted 
time  draft.  That  indorsement  vested  in  the  bank  the  title  to  the  cot- 
ton, as  well  as  to  the  contract.  While  it  there  continued,  and  during 
the  transit  of  the  cotton  from  St.  Louis  to  Philadelphia,  the  indorsed 
bill  of  lading  was  stolen  by  one  of  the  firm  of  Kuhn  &  Bro.,  and  by 
them  indorsed  over  to  Miller  &  Bro.  for  an  advance  of  $8,500.  The 
jury  has  found,  however,  that  there  was  no  negligence  of  the  bank, 
or  of  its  agents,  in  parting  with  possession  of  the  bill  of  lading,  and 
that  ^Miller  &  Bro.  knew  facts  from  which  they  had  reason  to  believe 
it  was  held  to  secure  the  payment  of  an  outstanding  draft ;  in  other 
words,  that  Kuhn  &  Bro.  were  not  the  lawful  owners  of  it,  and  had 
no  right  to  dispose  of  it. 

It  is  therefore  to  be  determined  whether  Miller  &  Bro.,  by  taking 
the  bill  of  lading  from  Kuhn  &  Bro.  under  these  circumstances,  ac- 
quired thereby  a  good  title  to  the  cotton  as  against  the  bank.  In  con- 
sidering this  question,  it  does  not  appear  to  us  necessary  to  inquire 
whether  the  effect  of  the  bill  of  lading  in  the  hands  of  Miller  & 
Bro.  is  to  be  determined  by  the  law  of  Missouri,  where  the  bill  was 
given,  or  by  the  law  of  Pennsylvania,  where  the  cotton  was  delivered. 
The  statutes  of  both  states  enact  that  bills  of  lading  shall  be  nego- 
tiable  by    indorsement   and   delivery.      The    statute    of    Pennsylvania 

»  The  statement  of  the  case  is  abridged,  and  the  arguments  of  counsel  and 
part  of  the  opinion  are  omitted. 


NEGOTIABILITY.  IT 

declares  simply,  they  "shall  be  negotiable,  and  may  be  transferred 
by  indorsement  and  delivery" ;  while  that  of  Missouri  enacts  that 
"they  shall  be  negotiable  by  written  indorsement  thereon  and  delivery, 
in  the  same  manner  as  bills  of  exchange  and  promissory  notes." 
There  is  no  material  difference  between  these  provisions.  Both  stat- 
utes prescribe  the  manner  of  negotiation;  i.  e.  by  indorsement  and 
delivery.     Neither  undertakes  to  define  the  effect  of  such  a  transfer. 

We  must,  therefore,  look  outside  of  the  statutes  to  learn  what 
they  mean  by  declaring  such  instruments  negotiable.  What  is  "ne- 
gotiability"? It  is  a  technical  term  derived  from  the  usage  of  mer- 
chants and  bankers,  in  transferring,  primarily,  bills  of  exchange,  and 
afterwards  promissory  notes.  At  common  law  no  contract  was  as- 
signable, so  as  to  give  to  an  assignee  a  right  to  enforce  it  by  suit 
in  his  own  name.  To  this  rule  bills  of  exchange  and  promissory 
notes,  payable  to  order  or  bearer,  have  been  admitted  exceptions, 
made  such  by  the  adoption  of  the  law  merchant.  They  may  be  trans- 
ferred by  indorsement  and  delivery,  and  such  a  transfer  is  called  ne- 
gotiation. It  is  a  mercantile  business  transaction,  and  the  capability 
of  being  thus  transferred,  so  as  to  give  to  the  indorsee  a  right  to  sue 
on  the  contract  in  his  own  name,  is  what  constitutes  negotiabil'ty. 
The  term  "negotiable"  expresses,  at  least  primarily,  this  mode  and 
effect  of  a  transfer. 

In  regard  to  bills  and  notes,  certain  other  consequences  generally 
though  not  always,  follow.  Such  as  a  liability  of  the  indorser,  if  de- 
mand be  duly  made  of  the  acceptor  or  maker,  and  seasonable  notice 
of  his  default  be  given.  So  if  the  indorsement  be  made  for  value  to 
a  bona  fide  holder,  before  the  maturity  of  the  bill  or  note,  in  due 
course  of  business,  the  maker  or  acceptor  cannot  set  up  against  the 
indorsee  any  defense  which  might  have  been  set  up  against  the  payee 
had  the  bill  or  note  remained  in  his  hands.  So,  also,  if  a  note  or  bill 
of  exchange  be  indorsed  in  blank,  if  payable  to  order,  or  if  it  be  pay- 
able to  bearer,  and  therefore  negotiable  by  delivery  alone,  and  then 
be  lost  or  stolen,  a  bona  fide  purchaser  for  value  paid  acquires  title  to 
it,  even  as  against  the  true  owner.  This  is  an  exception  from  the 
ordinary  rule  respecting  personal  property.  But  none  of  these  con- 
sequences are  necessary  attendants  or  constituents  of  negotiability, 
or  negotiation.  That  may  exist  without  them.  A  bill  or  note  past 
due  is  negotiable,  if  it  be  payable  to  order  or  bearer,  but  its  indorse- 
ment or  delivery  does  not  cut  off  the  defenses  of  the  maker  or  ac- 
ceptor against  it,  nor  create  such  a  contract  as  results  from  an  in- 
dorsement before  maturity,  and  it  does  not  give  to  the  purchaser  of 
a  lost  or  stolen  bill  the  rights  of  the  real  owner.  It  does  not  neces- 
sarily follow,  therefore,  that  because  a  statute  has  made  bills  of  lading 
negotiable  by  indorsement  and  delivery,  all  these  consequences  of 
an  indorsement  and  delivery  of  bills  and  notes  before  maturity  ensue 
or  are  intended  to  result  from  such  negotiation. 
Sm.&  M.B.&  N.— 2 


18  INTRODUCTION. 

Bills  of  exchange  and  promissory  notes  are  exceptional  in  their 
character.  They  are  representatives  of  money,  circulating  in  the 
commercial  world  as  evidence  of  money,  "of  which  any  person  in  law- 
ful possession  may  avail  himself  to  pay  debts  or  make  purchases  or 
make  remittances  of  money  from  one  country  to  another,  or  to  re- 
mote places  in  the  same  country.  Hence,  as  said  by  Story,  J.,  it  has 
become  a  general  rule  of  the  commercial  world  to  hold  bills  of  ex- 
change, as  in  some  sort,  sacred  instruments  in  favor  of  bona  fide 
holders  for  a  valuable  consideration  without  notice."  Without  such 
a  holding  they  could  not  perform  their  peculiar  functions.  It  is  for 
this  reason  it  is  held  that  if  a  bill  or  note,  indorsed  in  blank  or  pay- 
able to  bearer,  be  lost  or  stolen,  and  be  purchased  from  the  finder 
or  thief,  without  any  knowledge  of  want  of  ownership  in  the  vendor, 
the  bona  fide  purchaser  may  hold  it  against  the  true  owner.  He 
may  hold  it  though  he  took  it  negligently,  and  when  there  were  sus- 
picious circumstances  attending  the  transfer.  Nothing  short  of  actual 
or  constructive  notice  that  the  instrument  is  not  the  property  of  the 
person  who  offers  to  sell  it,  that  is,  nothing  short  of  mala  fides,  will 
defeat  his  right.  The  rule  is  the  same  as  that  which  protects  the 
bona  fide  indorser  of  a  bill  or  note  purchased  for  value  from  the 
true  owner.  The  purchaser  is  not  bound  to  look  beyond  the  instru- 
ment. Goodman  v.  Harvey,  4  Adol.  &  E.  870;  Goodman  v.  Simonds, 
20  How.  343,  15  L.  Ed.  934 ;  Murray  v.  Lardner,  2  Wall.  110,  17  L. 
Ed.  857;  Matthews  v.  Poythress,  4  Ga.  287.  The  rule  was  first  ap- 
plied to  the  case  of  a  lost  bank-note  (Miller  v.  Race,  1  Burrows, 
452),  and  put  upon  the  ground  that  the  interests  of  trade,  the  usual 
course  of  business,  and  the  fact  that  bank-notes  pass  from  hand  to 
hand  as  coin,  require  it.  It  was  subsequently  held  applicable  to  mer- 
chants' drafts,  and  in  Peacock  v.  Rhodes,  2  Doug.  633,  to  bills  and 
notes,  as  coming  within  the  same  reason. 

The  reason  can  have  no  application  to  the  case  of  a  lost  or  stolen 
bill  of  lading.  The  function  of  that  instrument  is  entirely  different 
from  that  of  a  bill  or  note.  It  is  not  a  representative  of  money,  used 
for  transmission  of  money,  or  for  the  payment  of  debts  or  for  pur- 
chases. It  does  not  pass  from  hand  to  hand  as  bank-notes  or  coin.  It 
is  a  contract  for  the  performance  of  a  certain  duty.  True,  it  is  a 
symbol  of  ownership  of  the  goods  covered  by  it — a  representative  of 
those  goods.  But  if  the  goods  themselves  be  lost  or  stolen,  no  sale 
of  them  by  the  finder  or  thief,  though  to  a  bona  fide  purchaser  for 
value,  will  divest  the  ownership  of  the  person  who  lost  them  or  from 
whom  they  were  stolen.  Why,  then,  should  the  sale  of  the  symbol 
or  mere  representative  of  the  goods  have  such  an  eflfect?  It  may 
be  that  the  true  owner  by  his  negligence  or  carelessness  may  have  put 
it  in  the  power  of  a  finder  or  thief  to  occupy  ostensibly  the  position  of 
a  true  owner,  and  his  carelessness  may  estop  him  from  asserting  his 
right  against  a  purchaser  who  has  been  misled  to  his  hurt  by  that 
carelessness.     But  the  present  is  no  such  case.     It  is  established  by 


NEGOTIABILITY.  19 

the  verdict  of  the  jury  that  the  bank  did  not  lose  its  possession  of 
the  bill  of  lading  negligently.  There  is  no  estoppel,  therefore,  against 
the  bank's  right. 

Bills  of  lading  are  regarded  as  so  much  cotton,  grain,  iron,  or  other 
articles  of  merchandise.  The  merchandise  is  very  often  sold  or  pledg- 
ed by  the  transfer  of  the  bills  which  cover  it.  They  are,  in  commerce, 
a  very  different  thing  from  bills  of  exchange  and  promissory  notes, 
answering  a  different  purpose  and  performing  different  functions.  It 
cannot  be  therefore  that  the  statute  which  made  them  negotiable  by 
mdorsement  and  delivery,  or  negotiable  in  the  same  manner  as  bills 
of  exchange  and  promissory  notes  are  negotiable,  intended  to  change 
totally  their  character,  put  them  in  all  respects  on  the  footing  of 
instruments  which  are  the  representatives  of  money,  and  charge  the 
negotiation  of  them  with  all  the  consequences  which  usually  attend 
or  follow  the  negotiation  of  bills  and  notes.  Some  of  these  conse- 
quences would  be  very  strange,  if  not  impossible.  Such  as  the  lia- 
bihty  of  indorsers,  the  duty  of  demand  ad  diem,  notice  of  nondelivery 
by  the  carrier,  etc.,  or  the  loss  of  the  owner's  property  by  the  fraudu- 
lent assignment  of  a  thief.  If  these  were  intended,  surely  the  statute 
would  have  said  something  more  than  merely  make  them  negotiable 
by  indorsement.  No  statute  is  to  be  construed  as  altering  the  com- 
mon law,  farther  than  its  words  import.  It  is  not  to  be  construed 
as  making  any  innovation  upon  the  common  law  which  it  does  not 
fairly  express.  Especially  is  so  great  an  innovation  as  would  be 
placing  bills  of  lading  on  the  same  footing  in  all  respects  with  bills 
of  exchange  not  to  be  inferred  from  words  than  can  be  fully  satisfied 
without  it.  The  law  has  most  carefully  protected  the  ownership  of 
personal  property,  other  than  money,  against  misappropriation  by 
others  than  the  owner,  even  when  it  is  out  of  his  possession.  This 
protection  would  be  largely  withdrawn  if  the  misappropriation  of 
its  symbol  or  representative  could  avail  to  defeat  the  ownership,  even 
when  the  person  who  claims  under  a  misappropriation  had  reason 
to  believe  that  the  person  from  whom  he  took  the  property  had  no 
right  to  it.     *     *     * 

Judgment  affirmed. 


PART  I 
FORM  AND  INCEPTION 


CHAPTER  I 
FORM  OF  BILL  AND  OF  NOTE 


SECTION  1.— XEGOTL\BLE  AND  XOXXEGOTL\BLE  BILLS 
AND   NOTES— WORDS    OF    NEGOTIABILITY 


HODGES  V.  STEWARD. 
(Court  of  King's  Bench,  IGOl.     1  Salk.  125.) 

In  an  action  on  the  case  on  an  inland  bill  of  exchange  brought 
by  the  indorsee  against  the  drawer,  these  following  points  were  re- 
solved : 

1st.  A  difference  was  taken  between  a  bill  payable  to  J.  S.  or  bear- 
er, and  J.  S.  or  order ;  for  a  bill  payable  to  J.  S.  or  bearer  is  not  as- 
signable by  the  contract  so  as  to  enable  the  indorsee  to  bring  an 
action,  if  the  drawer  refuse  to  pay,  because  there  is  no  such  au- 
thority given  to  the  party  by  the  first  contract,  and  the  effect  of  it 
is  only  to  discharge  the  drawee,  if  he  pays  it  to  the  bearer,  though 
Le  conies  to  it  by  trover,  theft,  or  otherwise.  But  when  the  bill  is  pay- 
able to  J.  S.  or  order,  there  an  express  power  is  given  to  the  party  to 
assign,  and  the  indorsee  may  maintain  an  action. 

2dly.  Though  an  assignment  of  a  bill  payable  to  J.  S.  or  bearer 
be  no  good  assignment  to  charge  the  drawer  with  an  action  on  the 
bill,  yet  it  is  a  good  bill  between  the  indorser  and  indorsee,  and  the 
indorser  is  liable  to  an  action  for  the  money ;  for  the  indorsement  is 
in  nature  of  a  new  bill. 

3dly.  It  being  objected,  that  in  this  case  there  was  no  averment 
of  the  defendant's  being  a  merchant,  it  was  answered  by  the  court, 
that  the  drawing  the  bill  was  a  sufficient  merchandizing  and  nego- 
tiating to  this  purpose. 

4thly.  The  plaintiff  declared  on  a  special  custom  in  London  for  the 
bearer  to  have  this  action.  To  which  the  defendant  demurred,  with- 
out traversing  the  custom ;  so  that  he  confessed  it,  whereas  in  truth 

(20) 


Ch.   1)  FORM    OF    BILL   AND    OF   NOTK.  21 

there  was  no  such  custom;  and  the  court  was  of  opinion,  that  for  this 
reason  judgment  should  be  given  for  the  plaintiff;  for  though  the 
court  is  to  take  notice  of  the  law  of  merchants  as  part  of  the  law  of 
England,  yet  they  cannot  take  notice  of  the  custom  of  particular 
places ;  and  the  custom  in  the  declaration  benig  sufficient  to  maintain 
the  action,  and  that  being  confessed,  he  had  admitted  judgment  against 
himself. 

5thly.  It  was  held  that  a  general  indebitatus  assumpsit  will  not  lie 
on  a  bill  of  exchange  for  want  of  a  consideration,  for  it  is  but  an 
evidence  of  a  promise  to  pay,  which  is  but  a  nudum  pactum ;  and 
therefore  he  must  either  bring  a  special  action  on  the  custom  of 
merchants,  or  else  a  general  indebitatus  against  the  drawer  for  money 
received  to  his  use. 

Judgment  pro  quer. 

Nota. — If  a  promissory  note  be  made  to  J.  S.  and  bearer,  the  bear- 
er cannot  bring  an  action  on  this  note  in  his  own  name,  but  he  may 
in  the  name  of  the  principal ;  and  the  bare  possession  of  the  note  is, 
for  that  purpose,  a  sufficient  authority.  Nicholson  v.  Sedgwick,  Hil. 
1696,  7  C.  B.  This  nota  is  copied  from  a  MSS.  rep,  of  Judge  Blen- 
cowe.     1  Ld.  Raym.  180,  S.  C. 


CLERKE  V.   MARTIN. 

(Court  of  Queen's  Bench,  1702.     2  Lrl.  Raym.  757.) 

The  plaintiff  brought  an  action  upon  his  case  against  the  defend- 
ant upon  several  promises;  one  count  was  upon  a  general  indebitatus 
assumpsit  for  money  lent  to  the  defendant ;  another  count  was  upon 
the  custom  of  merchants,  as  upon  a  bill  of  exchange;  and  showed, 
that  the  defendant  gave  a  note  subscribed  by  himself,  by  which  he 
promised  to  pay  to  the  plaintiff  or  his  order.  Upon  non  as- 
sumpsit a  verdict  was  given  for  the  plaintiff,  and  entire  damages. 
And  it  was  moved  in  arrest  of  judgment,  that  this  note  was  not  a 
bill  of  exchange  within  the  custom  of  merchants,  and  therefore  the 
plaintiff,  having  declared  upon  it  as  such,  was  wrong;  but  that  the 
proper  way  in  such  cases  is  to  declare  upon  a  general  indebitatus  as- 
sumpsit for  money  lent,  and  the  note  would  be  good  evidence  of  it. 

But  it  was  argued  by  Sir  Bartholomew  Shower  the  last  Michalemas 
term  for  the  plaintiff,  that  this  note,  being  payable  to  the  plaintiff  or 
his  order,  was  a  bill  of  exchange,  inasmuch  as  by  its  nature  it  was 
negotiable ;  and  that  distinguishes  it  from  a  note  payable  to  F.  S.  or 
bearer,  which  he  admitted  was  not  a  bill  of  exchange,  because  it  is 
not  assignable  nor  indorsable  by  the  intent  of  the  subscriber,  and 
consequently  not  negotiable,  and  therefore  it  cannot  be  a  bill  of  ex- 


22  FORM    AND    INCEPTION.  (Part   1 

change,  because  it  is  incident  to  the  nature  of  a  bill  of  exchange  to 
be  negotiable;  but  here  this  bill  is  negotiable,  for  if  it  had  been  in- 
dorsed payable  to  F.  N.  F.  N.  might  have  brought  his  action  upon 
it  as  upon  a  bill  of  exchange,  and  might  have  declared  upon  the  cus- 
tom of  merchants.  Why  then  should  it  not  be  before  such  indorse- 
ment a  bill  of  exchange  to  the  plaintiff  himself;  since  the  defendant 
by  his  subscription  has  shown  his  intent,  to  be  liable  to  the  payment 
of  this  money  to  the  plaintiff  or  his  order ;  and  since  he  hath  thereby 
agreed,  that  it  shall  be  assignable  over,  which  is  by  consequence 
that  it  shall  be  a  bill  of  exchange?  That  there  is  no  difference  in 
reason,  between  a  note,  which  saith,  "I  promise  to  pay  to  F.  S.  or 
order,"  etc.,  and  a  note  which  saith,  "I  pray  you  to  pay  to  F.  S.  or 
order,"  etc.,  they  are  both  equally  negotiable;  and  to  make  such  a  note 
a  bill  of  exchange,  can  be  no  wrong  to  the  defendant,  because  he,  by 
the  signing  of  the  note,  has  made  himself  to  that  purpose  a  merchant 
(Sarsfield  v.  Witherly,  2  Vent.  292),  and  has  given  his  consent,  that 
his  note  shall  be  negotiated,  and  thereby  has  subjected  himself  to  the 
law  of  merchants. 

But  Holt,  Chief  Justice,  was  totis  viribus  against  the  action ;  and 
said,  that  this  note  could  not  be  a  bill  of  exchange.  That  the  main- 
taining of  these  actions  upon  such  notes,  were  innovations  upon  the 
rules  of  the  common  law;  and  that  it  amounted  to  the  setting  up  a 
new  sort  of  specialty  unknown  to  the  common  law,  and  invented  in 
Lombard  street,  which  attempted  in  these  matters  of  bills  of  exchange 
to  give  laws  to  Westminster  Hall.  That  the  continuing  to  declare 
upon  these  notes  upon  the  custom  of  merchants  proceeded  from  ob- 
stinacy and  opinionativeness,  since  he  had  always  expressed  his  opin- 
ion against  them,  and  since  there  was  so  easy  a  method,  as  to  declare 
upon  a  general  indebitatus  assumpsit  for  money  lent,  etc.  As  to  the 
case  of  Sarsfield  v.  Witherly,  he  said,  he  was  not  satisfied  with  the 
judgment  of  the  King's  Bench,  and  that  he  advised  the  bringing  of 
a  writ  of  error. 

Gould,  Justice,  said,  that  he  did  not  remember,  it  had  ever  been 
adjudged,  that  a  note,  in  which  the  subscriber  promised  to  pay,  etc., 
to  F.  S.  or  bearer,  was  not  a  bill  of  exchange.  That  the  bearer  could 
not  sue  an  action  upon  such  a  note  in  his  own  name,  is  without 
doubt;  and  so  it  was  resolved  between  Horton  and  Coggs,  now  print- 
ed in  3  Lev.  299,  but  that  it  was  never  resolved,  that  the  party  him- 
self (to  whom  such  note  was  payable)  could  not  have  an  action  upon 
the  custom  of  merchants  upon  such  a  bill. 

But  Holt,  Chief  Justice,  answered,  that  it  was  held  in  the  said 
case  of  Horton  v.  Coggs,  that  such  a  note  was  not  a  bill  of  exchange 
within  the  customs  of  merchants. 

And  afterwards  in  this  Easter  term  it  was  moved  again,  and  the 
court  continued  to  be  of  opinion  against  the  action.  And  then  Mr. 
Branthwaite  for  the  plaintiff  urged,  that  if  this  note  was  not  a  bill 
of  exchange  within  the  custom  of  merchants,  then  the  promise  found- 


Ch.  1)  FORM    OF    BILL   AND   OF    NOTE.  23 

ed  upon  it  was  void ;  and  then  it  could  not  be  intended,  that  any  dam- 
age was  given  by  the  jury  for  the  breach  of  it,  but  all  the  damages 
must  be  intended  to  have  been  given  upon  the  general  indebitatus 
assumpsit. 

Holt,  Chief  Justice,  said,  that  would  be  true,  if  it  had  been  void 
by  reason  of  its  being  insensible;  but  this  matter  is  sensible  enough, 
though  not  sufficient  in  law  to  raise  a  promise ;  and  therefore  one 
cannot  intend,  but  that  damages  were  given  for  it ;  and  consequently 
that  judgment  must  be  arrested. 

And  judgment  was  given,  quod  querens  nil  capiat  per  billam,  etc. 
by  the  opinion  of  the  whole  court. 


3  &  4  ANNE,  c.  IX,  §  1    (1704). 

Whereas  it  hath  been  held.  That  notes  in  writing,  signed  by  the 
party  who  makes  the  same,  whereby  such  party  promises  to  pay 
unto  any  other  person,  or  his  order,  any  sum  of  money  therein  men- 
tioned, are  not  assignable  or  indorsible  over,  within  the  custom  of 
merchants,  to  any  other  person ;  and  that  such  person  to  whom  the 
sum  of  money  mentioned  in  such  note  is  payable,  cannot  maintain 
an  action,  by  the  custom  of  merchants,  against  the  person  who  first 
made  and  signed  the  same ;  and  that  any  person  to  whom  such  note 
shall  be  assigned,  indorsed,  or  made  payable,  could  not,  within  the 
said  custom  of  merchants,  maintain  any  action  upon  such  note 
against  the  person  who  first  drew  and  signed  the  same :  therefore 
to  the  intent  to  encourage  trade  and  commerce,  which  will  be  much 
advanced  if  such  notes  shall  have  the  same  effect  as  inland  bills  of 
exchange,  and  shall  be  negotiated  in  like  manner ;  be  it  enacted  by  the 
Queen's  most  excellent  majesty,  by  and  with  the  advice  and  consent 
of  the  lords  spiritual  and  temporal,  and  commons,  in  this  present 
parliament  assembled,  and  by  the  authority  of  the  same,  That  all 
notes  in  writing,  that  after  the  first  day  of  May,  in  the  year  of  our 
Lord,  one  thousand  seven  hundred  and  five,  shall  be  made  and  sign- 
ed by  any  person  or  persons,  body  politick  or  corporate,  or  by  the 
servant  or  agent  of  any  corporation,  banker,  goldsmith,  merchant,  or 
trader,  who  is  usually  intrusted  by  him,  her  or  them,  to  sign  such 
promissory  notes  for  him,  her,  or  them,  whereby  such  person  or  per- 
sons, body  politick  and  corporate,  his,  her,  or  their  servant  or  agent, 
as  aforesaid  doth  or  shall  promise  to  pay  to  any  other  person  or  per- 
sons, body  politick  and  corporate,  his,  her,  or  their  order,  or  unto 
bearer,  any  sum  of  money  mentioned  in  such  note,  shall  be  taken 
and  construed  to  be,  by  virtue  thereof,  due  and  payable  to  any  such 
person  or  persons,  body  politick  and  corporate,  to  whom  the  same 
is  made  payable ;  and  also  every  such  note  payable  to  any  person  or 
persons,  body  politick  and  corporate,  his,  her,  or  their  order,  shall 
be  assignable  or  indorsable  over,  in  the  same  manner  as  inland  bills 


24  FOKM    AND    INCEPTION.  (Part  1 

of  exchange  are  or  may  be,  according  to  the  custom  of  merchants; 
and  that  the  person  or  persons,  body  politick  and  corporate,  to  whom 
such  sum  of  money  is  or  shall  be  by  such  note  made  payable,  shall 
and  may  maintain  an  action  for  the  same,  in  such  manner  as  he,  she, 
or  they  might  do,  upon  any  inland  bill  of  exchange,  made  or  drawn 
according  to  the  custom  of  merchants,  against  the  person  or  persons, 
body  politick  and  corporate,  who,  or  whose  servant  or  agent,  as 
aforesaid,  signed  the  same;  and  that  any  person  or  persons,  body 
politick  and  corporate,  to  whom  such  note  that  is  payable  to  any 
person  or  persons,  body  politick  and  corporate,  his,  her,  or  their  or- 
der, is  indorsed  or  assigned,  or  the  money  therein  mentioned  ordered 
to  be  paid  by  indorsement  thereon,  shall  and  may  maintain  his,  her, 
or  their  action  for  such  sum  of  money,  either  against  the  person  or 
persons,  body  politick  and  corporate,  who,  or  whose  servant  or  agent, 
as  aforesaid,  signed  such  note,  or  against  any  of  the  persons  that 
indorsed  the  same,  in  like  manner  as  in  cases  of  inland  bills  of  ex- 
change: and  in  every  such  action  the  plaintiff  or  plaintiffs  shall  re- 
cover his.  her,  or  their  damages  and  costs  of  suit;  and  if  such  plain- 
tiff or  plaintiffs  shall  be  nonsuited,  or  a  verdict  be  given  against 
him,  her,  or  them,  the  defendant  or  defendants  shall  recover  his,  her, 
or  their  costs  against  the  plaintiff  or  plaintiffs ;  and  every  such  plain- 
tiff or  plaintiff's,  defendant  or  defendants,  respectively  recovering, 
may  sue  out  execution  for  such  damages  and  costs  by  capias,  fieri 
facias,  or  elegit. 


GRANT  v.  VAUGHAN. 
(Court  of  Kings  Bench,  1704.     3  Burrows.   1.">1G.) 

Upon  shewing  cause  why  a  verdict  which  had  been  given  for  the 
defendant  should  not  be  set  aside  (upon  payment  of  costs,J  and  a  new 
trial  granted, — the  case  appeared  to  be  tins — 

The  defendant  Vaughan,  a  merchant  in  London,  gave  a  cash-note 
upon  his  banker,  to  one  Bicknell,  a  husband  of  a  ship  of  his:  which 
note  was  dated  "London  22d  October  1763,"  and  directed  to  Sir 
Charles  Asgill,  who  was  Vaughan's  banker;  and  was  worded  thus — 
"Pay  to  Ship  Fortune,  or  bearer,"  so  much.  Bicknell,  by  some  ac- 
cident, lost  this  note.  The  person  who  found  it,  or  who  at  least  was 
in  possession  of  it  (however  he  might  obtain  that  possession),  came, 
four  days  after  the  note  was  payable  in  London,  to  the  shop  of 
Grant  the  plaintiff,  who  was  a  tradesman  at  Portsmouth,  and  bought 
five  pounds  worth  of  tea  of  him,  and  gave  him  this  note  in  payment, 
desiring  to  have  the  change  out  of  it.  Grant  (the  plaintiff)  stept  out, 
to  make  inquiry  "who  this  Vaughan  might  be:"  And  upon  being 
informed  "That  he  was  a  very  good  man,  and  that  it  was  his  hand- 
writing." he  readily  gave  the  change  out  of  the  note,  retaining  the 
price  of  the  tea.     Vaughan,  upon  being  apprized   that  Bicknell  had 


Ch.  1)  FORM    OF   BILL   AND    OF    NOTE.  25 

lost  the  note,  sent  notice  to  Sir  Charles  Asgill,  "Not  to  pay  it." 
Whereupon  Grant,  being -refused  payment,  brought  his  action  upon 
the  case  against  Vaughan,  and  inserted  two  counts  in  his  declara- 
tion; one,  upon  an  inland  bill  of  exchange;  the  other,  an  indebitatus 
assumpsit  for  money  had  and  received  to  his  use.  The  cause  was  tried 
by  a  special  jury  of  merchants;  who  found  for  the  defendant.^ 

Lord  Mansfield  said  the  case  of  Nicholson  and  Sedgwick,  1  Ld. 
Raym.  180,  was  urged  by  the  defendant's  counsel  at  the  trial:  and, 
not  being  apprized  of  the  point  in  question,  till  it  came  on  to  be  tried 
before  him,  he  was  not  fully  aware  of  the  cases  which  differed  from 
it.  And  yet  he  was  struck,  he  said,  very  strongly  that,  upon  general 
principles  that  case  was  not  agreeable  to  law  and  justice:  and  he 
then  thought  that  the  reasons,  upon  which  that  case  and  the  other 
authorities  relied  upon  by  the  counsel  for  the  defendant  at  the  trial, 
were  grounded,  were  insufficient  ones. 

That  "of  the  goldsmith's  having  perhaps  paid  the  money  to  the 
original  payee  himself,  before  notice  from  the  bearer,"  can  never 
hold:  it  cannot  happen,  in  the  course  of  business,  that  the  money 
should  be  paid  to  the  nominee,  before  notice  from  the  bearer. 

Nor  was  any  satisfactory  reason  given,  why  an  action  might  not  be 
brought  in  the  bearer's  own  name.  The  reason  alledged,  "That  then 
any  person  who  finds  the  note  accidentally,  may  bring  an  action  and 
recover,"  is  insufficient ;  because  the  plaintiff  in  such  action  must 
prove  that  he  came  by  it  bona  fide  and  upon  a  valuable  consideration. 

As  to  the  necessity  of  bringing  the  action  in  the  name  of  the  per- 
son to  whom  the  note  was  originally  made  payable; — it  was  impos- 
sible in  the'  present  case ;  because  there  was  no  person  originally 
named  as  the  payee:  it  runs  "Pay  to  ship  Fortune,  or  bearer." 
However,  if  there  had  been  a  person  named,  the  reason  would  not 
hold :  for  the  person  so  originally  named  may  become  bankrupt ;  or 
may  be  indebted  to  the  drawer  of  the  note ;  so  as  to  give  the  drawer 
a  right  to  set  off  such  debt  against  the  demand  of  the  money  due 
upon  the  note.  So  that  if  the  courts  of  law  should  not  allow  the 
bearer  to  bring  the  action  in  his  own  name,  there  might  be  no  re- 
lief at  all.  And  it  can  never  be  supposed  reasonable  or  legal,  that 
the  banker  should  have  it  left  in  his  discretion  or  choice,  to  pay  the 
money  to  one  or  the  other  as  his  fancy  or  inclination  should  lead 
him. 

These  thoughts  occurred  to  me  at  the  trial :  and  therefore  I  chose 
to  take  the  opinion  of  the  court. 

I  left  two  things  to  the  consideration  of  the  jury.  The  first  was, 
■"Whether  the  plaintiff  came  to  the  possession  of  this  note  fairly  and 
bona  fide:"  (which  necessarily  includes  his  not  having  notice  of  it's 
being  a  lost  note.)     The  second  was,  "Whether  such  draughts  as  this 

1  Arguments  of  counsel  and  the  concurring  opinions  of  Wilmot  and 
Yates,  JJ.,  are  omitted. 


26  FOKM    AND    INCEPTION.  (Part   1 

is,  were,  in  the  course  of  trade,  dealing  and  business,  actually  paid 
away  and  negotiated,  or  in  fact  and  practice  negotiable:''  and  I  then 
considered  this,  as  leaving  a  plain  fact  to  them,  upon  which  they 
could  have  no  doubt. 

But  I  am  now  clearly  of  opinion,  that  I  ought  not  to  have  left 
the  latter  point  to  them :  for  it  is  a  question  of  law,  "Whether  a  bill 
or  note  be  negotiable,  or  not." 

It  appears  in  the  books,  "That  these  notes  are,  by  law,  negotiable." 
And  the  plaintiff's  maintaining  his  action,  or  not  maintaining  it,  de- 
pends upon  the  question  "Whether  such  a  note  is  negotiable,  or  not." 

It  appears  likewise,  "That  the  bearer  of  them  may  maintain  an  ac- 
tion as  bearer,  where  he  can  intitle  himself  to  them  on  a  valuable 
consideration." 

Hinton's  Case,  in  2  Show.  235,  is  this — "Case  on  a  bill  of  exchange, 
against  the  drawer,  (bill  not  being  paid)  and  payable  to  J.  S.  or  to 
the  bearer.  The  plaintiff  brings  the  action,  as  bearer.  And,  upon 
evidence,  ruled  by  the  Lord  Pemberton,  that  he  must  intitle  himself 
to  it  on  a  valuable  consideration,  (though  among  bankers  they  never 
make  indorsements  in  such  case:)  for  if  he  come  to  be  bearer  by 
casualty  or  knavery,  he  shall  not  have  the  benefit  of  it."  (And  it 
would  be  absurd,  to  indorse  such  bills  as  are  made  payable  to  bearer.) 

Crawley  v.  Crowther,  2  Freem.  257,  Tr.  1702,  in  Chancery — "If 
a  bill  be  payable  to  A.  or  bearer,  it  is  like  so  much  money  paid  to 
whomsoever  the  note  is  given;  that,  let  what  accounts  or  conditions 
soever  be  between  the  party  who  gives  the  note  and  A.  to  whom  it 
is  given,  yet  it  shall  never  affect  the  bearer ;  but  he  shall  have  his 
whole  money."  So  that  the  whole  interest  is  transferred  to  the 
bearer. 

1  Salk.  126,  pi.  5,  anonymous,  M.  10  Wm.  III.,  coram  Holt,  Ch. 
J.,  at  nisi  prius  at  Guildhall.  "A  bank-bill  payable  to  A.  or  bearer, 
being  given  to  A.  and  lost,  was  found  by  a  stranger,  who  transferred 
it  to  C.  for  a  valuable  consideration :  C.  got  a  new  bill  in  his  own 
name.  Per  Holt,  Ch.  J.  A.  may  have  trover  against  the  stranger 
who  found  the  bill ;  for,  he  had  no  title,  (though  the  payment  to  him 
would  have  indemnified  the  bank:)  but  A.  can  not  maintain  trover 
against  C.  by  reason  of  the  course  of  trade ;  which  creates  a  property 
in  the  assignee  or  bearer."     It  is  negotiable  by  delivery. 

Miller  v.  Race,  H.  31  Geo.  II.,  1  Burrows,  452.  The  holder  of  a 
bank-note  recovered  against  the  cashier  of  the  bank,  though  the  mail 
had  been  robbed  of  it,  and  payment  was  stopt;  it  appearing,  that  he 
came  by  it  fairly  and  bona  fide  and  upon  a  valuable  consideration. 
And  there  is  no  distinction  between  a  bank-note  and  such  a  note 
as  this  is. 

The  act  of  3  &  4  Anne,  c.  9,  puts  promissory  notes  upon  the  same 
foot,  throughout,  with  inland  bills  of  exchange.  And  therefore  what- 
ever is  the  rule  as  to  inland  bills  of  exchange  payable  to  bearer, 
must  be  so  likewise  as  to  notes  payable  to  bearer. 


Ch.   1)  FORM    OF    BILL   AND   OF   NOTE.  27 

In  a  case  between  Walmesley  v.  Child,  11th  December,  1749,  in 
chancery,  where  one  of  Mr.  Child's  notes,  payable  to  bearer,  was  lost 
or  stolen,  and  payment  stopt  by  the  true  owner,  who  demanded  that 
it  should  be  paid  to  him ;  Mr.  Child  refused  to  pay  it,  without  surety 
against  the  demands  of  a  future  bearer.  The  true  owner  brought  his 
bill.  Lord  Hardwicke  dismissed  the  bill,  unless  the  true  owner  would 
find  such  security.  And  he  went  upon  the  principle,  that  no  dispute 
ought  to  be  made  with  the  bearer  of  a  cash-note,  who  comes  fairly 
by  it;  for  the  sake  of  commerce,  to  which  the  discrediting  such  notes 
might  be  very  detrimental. 

Upon  looking  into  the  reports  of  the  cases  on  this  head,  in  the 
times  of  King  William  the  Third  and  Queen  Anne,  it  is  difficult  to 
discover  by  them,  when  the  question  arises  upon  a  bill,  and  when 
upon  a  note :  for  the  reporters  do  not  express  themselves,  with  suffi- 
cient precision,  but  use  the  words  "Note"  and  "Bill"  promiscuously. 
It  appears,  however,  that  there  were  different  opinions  about  the 
manner  of  declaring  upon  them:  Lord  Chief  Justice  Holt  got  into  a 
dispute  with  the  city  about  it.  He  was  of  opinion,  that  the  plaintiff 
could  not  declare  as  upon  a  specialty,  (where  the  consideration  could 
not  be  disputed :)  but  he  all  along  agreed,  that  the  plaintiff  might 
declare  upon  an  indebitatus  assumpsit.  The  objection  was,  to  bring- 
ing an  action  upon  the  note  itself,  as  upon  a  specialty:  but  I  do  not 
find  it  any  where  disputed,  that  an  action  upon  an  indebitatus  assump- 
sit generally,  for  money  lent,  might  be  brought  on  a  note  payable  to 
one  or    order. 

Great  force  arises  from  the  act  of  Parliament  of  3  &  4  Anne  put- 
ting notes  merely  upon  the  foot  of  inland  bills  of  exchange,  and 
particularly  specifying  notes  payable  to  bearer. 

But  upon  the  second  count,  the  present  case  is  quite  clear,  beyond 
all  dispute.  For,  undoubtedly,  an  action  for  money  had  and  received 
to  the  plaintiff's  use,  may  be  brought  by  the  bona  fide  bearer  of  a 
note  made  payable  to  bearer.  There  is  no  case  to  the  contrary.  It 
was  certainly  money  received  for  the  use  of  the  original  advancer 
of  it:  and  if  so,  it  is  for  the  use  of  the  person  who  has  the  note  as 
bearer.  In  this  case,  Bicknell  himself  might  undoubtedly  have  brought 
this  action.  He  lost  it:  and  it  came  bona  fide  and  in  the  course  of 
trade,  into  the  hands  of  the  present  plaintiff,  who  paid  a  full  and 
fair  consideration  for  it.  Bicknell  and  the  plaintiff  are  both  inno- 
cent. The  law  must  determine  which  of  them  is  to  stand  to  the 
loss.     And,  by  law,  it  falls  upon  Bicknell. 

There  ought  to  be  a  new  trial.     *     *     * 

Rule  absolute  for  a  new  trial. ^ 

2  A  note  payable  "to  the  bearer,  A.,"  Is  not  negotiable.  Bloomingdale 
V.  Bank,  33  Misc.  Rep.  594,  68  N.  Y.  Supp.  35  (1901) ;  Warren  v.  Scott,  32 
Iowa,  22  (1871).  But  an  instrument  payable  to  "A.,  or  bearer,"  is  negotiable. 
Bitzer  v.  Wagar,  83    Mich.  223,  47  N.  W.  210  (1890). 


28  FORM    AND   INCEPTION.  (Part   1 

SMITH  V.  KENDALL. 

(Court  of  King's  Bench,  170-4.     6  Term  R.  123.) 

Assumpsit  for  money  paid  by  the  plaintiff  to  the  use  of  the  testa- 
tor, money  lent  to  him,  and  on  an  account  stated  with  the  testator 
and  another  with  the  executor.  The  defendant  pleaded  the  statute  of 
limitations ;  to  this  the  plaintiff  replied  that  the  latitat  was  sued  out 
on  the  2Gth  of  September  1793,  and  that  the  cause  of  action  accrued 
within  6  years  before  that  time;  on  which  issue  was  taken. 

On  the  trial  before  Lord  Kenyon  the  plaintiff  gave  the  following- 
note  in  evidence :  "Three  months  after  date  I  promise  to  pay  to 
Mr.  Smith,  Currier,  £40  value  received  in  trust  for  ]\Irs.  E.  Thomp- 
son, as  witness  my  hand.  L.  Askew,  25  June  1787."  The  defend- 
ant objected,  1st.  That  this  note  was  only  evidence  of  money  lent 
or  paid  by  Mrs.  Thompson  and  not  by  the  plaintiff  to  the  testator ; 
and  2dly,  that  this  was  not  a  promissory  note  within  the  statute,  and 
if  not,  that  the  cause  of  action  accrued  on  the  25th  of  September 
1787,  three  months  after  the  date  of  the  note,  and  consequently  that 
6  years  had  elapsed  before  the  suing  out  of  the  writ.  The  plaintiff 
answered  that  as  the  note  was  payable  to  him,  it  was  more  proper 
to  bring  the  action  in  his  name  than  in  that  of  Mrs.  Thompson,  and 
that  the  money  when  recovered  by  him  would  be  recovered  for  her 
use;  and  in  answer  to  the  second  objection,  that  this  was  a  promis- 
sory note  within  the  statute,  in  which  case  three  days  were  allowed ; 
and  of  course  that  six  years  had  not  expired  when  the  latitat  was 
sued  out.  A  verdict  was  taken  for  the  defendant,  leave  being  given 
to  the  plaintiff  to  move  to  set  that  verdict  aside,  and  to  enter  a  ver- 
dict for  him.  if  this  court  thought  he  was  entitled  to  recover. 

A  motion  was  accordingly  made  for  that  purpose.^ 

Lord  Kenyon,  C.  J.,  said:  If  this  were  res  integra,  and  there 
were  no  decision  upon  the  subject,  there  would  be  a  great  deal  of 
weight  in  the  defendant's  objection :  but  it  was  decided  in  a  case 
in  Lord  Raymond  (2  Ld.  Raym.  1545)  on  demurrer,  that  a  note  pay- 
able to  B.  without  adding  or  to  his  order,  or  to  bearer,  was  a  legal 
note  within  the  act  of  Parliament.  It  is  also  said  in  IMarius  that 
a  note  may  be  made  payable  either  to  A.  or  bearer,  A.  or  order,  or 
to  A.  only.  In  addition  to  these  authorities  I  have  made  enquiries 
among  different  merchants  respecting  the  practice  in  allowing  the 
three  days  grace,  the  result  of  which  is  that  the  Bank  of  England 
and  the  merchants  in  London  allow  the  three  days  grace  on  notes 
like  the  present.  The  opinion  of  merchants  indeed  would  not  govern 
this  court  in  a  question  of  law,  but  I  am  glad  to  find  that  the  prac- 
tice of  the  commercial  world  coincides  with  the  decision  of  a  court 
of  law.     Therefore  I  think  that  it  would  be  dangerous  now  to  shake 

8  Arguments  of  counsel  are  omitted. 


Ch.  1)  FORM    OF   BILL   AND   OF   NOTE.  29 

that  practice,  which  is  warranted  by  a  solemn  decision  of  this  court, 
by  any  speculative  reasoning  upon  the  subject;  and  consequently  this 
rule  must  be  made  absolute  to  enter  a  verdict  for  the  plaintiff. 
Rule  absolute. 


PUTNAM  V.  CRYMES. 

(Court  of  Appeals  of  South  Carolina,  1840.    1  M.cMul.  9,  36  Am.  Dec.  250.) 

The  plaintiff  in  this  case  was  not  the  original  payee,  but  held  the 
note  by  transfer  to  himself  by  delivery.  The  note  was  made  pay- 
able to  Mancil  Owens  or  holder,  and  the  plaintiff  declared  as  holder, 
and  defendants  demurred,  on  the  ground  that  the  holder  could  not 
sue  without  a  written  assignment.  I  regarded  holder  as  synonymous 
with  bearer  and  overruled  the  demurrer. 

Curia,  per  Butler,  J.  The  word  "bearer"  is  usually  inserted  in  a 
negotiable  note,  transferable  by  delivery.  But  without  it,  the  maker 
of  a  note  may  make  it  transferable  by  delivery,  either  by  circumlo- 
cution, or  using  a  word  of  precisely  the  same  import.  As  if  a  note 
were  made  payable  to  A.  B.,  or  to  any  one  to  whom  he  may  deliver 
it ;  or  to  any  one  who  might  hold  the  same  by  delivery.  In  both 
cases  the  bearer  would  be  sufficiently  meant  and  designated,  although 
the  word  was  not  used.  If  it  was  the  intention  of  the  maker  to  make 
it  payable  to  any  one  who  acquires  possession  by  delivery,  he  has  no 
right  to  complain  when  it  is  presented  to  him  without  a  written  trans- 
fer. "Holder"  is  a  word  of  the  same  import  as  "bearer,"  and  both 
may  acquire  a  title  by  lawful  delivery,  according  to  the  terms  of  the 
contract.  All  the  law  requires  is,  that  the  paper  must  have  nego- 
tiable words  on  its  face,  showing  it  to  be  the  intention  to  give  it  a 
transferable  quality  by  delivery ;  otherwise  the  instrument  must  be 
transferred  by  written  endorsement,  if  payable  to  order;  or  sued 
on  by  the  original  payee,  if  there  are  no  negotiable  words  at  all. 

The  decision  below  is  affirmed :    the  whole  court  concurring:.* 


JARVIS  v.  WILSON. 

(Supreme  Court  of  Errors  of  Connecticut,  1878.    46  Oonn.  90,  3.3  Am.  Rep.  18.) 

Assumpsit  against  the  defendant  as  acceptor  of  an  order  drawn 
on  him  in  favor  of  the  plaintiff,  brought  to  the  court  of  common 
pleas  of  Hartford  county,  and  tried  to  the  court  on  the  general  issue 

4  "The  concession,  therefore,  may  be  made  that  if  the  makers  of  this  note, 
having  omitted  the  usual  words  to  express  negotiability,  had  said,  'This  note 
is  and  shall  be  negotiable',  it  would  have  been  negotiable."  Porter,  J.,  in 
Raymond  v.  Middleton,  29  Pa.  529,  530  (1858). 

See,  also,  Stadler  v.  Bank,  22  Mont.  190,  56  Pac.  Ill,  115,  74  Am.  St.  Rep. 
582  (LS99). 


30  FOKM    AND   INCEPTION.  (Part   ] 

before  McManus,  J.  Facts  found  and  judgment  rendered  for  the 
plaintiff.  Motion  in  error  by  the  defendant.  The  case  is  fully  stated 
in  the  opinion. 

LooMis,  J.  On  the  8th  of  July,  1874,  one  William  Murphy  owed 
the  plaintiff  $189.20,  and  drew  his  order  on  the  defendant  in  favor 
of  the  plaintiff  in  writing  as  follows: 

"Mr.  A.  M.  Wilson :  Please  pay  Joseph  Jarvis  one  hundred  and 
eighty-nine  dollars  and  twenty  cents,  and  charge  the  same  to  me. 

"William  Murphy." 

Murphy,  who  was  then  and  had  been  for  some  time  in  the  employ 
of  the  defendant,  had  been  authorized  by  the  latter  to  draw  orders 
in  favor  of  his  workmen,  of  whom  the  defendant  knew  the  plaintiff 
to  be  one. 

The  above  order  was  duly  presented  for  acceptance  to  the  defend- 
ant on  the  same  day  that  it  was  given,  and  the  defendant  said  it 
was  good,  and  verbally  promised  to  pay  it.  It  afterwards  appeared 
that  there  was  in  fact  due  from  the  defendant  to  the  drawer  only 
$144.94,  and  thereupon  the  defendant  refused  to  pay  the  plaintiff  as 
he  had  before  agreed.  The  court  below  upon  these  facts  held  the 
defendant  liable  for  the  full  amount  of  the  order.  We  think  the 
judgment  must  stand  against  all  the  objections  urged  in  behalf  of 
the  defendant. 

The  defendant  claims,  in  limine,  that  his  undertaking  cannot  be 
regarded  as  subject  to  the  rules  applicable  to  bills  of  exchange,  but 
must  be  treated  as  a  mere  promise  to  pay  money.  But  we  do  not 
see  why  it  does  not  contain  every  essential  element  of  the  most  ap- 
proved definition  of  a  bill  of  exchange.  It  is  a  written  order  from 
Murphy,  addressed  to  the  defendant,  requesting  him  to  pay  the  plain- 
tiff a  certain  sum  of  money  therein  named.  1  Bouvier's  Law  Diet., 
Bill  of  Exchange;  Byles  on  Bills,  57;  Story  on  Bills,  §§  3,  37,  40; 
Edwards  on  Bills  and  Notes,  150;  Eastern  R.  R.  Co.  v.  Benedict.  15 
Gray  (Mass.)  292;  Kendall  v.  Galvin,  15  Me.  131,  32  Am.  Dec. 
141 ;  Michigan  Ins.  Co.  v.  Leavenworth,  30  Vt.  12. 

But  conceding  the  order  to  be  a  bill  of  exchange,  the  defendant 
further  claims  that  he  is  not  liable,  because  his  acceptance  was  only 
by  parol,  when  it  should  have  been  in  writing. 

It  is  true,  as  a  general  rule,  that  to  make  one  liable  as  a  party  to 
a  bill  or  note  his  name  should  appear  thereon  under  his  own  hand 
or  that  of  his  agent.  A  wise  policy  may  also  require  that  the  liability 
of  an  acceptor  should  not  depend  on  parol  evidence,  and,  recognizing 
this,  some  states  have  already  changed  the  rule  of  the  common  law 
as  to  an  acceptor  of  a  bill  of  exchange.  In  New  York  it  is  required 
by  statute  that  the  acceptance  should  be  in  writing,  and  there  is  a 
similar  statute  in  England  as  applicable  to  an  inland  bill.  But  where 
there  is  no  statute  to  control,  the  rule  is  quite  general,  both  in  Eng- 
land and  in  the  United  States,  that  an  acceptance  of  a  bill  of  ex 
change  may  be  by  parol.     1  Swift,  Dig.  424;  Story  on  Bills,  §§  242, 


Ch.   1)  FORM    OF   BILL   AND   OF    NOTE.  31 

243,  246 ;  1  Parsons  on  Cont.  267 ;  Edwards  on  Bills  and  Notes,  409  ; 
Dunavan  v.  Flynn,  118  Mass.  539 ;  Spaulding  v.  Andrews,  48  Pa.  411. 

The  statute  of  frauds  does  not  apply  to  such  an  undertaking.  One 
reason  may  be  that  the  acceptor  is  regarded  as  the  primary  debtor, 
and  his  acceptance  is  an  undertaking  not  merely  to  pay  a  debt  due 
from  the  drawer  to  the  payee,  but  to  pay  his  own  debt  to  the  drawer. 

But  in  this  case  the  defendant  relies  on  the  fact  that  when  he 
accepted  the  bill  he  had  not  in  his  hands  sufficient  funds  of  the  draw- 
er to  pay  the  amount  required,  and  contends  that  the  acceptance 
should  therefore  either  be  considered  within  the  statute,  or  should  be 
held  void  for  want  of  consideration.  This  objection  ignores  the 
fundamental  principle  that  the  acceptance  admits  everything  essen- 
tial to  the  validity  of  the  bill,  and  that  want  or  failure  of  considera- 
tion cannot  be  shown  in  a  suit  by  the  payee  against  the  acceptor. 
The  presumption  is  that  every  bill  of  exchange  is  drawn  on  account 
of  some  indebtedness  from  the  drawee  to  the  drawer,  and  that  the 
acceptance  is  an  appropriation  of  the  funds  of  the  latter  in  the  hands 
of  the  former.  The  rule  of  law  is  not  unjust  that  prevents  the  ac- 
ceptor from  showing  as  a  defence  against  a  suit  by  the  payee  a  want 
of  funds  of  the  drawer  in  his  hands,  for  it  was  his  duty  to  ascertain 
before  he  accepted  the  bill  whether  he  owed  the  drawer  that  amount. 
This  was  exclusively  within  his  knowledge,  but  the  plaintiff  had  no 
means  of  knowing  how  the  fact  was,  and  he  had  a  right  to  assume 
that  the  defendant  would  not  accept  the  bill  unless  he  had  funds  of 
the  drawer  sufficient  to  make  good  the  acceptance.  Fisher  v.  Beck- 
with,  19  Vt.  31,  46  Am.  Dec.  174;  Arnold  v.  Sprague,  34  Vt.  402; 
United  States  v.  Bank  of  Metropolis,  15  Pet.  377,  10  L.  Ed.  774; 
Grant  v.  Ellicott,  7  Wend.  (N.  Y.)  227;  Hoffman  v.  Bank  of  Mil- 
waukee, 12  Wall.  181,  20  L.  Ed.  366;  Parsons  on  Notes  and  Bills, 
323 ;  1  Daniel  on  Negotiable  Instruments,  135. 

There  is  no  error  in  the  judgment  complained  of.^ 


ZANDER  v.  NEW  YORK  SECURITY  &  TRUST  CO. 

(Supreme  Court,  Special  Term,  New  York  County,  1902.     39  Misc.  Rep.  98, 
78    N.    Y.    Supp.    900.) 

Action  by  Caroline  Zander  against  the  New  York  Security  &  Trust 
Company.    Demurrer  to  complaint  overruled. 

ScoTT,  J.®  It  is  alleged  by  the  complaint,  and  admitted  by  the  de- 
murrer, that  on  or  about  July  11,  1901,  the  plaintiff  deposited  with 
defendant  the  sum  of  $500,  and  received  therefor  the  following  cer- 

5  "It  [a  check]  is  commonly  though  not  always  payable  to  bearer ;  but  I 
conceive  it  to  be  still  a  check,  if  drawn  on  a  bank  or  banker,  although  pay- 
able to  a  particular  party  only."  Story,  J.,  in  Re  Brown,  4  i  ed.  Cas.  342, 
346  (1843). 

8  Part  of  the  opinion  is  omitted. 


32  FORM    AND   INCEPTION.  (Part  ] 

tificate  or  receipt:  "The  New  York  Security  &  Trust  Company, 
New  York,  July  11,  1901,  has  received  from  CaroHne  Zander  the 
sum  of  five  hundred  dollars,  of  current  funds,  upon  which  the  said 
company  agrees  to  allow  interest  at  the  annual  rate  of  three  per  cent, 
from  this  date,  and  on  five  days'  notice  will  repay,  in  current  funds, 
the  like  amount,  with  interest,  to  the  said  Caroline  Zander  or  her 
assigns,  on  return  of  this  certificate,  which  is  assignable  only  on  the 
books  of  the  company."  Then  followed  provisions  as  to  the  reduc- 
tion or  discontinuance  of  interest,  not  material  here. 

Plaintiff  always  remained  the  owner  of  the  certificate ;  has  never 
assigned  it,  or  any  part  thereof,  or  in  any  way  indorsed  or  transfer- 
red it,  or  any  interest  therein.  Before  August  9,  1901,  she  lost  or  in- 
advertently destroyed  the  certificate,  and,  though  she  has  diligently 
searched,  she  has  been  unable  to  find  it,  and  on  August  9,  1901,  she 
notified  defendant  of  the  loss  of  the  certificate.  She  has  duly  de- 
manded of  defendant  the  issue  of  a  new  certificate  or  the  payment 
of  the  am.ount  of  the  deposit.  The  demurrer  is  stated  to  be  inter- 
posed merely  for  the  purpose  of  enabling  the  defendant  to  insist  that 
the  plaintiflF  shall  be  required  to  give  the  security  specified  in  section 
1917,  Code  Civ.  Proc.  That  section  refers  to  lost  negotiable  paper, 
and  the  question  which  presents  itself  is,  therefore,  whether  or  not 
the  certificate  of  deposit  given  by  defendant  is  negotiable.  Section 
20,  c.  612,  Laws  1897,  known  as  the  "Negotiable  Instruments  Law," 
declares  that  an  instrument,  to  be  negotiable,  "must  be  payable  to 
order  or  to  bearer,"  and  in  this  respect  is  merely  declaratory  of  the 
law  of  negotiable  paper  as  it  existed  before  the  passage  of  the  statute. 

The  papers  which  were  before  the  court  in  the  cases  principally 
relied  upon  by  defendant  conformed  to  the  foregoing  definition,  and 
in  each  case  the  decision  turned  upon  the  fact  that  the  lost  receipts 
were  payable  to  "order,"  which  circumstance  was  held  to  render  them 
negotiable  instruments,  and  to  require  that  indemnity  be  given  be- 
fore judgment  upon  them  could  be  rendered.  Frank  v.  Wessels,  64 
N.  Y.  155 ;  Read  v.  Bank,  136  N.  Y.  454,  32  N.  E.  1083,  32  Am.  St. 
Rep.  758.  The  receipt  or  certificate  in  the  present  case  is  not  nego- 
tiable. The  money  represented  by  it  is  payable,  not  "to  order  or 
bearer,"  but  to  the  plaintiff  "or  her  assigns."  It  is  therefore  what  is 
known  to  the  law  as  a  "nonnegotiable  instrument."  In  an  action 
upon  a  lost  or  destroyed  instrument  of  this  description,  it  is  not  nec- 
essary that  the  plaintiff  should  give  or  tender  indemnity.  Wright  v. 
Wright,  54  N.  Y.  437 ;  Mills  v.  Bank.  28  Misc.  Rep.  251,  59  N.  Y. 
Supp.  149.  The  distinction  between  actions  on  negotiable  and  non- 
negotiable  instruments,  and  the  reason  for  the  different  rules  re- 
specting the  necessity  for  indemnity  in  such  actions,  are  too  obvious, 
and  too  clearly  stated  in  the  authorities  cited,  to  require  restatement 
here. 

The  demurrer  admits  that  the  plaintiff  never  parted  with  or  as- 
signed the  certificate,  and  that  it  has  been  lost  or  destroyed.     Even  if 


Ch.  1)  FORM    OF   BILL   AND    OF   NOTE.  33 

the  plaintiflF  had  not  lost  or  destroyed  the  certificate,  and  has  assigned 
it,  the  defendant  would  assume  no  risk  in  paying  her  the  amount  rep- 
resented thereby.  Section  1909  of  the  Code  of  Civil  Procedure  pro- 
vides that,  except  in  the  case  of  a  negotiable  instrument,  the  trans- 
fer of  a  claim  or  demand  passes  an  instrument  which  the  transferee 
may  enforce  by  an  action  or  special  proceeding,  or  interpose  as  a 
defense  or  counterclaim,  in  his  own  name,  as  the  transferror  might 
have  done,  "subject  to  any  defense  or  counterclaim,  existing  against 
the  transferror,  before  notice  of  the  transfer."  Payment  to  the 
plaintiff  would  be  a  complete  defense  to  any  claim  or  action  by  her 
upon  the  certificate  of  deposit,  and  equally  be  a  defense  of  any  action 
or  claim  by  a  transferee  from  her,  if  made  before  notice  of  the  trans- 
fer; and  it  does  not  appear,  and  is  not  suggested,  that  defendant 
has  received  any  notice  of  a  transfer  by  her.  *  *  * 
Demurrer  overruled. '^ 


GILLEY  V.  HARRELL  et  al. 
(Supreme  Court  of  Tennessee,  1907.     118  Tenu.  115,  101  S.  W.  424.) 

Bill  by  A.  T.  Gilley  against  J.  R.  Harrell  and  others.  From  a 
decree  dismissing  plaintiff's  bill,  he  appeals.     Affirmed.^ 

Sansom,  Special  Judge.  The  complainant,  A.  T.  Gilley,  appeals 
to  this  court  from  the  decree  of  the  Court  of  Chancery  Appeals  dis- 
missing his  bill.  The  original  bill  in  the  case  was  filed  in  the  chan- 
cery court  at  Murfreesboro  to  collect  a  note  for  $300  alleged  to 
have  been  executed  by  the  defendant  J.  R.  Harrell  to  one  Robert  B. 
Meeks,  and  by  Meeks  transferred  and  assigned  to  the  complainant, 
and  seeking  to  foreclose  a  mortgage  or  deed  of  trust  given  to  secure 
the  payment  of  the  note  and  to  set  aside  a  previously  executed  trust 
deed  resting  upon  the  property. 

The  bill  alleges  the  execution  and  transfer  of  the  note,  and  avers 
that  the  plaintiff  is  an  innocent  holder  thereof,  having  acquired  same 
before  maturity,  for  value,  and  in  due  course  of  trade;  and  it  is 
charged  that  the  previously  executed  trust  deed  resting  upon  the 
property  was  fraudulent  and  void. 

7 Affirmed  on  opinion  of  Scott,  J.,  81  App.  Div.  635,  81  N.  Y.  Supp.  1151 
(1903).  In  Brainerd  v.  Railroad  Co.,  25  N.  Y.  496  (1862),  it  was  tield  that 
a  corporate  bond  payable  to  A.  or  his  assigns  was  negotiable.  Denio,  C.  J., 
said  (page  500) :  "But  when  such  obligations  are  issued  to  secure  the  pay- 
ment of  money  upon  time,  and  contain  on  their  face  an  expression  showing 
that  they  are  expected  to  pass  from  one  person  to  another,  and  thus  to  per- 
form the  office  of  bills  and  notes  or  of  money,  as  the  words  'bearer'  or  'as- 
signs,' or  'the  holder,'  or  the  like,  the  courts  of  this  country,  with  a  single 
exception,  and  those  of  this  state  without  any  exception,  have  concurred  in 
attaching  to  them  the  attributes  of  commercial  paper." 

Compare  Bank  of  Commerce  v.  Pick,  13  N.  D.  74,  81,  99  N.  W.  63  (1904). 

«  Part  of  the  opinion  is  omitted. 
Sm.&  M.B.&  N.-^ 


34  FORM    AND   INCEPTION.  (Part  1 

The  defendant  J.  R.  Harrell  filed  an  answer,  in  which  he  says  that 
he  might  have  executed  a  note  payable  to  Meeks  for  $300,  and 
might  have  executed  a  mortgage  to  secure  the  payment  thereof,  but 
that,  if  he  did  so,  he  was  drunk  at  the  time  and  incapacitated  for 
the  transaction  of  business,  and  that  the  note,  if  executed,  was  with- 
out consideration  and  obtained  through  fraud,  and  at  a  time  when 
he  was  unable  to  care  for  or  protect  himself.  The  note  sued  on  is 
in  these  words : 
":«J00.  Murfreesboro,  Tenn.,   February  5,   1903. 

"On  the  24th  day  of  December,  1903,  I  promise  to  pay  to  Robert 
B.  Meeks  the  sum  of  three  hundred  ($300)  dollars,  with  interest 
from  date.  This  note  secured  by  a  mortgage  on  thirty-five  acres  of 
land,  this  day  executed  by  me  and  wife  to  Robert  B.  ]\Ieeks. 

"J.  R.  Harrell." 

The  note  is  indorsed  as  follows: 

"I  this  day  transfer  and  assign  this  note  over  to  A.  T.  Gilley,  for 
value  received,  with  all  the  equities,  this  February  10,  1903. 

"R.  B.  Meeks." 

It  should  be  stated  that  the  answer  defends  upon  the  ground  that 
the  complainant,  Gilley,  is  a  dealer  in  notes  and  that  the  purchase 
of  this  note  was  void,  because  of  his  not  having  to  pay  any  license 
as  such  dealer. 

Four  errors  are  assigned  to  the  decree  of  the  Court  of  Chancery 
Appeals.     *     *     * 

Taking  up  these  assignments  of  error  in  order:  The  court  held 
that  the  note  above  copied  was  nonnegotiable,  and  this  holding  is 
attacked.  Under  the  common  law  the  note  was  not  negotiable. 
"When  bills  of  exchange  first  came  into  use,  as  has  already  been 
explained,  choses  in  action  in  general  were  nonassignable;  and,  in 
order  that  the  intention  of  parties  to  make  commercial  paper  assign- 
able and  negotiable  may  be  indicated,  it  became  the  custom  to  make 
it  in  express  terms  payable  to  A.,  or  order,  or  bearer,  or  using  like 
words  giving  authority  to  convey.  So,  also,  when  promissory  notes 
were  by  the  statute  of  Anne  declared  to  be  negotiable,  like  bills  of 
exchange,  notes  which  would  fall  within  the  statute  were  described 
as  containing  these  [to  order  or  bearer]  or  other  A^ords  of  negotiabil- 
ity."   Tiedeman  on  Com.  Paper,  §  27. 

In  other  words,  under  the  common  law  in  order  that  a  note  should 
be  negotiable  it  had  to  be  payable  to  order,  or  to  bearer,  and  not 
directly  to  the  payee. 

Section  3505  of  Shannon's  Code  is  in  these  words :  "Every  note 
whereby  the  maker  promises  to  pay  money  to  any  other  person  or 
order,  or  to  the  order  of  any  other  person,  shall  be  negotiable  in  the 
same  manner  as  inland  bills  of  exchange  by  the  custom  of  merchants." 

Section  3506  of  Shannon's  Code  is  in  these  words:  "Every  bill, 
bond  or  note  for  money,  whether  sealed  or  not,  and  whether  expressed 


Ch.  1)  FORM    OF   BILL   AND   OF   NOTE.  35 

to  be  payable  to  the  order  or  for  value  received  or  not,  shall  be  nego- 
tiable in  the  same  manner  as  promissory  notes." 

It  is  insisted  very  earnestly  under  this  latter  Code  provision, 
which  is  section  1  of  chapter  4  of  the  Acts  of  1786,  that  the  note 
in  controversy  in  this  case  is  a  negotiable  instrument. 

By  Acts  1899,  p.  139,  c.  94,  entitled  "A  general  act,  relating  to 
negotiable  instruments,  being  an  act  to  establish  a  law  uniform  with 
the  laws  of  other  states  on  that  subject,"  it  is  provided  by  article 
1,  §  1,  as  follows :  "An  instrument  to  be  negotiable  must  conform 
to  the  following  requirements:,  (1)  It  must  be  in  writing  and  signed 
by  the  maker  or  drawer.  (2)  Must  contain  an  unconditional  promise 
or  order  to  pay  a  sum  certain  in  money.  (3)  Must  be  payable  on  de- 
mand or  at  a  fixed  or  determinable  future  time.  (4)  Must  be  payable 
to  order  or  to  bearer." 

By  section  184  of  this  act  it  is  provided :  "A  negotiable  promis- 
sory note,  within  the  meaning  of  this  act,  is  an  unconditional  promise 
in  writing,  made  by  one  to  another,  signed  by  the  maker,  engaging 
to  pay  on  demand  or  at  a  fixed  or  determinable  future  time,  a  sum 
certain  in  money,  to  order  or  to  bearer." 

Section  8  of  the  act  is  in  these  words :  "An  instrument  is  payable 
to  order  where  it  is  drawn  payable  to  the  order  of  a  specified  person 
or  to  him  or  his  order." 

By  section  9  of  the  act  it  is  provided  as  follows:  "The  instrument 
is  payable  to  bearer  (1)  when  it  is  expressed  to  be  so  payable,  or 
(2)  when  it  is  payable  to  a  person  named  therein  or  bearer,  or  (3) 
when  it  is  payable  to  the  order  of  a  fictitious  or  nonexisting  person, 
and  such  fact  was  known  to  the  person  making  it  so  payable,  or 
(4)  when  the  name  of  the  payee  does  not  purport  to  be  the  name 
of  any  person,  or  (5)  when  the  only  or  last  indorsement  is  an  in- 
dorsement in  blank." 

The  note  in  question  in  this  case  is  not  payable  to  either  order 
or  bearer.  Under  these  provisions  of  the  negotiable  instrument  law, 
and  in  order  to  be  negotiable,  it  must  be  payable  in  one  or  the  other 
of  these  ways,  either  to  order  or  to  bearer.  The  earnest  insistence, 
however,  of  appellant,  is  that  section  3506  of  the  Code  (Shannon's), 
above  quoted,  is  not  repealed  by  the  negotiable  instrument  act  of 
1899;  that  that  act  does  not  purport  to  repeal  this  section  of  the 
Code,  which  does  make  the  note  in  question  a  negotiable  instru- 
ment. This  insistence,  however,  is  not  sound;  for  by  necessary  im- 
plication, section  3506  is  repealed  by  this  act,  because  directly  in 
conflict  therewith,  and  embracing  the  entire  subject-matter  thereof. 
Poe  V.  State,  85  Tenn.  495,  3  S.  W.  658.»     *     *     * 

8  Accord:  Fulton  v.  Varney,  117  App.  Div.  572,  102  N.  Y.  Supp.  608  (1907) ; 
Westberg  v.  Lumber  Oo.,  117  Wis.  589,  94  N.  W.  572  (1903). 


36  FORM   AND   INCEPTION.  (Part  1 


SECTION  8.— WRITING 


GEARY  V.  PHYSIC. 

(Court  of  KiQg's  Bench,  1826.     5  Barn.  &  C.  234.) 

Assumpsit  by  the  plaintiff  as  indorsee  against  the  defendant  as 
maker  of  a  promissory  note  for  the  sum  of  £30.  payable  two  months 
after  date  to  the  order  of  one  Folder,  and  indorsed  by  him,  Folder, 
to  one  Kemp,  who  subsequently  indorsed  the  note  to  the  plaintiff. 
At  the  trial  before  Abbott,  C.  J.,  at  the  London  sittings  after  Hilary 
term,  1825,  it  appeared  that  the  indorsement  by  Kemp  to  the  plain- 
tiff was  in  pencil,  and  it  was  thereupon  objected  that  the  plaintiff 
could  not  recover;  an  indorsement  in  pencil  not  being  such  an  in- 
dorsement as  the  law  and  custom  of  merchants  recognizes  to  be 
sufficient  to  pass  the  interest  in  a  bill  of  exchange,  and  promissory 
notes  being  by  the  statute  3  &  4  Anne,  c.  9,  §  1,  assignable  or  in- 
dorsable  in  the  same  manner  as  unpaid  bills  of  exchange  are  ac- 
cording to  the  custom  of  merchants.  The  Lord  Chief  Justice  thought 
it  sufficient,  and  directed  the  jury  to  find  a  verdict  for  the  plaintiff, 
reserving  liberty  to  the  defendant's  counsel  to  move  to  enter  a  non- 
suit, if  the  court  should  be  of  opinion  that  the  indorsement  of  the 
promissory  note  in  pencil  was  not  a  good  and  valid  indorsement. 
F.  Pollock,  in  last  Easter  term,  obtained  a  rule  nisi  to  enter  a  non- 
suit. He  contended,  first,  that  a  writing  in  pencil  was  not  a  writ- 
ing recognized  at  common  law ;  and  he  cited  Co.  Lit.,  229a,  where 
Lord  Coke,  speaking  of  a  deed,  says:  "Here  it  is  to  be  understood, 
that  it  ought  to  be  in  parchment  or  in  paper.  For  if  a  writing  be 
made  upon  a  piece  of  wood,  or  upon  a  piece  of  linen,  or  on  the  bark 
of  a  tree  or  on  a  stone,  or  the  like,  &c.,  and  the  same  be  sealed  or 
delivered,  yet  is  it  no  deed,  for  a  deed  must  be  written,  either  in 
parchment  or  paper,  as  before  is  said,  for  the  writing  upon  these 
is  least  subject  to  alteration  or  corruption."  For  the  same  reasons 
a  writing  ought  to  be  made  with  materials  least  subject  to  alteration 
or  corruption.  Now,  writing  made  with  a  pencil  is  easily  altered  or 
obliterated,  and,  therefore,  for  the  reasons  given  by  Lord  Coke,  where 
the  law  requires  a  contract  to  be  in  writing,  it  ought  to  be  in  writing 
made  with  materials  the  least  subject  to  alteration.  Secondly,  he 
contended,  that  it  was  not  a  writing  according  to  the  custom  and 
usage  of  merchants.  In  point  of  practice  bills  of  exchange  were 
generally  written  in  ink,  and  it  lay  upon  the  plaintiff  in  this  case 
to  show  by  evidence  that  this  was  a  writing  according  to  the  custom 
of  merchants.     *     *     * 


Ch.   i)  FORM   OF   BILL   AND   OF    NOTE.  37 

Suppose  the  indorsement  on  the  paper  had  been  scratched  with  a 
pin,  or  with  the  inverted  end  of  a  pencil,  would  that  have  been  a 
writing  according  to  the  custom  of  merchants? 

Thesiger  showed  cause. ^° 

Abbott,  C.  J.  There  is  no  authority  for  saying  that  where  the 
law  requires  a  contract  to  be  in  writing,  that  writing  must  be  in  ink. 
The  passage  cited  from  Lord  Coke  shows  that  a  deed  must  be  writ- 
ten on  paper  or  parchment,  but  it  does  not  show  that  it  must  be  writ- 
ten in  ink.  That  being  so,  I  am  of  opinion  that  an  indorsement  on 
a  bill  of  exchange  may  be  by  writing  in  pencil.  There  is  not  any 
great  danger  that  our  decision  will  induce  individuals  to  adopt  such  a 
mode  of  writing  in  preference  to  that  in  general  use.  The  imper- 
fection of  this  mode  of  writing,  its  being  so  subject  to  obliteration, 
and  the  impossibility  of  proving  it  when  it  is  obliterated,  will  pre- 
vent its  being  generally  adopted.  There  being  no  authority  to  shew 
that  a  contract  which  the  law  requires  to  be  in  writing  should  be  writ- 
ten in  any  particular  mode,  or  with  any  specific  material,  and  the  law 
of  merchants  requiring  only  that  an  indorsement  of  bills  of  exchange 
should  be  in  writing,  (see  the  custom  stated  in  Claxton  v.  Swift,  1 
Lutw.  362,  Reps.)  without  specifying  the  manner  with  which  the  writing 
is  to  be  made,  I  am  of  opinion  that  the  indorsement  in  this  case  was 
a  sufficient  indorsement  in  writing  within  the  meaning  of  the  law 
of  merchants,  and  that  the  property  in  the  bill  passed  by  it  to  the 
plaintiff. 

BaylEy,  J.  I  think  that  a  writing  in  pencil  is  a  writing  within  the 
meaning  of  that  term  at  common  law,  and  that  it  is  a  writing  within 
the  custom  of  merchants.  I  cannot  see  any  reason  why,  when  the 
law  requires  a  contract  to  be  in  writing,  that  contract  shall  be  void 
if  it  be  written  in  pencil.  If  the  character  of  the  hand-writing  were 
thereby  wholly  destroyed,  so  as  to  be  incapable  of  proof,  there  might 
be  something  in  the  objection;  but  it  is  not  thereby  destroyed,  for, 
when  the  writing  is  in  pencil,  proof  of  the  character  of  the  hand- 
writing may  still  be  given.  I  think,  therefore,  that  this  is  a  valid 
writing  at  common  law,  and  also  that  it  is  an  indorsement  accord- 
ing to  the  usage  and  custom  of  merchants ;  for  that  usage  only  re- 
quires that  the  indorsement  should  be  in  writing,  and  not  that  that 
writing  should  be  made  with  any  specific  materials. 

HoLROYD,  J,,  concurred. 

Rule  discharged. ^^ 

10  Part  of  the  argument  is  omitted. 

11  "The  defendant,  by  issuing  the  instruments,  for  value,  adopted  the 
printed  signature  thereon  as  his  own,  and  became  thereby  bound  in  the  same 
manner,  as  if  it  had  been  written  by  himself.  He  thereby  asserted  to  whom- 
ever might  receive  the  instruments  that  the  signature  was  binding  upon  him, 
and  he  is  not  at  liberty  now  to  retract  the  assertion.  We  think  it  makes  no 
difference,  so  far  as  the  defendant's  liability  is  concerned,  whether  he  wrote 
his  name  in  script  or  Roman  letters,  or  whether  such  letters  were  made  with 
a  pen  or  with  type,  or  whether  he  printed,  engraved,  photographed  or  litho- 


38  FOHM    AND   INCEPTION.  (Part    1 


SECTION  3.— THE  PROMISE 


ISRAEL  V.  ISRAEL. 

(Nisi  Prius.  before  Lord  Ellenborougb,  C.  J..  1808.     1  Camp.  490.) 

Assumpsit  for  money  lent,  and  an  account  stated.  Plea,  the  gen- 
eral issue. 

It  appeared,  that  in  July  last,  a  settlement  of  accounts  took  place 
between  the  parties,  when  the  defendant,  who  is  son  to  the  plaintiff, 
gave  him  an  unstamped  slip  of  paper,  with  the  following  words  writ- 
ten upon  it  in  his  own  hand:  "I  owe  my  father  four  hundred  and 
seventy  pounds.  Jas.  Israel."  This  was  now  offered  in  evidence  as 
proof  of  a  debt  to  that  amount. 

The  .Attorney  General  objected,  that  it  was  to  be  considered  either 
as  a  promissory  note,  or  a  receipt,  and  that  in  neither  case  was  it 
receivable  without  a  stamp. 

Garrow  &  Lawes,  on  the  other  side,  contended  that  it  was  merely 
an  acknowledgment  by  the  defendant,  that  upon  a  settlement  of 
accounts,  such  a  balance  was  due  to  the  plaintiff;  and  they  cited 
the  case  of  Fisher  v.  Leslie,  1  Esp.  N.  P.  Cas.  426.  in  which  it  had 
been  held  by  Eyre,  C.  J.  that  an  I.  O.  U.  was  good  evidence  under 
the  money  counts,  without  a  stamp. 

Lord  Ellenborough.  I  entertained  some  doubts  whether  this  pa- 
per ought  not  to  have  been  stamped  as  a  promissory  note ;  but  upon 
the  authority  of  that  case.  I  will  receive  it  in  evidence  though  un- 
stamped. 

The  plaintiff  had  a  verdict. 


SMITH  V.  ALLEN. 

(Supreme  Court  of  Errors  of  Connecticut,  1812.     .5  Day,  337.) 

Smith,  J.^^  This  was  a  writ  of  error,  brought  by  the  defendants 
in  the  court  below,  to  reverse  a  judgment  rendered  against  them  in 
that  court. 

graphed  them,  so  long  as  he  adopted  and  issued  the  signature  as  his  own. 
It  is  true,  that  a  written  signature  In  script,  may  be  a  safer  mode  of  sutn 
scribing  ones  name,  but  where  a  party  has  adoj>ted  a  signature  made  in 
any  other  mode,  and  has  issued  an  instrument  with  such  adopted  signature, 
for  value,  he  is  estopped  from  denying  its  validity.'  Beckwith,  J  ,  in  Wes^ 
ton  V.  Myers.  33  111.  424  (1S<>4). 

Accord:  Mayers  v.  McKimmon,  140  N.  C.  640,  53  S.  E.  447  111  Am  St 
Rep.  879  (1906). 

12  The  statement  of  the  case  and  arguments  of  counsel  are  omitted. 


Ch.    1)  FORM    OF   BILL   AND   OF   NOTE.  39 

The  declaration  was  in  common  form,  in  assumpsit,  counting  upon 
a  promissory  note,  and  demanding  $100,  damages.  To  this  there 
was  a  demurrer  and  joinder  in  demurrer.  The  writing  counted  upon, 
and  recited  in  the  declaration,  was  of  the  following  tenor,  viz.: 

"Due  John  Allen  $94.91.     On  demand. 

"Litchfield,  August  30th,  1808.  'Joseph    L.    Smith. 

"Seth    P.    Beers." 

The  court  below  adjudged  the  declaration  to  be  sufficient,  and 
rendered  judgment  for  the  plaintiff,  to  recover  $111.99,  damages. 

On  inspection  of  the  record,  it  appears  that  judgment  was  rendered 
for  a  larger  sum  than  is  warranted  by  law,  and  therefore,  on  that 
ground,  is  clearly  erroneous,  and  must  be  reversed. 

But  still  the  question  arises,  whether  this  cause  shall  be  remanded 
to  the  superior  court?  The  decision  of  this  question  depends  upon 
the  sufficiency  or  insufficiency  of  the  plaintiff's  declaration:  Because, 
if  the  instrument  on  which  the  action  is  brought,  and  which  is  recited 
in  the  declaration,  will  not  sustain  it,  it  will  be  useless  to  send  the 
cause  back  for  farther  trial. 

On  this  subject,  in  my  view,  it  is  very  clear  that,  where  a  writing 
contains  nothing  more  than  a  bare  acknowledgment  of  a  debt,  it  does 
not,  in  legal  construction,  import  an  express  promise  to  pay.  It 
would  not  appear,  from  such  a  writing,  that  the  parties  intended  the 
debt  should  be  paid.  Their  meaning  might  be,  in  such  case,  merely 
to  settle  their  accounts,  in  writing,  with  a  view  to  further  dealings. 

But  where  a  writing  imports,  not  only  the  acknowledgment  of  a 
debt,  but  an  agreement  to  pay  it,  this  amounts  to  an  express  con- 
tract. 

From  the  writing  in  question,  it  is  perfectly  manifest  that  the 
debt  acknowledged  to  be  due  was  to  be  paid  on  demand,  as  fully 
as  if  the  words  "to  be  paid,"  or  "which  we  promise  to  pay,"  had 
been  inserted  next  before  the  words  "On  demand." 

I  think,  therefore,  that  the  declaration  is  sufficient,  and  that  the 
cause  ought  to  be  remanded  for  further  proceedings. 

The  other  Judges  severally  concurred  in  this  opinion. 

Judgment  reversed,  and  the  cause  remanded. 


STAGG  v.  PEPOON. 

(Constitutional  Court  of  Soutli  Carolina,  1818.     1  Nott  &  .ISI^cC.  102.) 

This  case  was  tried  before  Mr.  Justice  Smith,  at  Charleston. 

It  was  an  action  of  assumpsit  on  a  duebill,  made  by  the  defendant 
to  the  plaintiffs.  When  produced  in  evidence,  it  was  in  the  follow- 
ing words:  "Due  Messrs.  Jacob  D.  Stagg  &  Co.,  or  order,  one 
hundred  and  thirty-five  dollars,  payable  on  demand.  [Sigf^ed]  Benj. 
Pepoon." 


40  FOKM    AND   INCEPTION.  (Part    1 

It  appeared  in  evidence,  that  the  words  "or  order"  were  not  in- 
serted in  the  bill  originally,  and  that  the  plaintiff  had  requested  the 
defendant  to  permit  him  to  insert  them,  with  a  view  to  negotiate  it; 
but  he  expressly  refused  his  assent.  The  plaintiff,  notwithstanding, 
did  insert  them. 

Several  grounds  of  defense  were  stated  in  the  brief  to  have  been 
taken  on  the  trial,  in  the  circuit  court,  and  among  others  that  the 
insertion  of  the  words  "or  order"  was  such  an  alteration  as  destroyed 
the  validity  of  the  note. 

The  jury  however,  under  the  direction  of  the  presiding  judge, 
found  a  verdict  for  the  plaintiff,  and  a  motion  was  now  made  for 
a  new  trial,  on  the  part  of  the  defendant,  on  the  ground: 

That  the  insertion  of  the  words  "or  order,"  in  the  bill,  without  the 
consent  of  the  defendant,  is  such  an  alteration,  in  a  material  part, 
as  wholly  destroyed  the  validity  of  the  bill,  and  that  the  plaintiff  was 
not  therefore  entitled  to  recover. 

Mr.  Justice  Johnson,  delivered  the  opinion  of  the  court. 

It  has  not  been  denied  in  the  argument,  and  numerous  authorities 
prove,  that  an  alteration  in  a  bill  of  exchange,  or  promissory  note, 
in  a  material  part,  without  the  consent  of  the  drawer,  will  discharge 
him  from  all  liability  on  it.  Chitty  on  Bills,  85.  The  duebill,  in  this 
case,  as  it  originally  stood,  without  the  words  "or  order,"  was  not 
negotiable,  either  by  the  custom  of  merchants  or  the  statute  of  Anne. 
And  that  the  negotiability  of  a  paper,  in  mercantile  transactions,  is 
material  and  important,  will  not  be  questioned.  But  it  has  been  sug- 
gested that  even  with  the  words  "or  order"  the  bill  was  not  negotiable, 
not  being  a  promissory  note  within  the  statute  of  Anne,  and  that, 
therefore,  the  alteration  was  immaterial,  as  it  did  not  change  the 
nature  and  character  of  the  writing. 

No  precise  form  of  words  is  necessary  to  constitute  a  promissory 
note;  it  is  sufficient  if  it  amount  to  a  promise  or  undertaking  to  pay 
unconditionally.  A  "promise  to  account  with  J.  S.  or  order,"  and  "I 
acknowledge  myself  indebted  to  A.  &  Co.  to  be  paid  on  demand," 
have  been  held  to  be  promissory  notes  within  the  meaning  of  the 
statute  of  Anne.  1  Selwyn's  N.  P.  395.  It  appears  to  me  impossible 
to  distinguish  the  present  case  from  the  last.  The  word  "due"  is 
clearly  an  acknowledgment  of  a  subsisting  debt,  and  the  words 
"payable  on  demand"  necessarily  imply  a  promise  to  pay. 

I  am  therefore  of  opinion  that  the  motion  for  a  new  trial  ought 
to  prevail. 


Ch.   i)  rORM    OF   BILL   AND   OF    NOTE.  41 

PURTEL  V.  MOREHEAD. 

(Supreme  Court  of  North  Carolina,  1837.     19  N.  C.  239.) 

This  was  an  action  of  assumpsit,  commenced  originally  by  a  war- 
rant before  a  single  justice  of  the  peace.     Plea,  non  assumpsit. 

On  the  trial,  before  Dick,  Judge,  at  Rockingham,  on  the  last  cir- 
cuit, the  plaintiff  produced  and  proved  the  following  acknowledg- 
ment: 

"Morehead  and  Field  bought  of  Thomas  Purtel  hides  to  the 
amount  of  ninety-seven  dollars  and  forty-eight  cents;  and  paid  him 
in  leather  four  dollars  and  eight  cents ;  leaving  a  balance  of  ninety- 
three  dollars  and  forty  cents,  due  him  at  the  end  of  three  months. 

"Burton  Field, 

"For  Morehead  &   Field." 

The  defendants  on  their  part  offered  to  prove  that  the  acknowl- 
edgment was  given  as  evidence  of  the  probable  amount  due  for  a 
quantity  of  green  hides  at  121/2  cents  the  pound,  upon  the  supposi- 
tion that  their  weight  was  a  certain  amount;  that  it  was  agreed,  at 
the  time  of  giving  the  acknowledgment,  that  the  hides  should  be 
weighed  when  dry,  and  accounted  for  at  their  actual  weight ;  and 
that,  upon  their  being  thus  weighed,  they  fell  short  500  or  600  pounds. 
His  honor  rejected  this  evidence;  and,  the  plaintiff  obtaining  a  ver- 
dict, the  defendants  appealed.^ ^ 

Daniel,  J.  *  *  *  We  suppose  he  refused  it  on  the  belief  that 
the  paper  was  a  promissory  note,  and  that  the  partial  failure  of  con- 
sideration could  not  be  admitted  in  evidence  according  to  the  case 
of  Washburn  v.  Picot,  14  N.  C.  390.  But  we  are  of  the  opinion 
that,  as  it  contains  no  express  promise  to  pay,  it  is  not  a  promissory 
note,  but  the  paper  must  be  considered  as  an  account  stated;  and 
then  the  authorities  mentioned  in  this  opinion  oblige  us  to  say,  that 
the  evidence  was  admissible. 

Per  Curiam.     Judgment  reversed. 


HUYCK  v.  MEADOR. 

(Supreme  Court  of  Arkansas,  1866.     24  Ark.  191.) 

ClEndenin,  special  Judge.^*  The  appellant  in  this  court,  who  was 
the  plaintiff  in  the  court  below,  commenced  his  action  of  assumpsit 
in  the  circuit  court  of  Pulaski  county.  The  declaration  contained  two 
counts;    the  first  count  based  on  the  following  instrument  in  writing: 

"Due  I.  Huyck,  or  order,  the  sum  of  three  thousand  nine  hundred 

18  Part  of  the  opinion  is  omitted. 
1*  Part  of  the  opinion  is  omitted. 


42  FORM    AND   INCEITION.  (Part    1 

and   twenty   eight   dollars   ($3,928),    for   value  received   of  him,   and 
on  settlement  up  to  date."  C.  V.  Meador. 

"Little  Rock,  Ark.,  Feb.  16,  1865. 

******  ♦** 

We  come  now  to  consider  the  other  objection,  raised  by  the  record 
and  the  assignment  of  error.  This  question  grows  out  of  the  action 
of  the  court  below  in  refusing  to  permit  the  plaintiff  to  read  as  evi- 
dence, on  the  trial,  the  writing  (a  copy  of  which  is  given  before  in 
this  opinion),  and  which  writing  may  be  said  to  be  the  foundation 
of  the  suit.  The  first  count  of  the  declaration  avers  that  the  defend- 
ant "made  his  certain  promissory  note  in  writing,"  etc.,  and  that  "he 
promised  to  pay  immediately,"  etc.  The  first  question  to  be  decided 
is,  was  the  instrument  offered  in  evidence  a  promissory  note?  and, 
secondly,  if  it  was,  when  was  it  payable? 

A  promissory  note  is  a  written  promise  for  the  payment  of  money. 
Bayley  on  Bills,  1,  3.  The  case  of  Russell  v.  Whipple,  2  Cow.  (N. 
Y.)  536,  was  upon  a  duebill  in  the  following  words:  "Due  Lawson 
Russell,  or  bearer,  two  hundred  dollars  and  twenty-six  cents  for 
value  received."  The  court  held  in  this  case  that  this  instrument  was 
a  promissory  note. 

In  the  case  of  Kimball  v.  Huntington,  10  Wend.  (N.  Y.)  679,  680, 
25  Am.  Dec.  500,  the  court  decided  that  an  instrument  similar  to  the 
one  offered  in  evidence  in  this  case  is  a  promissory  note.  As  it 
contains  every  quality  essential  to  such  paper,  the  acknowledgment  of 
indebtedness  on  its  face  implies  a  promise  to  pay.  So  in  the  case 
of  Franklin  v.  March,  6  N.  H.  364,  25  Am.  Dec.  462,  it  was  held 
that  a  writing  in  these  words,  "Good  to  Cochran  or  order,  for  thirty 
dollars,  borrowed  money,"  is  a  promissory  note.  See,  also.  Smith's 
Mercantile  Law,  263;  Luqueer  v.  Prosser,  1  Hill  (N.  Y.)  259; 
Hitchcock  V.  Cloutier,  7  Vt.  22  ;  United  States  v.  White,  2  Hill  (N. 
Y.)  59,  37  Am.  Dec.  374. 

Holding,  as  we  do  that  the  instrument  declared  on  in  this  case 
and  offered  in  evidence  is  a  promissory  note,  the  inquiry  next  arises 
when,  by  its  terms,  did  it  become  due  and  payable.  No  time  of 
payment  being  named  in  the  note,  it  is  due  immediately,  and  was  so 
correctly  described  in  the  plaintiff's  declaration.  See  Sackett  v. 
Spencer,  29  Barb.  (N.  Y.)  180;  Thompson  v.  Ketchum,  8  Johns. 
(N.  Y.)  191,  192,  5  Am.  Dec.  332;  Gaylord  v.  Van  Loan,  15  Wend. 
(N.  Y.)  308;  Cornell  v.  Moulton,  3  Denio  (N.  Y.)  12. 

We  are  therefore  of  the  opinion  that  there  was  no  variance  be- 
tween the  note  offered  in  evidence  and  that  declared  on,  and  that 
the  circuit  court  erred  in  not  permitting  the  note  to  be  read  in  evi- 
dence.    *     *     * 

Reversed.^' 

IB  Accord:  Kraft  v.  Thomas,  123  Ind.  513,  24  N.  E.  346,  18  Am.  St.  Rep. 
345  (1S90). 


Ch.  1)  FORM    OF   BILL   AND   OF    NOTE.  43 

HUSSEY  V.  WINSLOW. 

(Supreme  Judicial  Court  of  Maine,  Lincoln,  1870.     59  Me.  170.) 

On  exceptions. 

Assumpsit  on  a  promissory  note,  commenced  by  trustee  process, 
in  which  William  Vannah  was  summoned  as  trustee  of  the  principal 
defendant. 

The  trustee  disclosed  that  on  the  4th  day  of  October,  1869,  and  be- 
fore the  service  of  the  writ  in  this  action  on  him,  he  delivered  to  the 
said  Winslow  to  whom  he  was  indebted  on  account,  a  writing,  of 
which  the  following  is  a  copy : 

"Nobleboro,  Oct.  4,  1869. 
Nathaniel  O.  Winslow,   Cr. 

By  labor  163^4  days  @  $4  per  day $67  00 

Good  to  barer.  Wm.  Vannah," 

and  claimed  that  he  should  be  discharged. 

The  presiding  judge  ruled  that  the  instrument  was  a  negotiable 
promissory  note,  and  that  the  trustee  be  discharged.  Thereupon 
the  plaintiff  alleged  exceptions.^® 

DanForth,  J.  The  only  question  here  raised  is  whether  the  writ- 
ten instrument,  disclosed  by  the  trustee,  is  a  negotiable  promissory 
note.  It  was  evidently  so  intended  by  the  parties,  and  seems  to  pos- 
sess all  that  is  legally  requisite  to  constitute  it  such.  It  is  not  a 
mere  acknowledgment  of  a  debt,  as  contended  by  the  plaintiff.  It 
is  true  that  the  words,  "Cr.  by  labor  16%  days  @  $4  per  day  .... 
$67.00,"  may  very  properly  be  construed  as  an  admission  that  so 
much  money  is  due  Mr.  Winslow  for  labor  performed  by  him.  But 
the  remaining  words,  "Good  to  barer,"  are  not  inconsistent  with  what 
goes  before  and  cannot  therefore  be  rejected.  They  must  have  some 
meaning,  and,  taken  in  connection  with  the  words  previously  used, 
that  meaning  cannot  be  doubtful.  In  Franklin  v.  March,  6  N.  H.  364, 
25  Am.  Dec.  462,  in  a  similar  instrument  the  word  "good"  was  held 
to  imply  a  promise.  In  the  paper  under  consideration,  no  other 
meaning  can  be  attached  to  it  than  a  promise  to  pay  for  the  labor 
received.  Nor  is  the  promise  to  pay  in  labor.  Labor  is  not  mentioned 
except  as  the  consideration  for  the  promise.  The  sum  due  has  pre- 
fixed to  it  the  mark  for  dollars,  and  there  is  no  intimation  that  it  is 
to  be  paid  in  any  other  way  than  by  money.  In  such  cases  the  debt 
can  only  be  discharged  by  lawful  currency.  The  sum  to  be  paid  is 
definite  and  subject  to  no  contingency.  It  is  to  be  paid  absolutely, 
and  as  no  time  is  given  it  is  payable  on  demand.  Nor  can  there  be 
any  doubt  as  to  the  payee,  if  any  were  necessary  in  a  note  payable  to 

i«  The  arguments  of  counsel  are  omitted. 


44  FORM    AND   INCEPTION.  (Part    1 

bearer.  Nathaniel  O.  Winslow  is  named  as  the  person  from  whom 
the  consideration  proceeds,  and  if  there  were  no  other  indication  as 
to  whom  the  promise  is  made  the  law  would  deem  this  sufficient. 
Story  on  Notes,  §  36. 

It  would  seem  that  the  only  possible  construction  which  can  be 
given  to  this  instrument  is,  substantially,  this:  In  consideration  of 
16%  days'  labor,  performed  by  Nathaniel  O.  Winslow,  at  $-i  per  day, 
amounting  to  $67,  I  promise  to  pay  him  or  bearer,  that  sum  on  de- 
mand.    [Signed]  William  Vannah. 

Here  we  have  every  element  of  a  negotiable  promissory  note ;  a 
maker,  a  payee,  a  promise  or  engagement  to  pay  a  certain  sum  of 
money  at  a  specified  time,  absolutely  and  unconditionally,  and  the 
word  "bearer"  to  make  it  negotiable. 

Exceptions  overruled. 


COWAN  v.  HALLACK. 

(Supreme  Court  of  Colorado,  1S87.     9  Colo.  572,  13  Pac.  700.) 

Action  on  the  following  instrument: 

"Denver,  Colo.,  July  15,  1881. 
"Mr.  H.  A.  Garvey  bought  of  E.  F.  Hallack,  manufacturer  and 
wholesale  and  retail  dealer  in  lumber,  lath,  shingles,  sash,  doors, 
blinds,  mouldings,  trimmings,  paints,  oils,  window  glass,  roofing  pa- 
per, pitch,  building  paper,  cement,  plaster  of  Paris,  plastering  hair, 
etc.: 

"June  21.     To  114  lbs.  tarred  felt,  d]U $     3  99 

Express    charges 25 

To  15  bbls.  Eng.  Port,  cement 108  00 

June  27.     To  10     "         "         "  "       72  00 

June  27.     To     5     "         "         "  "        36  00 

Julv      2.     To     2     "         "         "  "       1-i  40 

July      5.     To     1     "         "         "  "        7  20 

July      6.     To     5     "         "         "  "       36  00 

$277  84" 

Indorsed  upon  the  account  rvas  the  following: 

"I  hereby  accept  this  bill,  in  compliance  with  the  terms  of  contract 
and  specifications  with  Mr.  H.  A.  Garvey,  payable  to  E.  F.  Hallack 
thirty  days  after  July  9,  1881. 

"E.  R.  Cowan."  '' 

Elbert,  J.  Hallack's  account  with  Garvey,  upon  which  the  under- 
taking sued  upon  appears  to  have  been  indorsed,  is  an  ordinary  item- 

iT  The  statement  of  the  case  is  abridged,  aud  a  portion  of  the  opinion 
omitted. 


Ch.   1)  FORM    OF   BILL   AND   OF    NOTE.  45 

ized  statement  by  a  merchant  of  his  account  with  a  debtor.  The 
language  of  the  undertaking  so  indorsed  is  as  follows : 

"I  hereby  accept  this  bill,  in  compliance  with  the  terms  of  contract 
and  specifications  with  Mr.  H.  A.  Garvey,  payable  to  E.  F.  Hallack 
thirty  days  after  July  9,  1881. 

"[Signed]  E.  R.  Cowan." 

The  defense  admitted  the  signature,  and  that  no  payment  had  been 
made.  Aside  from  this,  the  undertaking  was  all  the  evidence  intro- 
duced on  the  trial  in  the  court  below,  and  upon  it  the  plaintiff  re- 
covered judgment.  Two  points  are  made  by  counsel:  (1)  That  no 
consideration  was  alleged  or  proved,  and  that,  therefore,  the  court 
erred  in  overruling  the  defendant's  motion  for  a  nonsuit;  (2)  that 
the  court  erred  in  sustaining  the  demurrer  to  the  third  defense. 

It  is  well  understood  that  in  an  action  upon  a  simple  contract,  the 
plaintiff,  in  order  to  recover,  must  allege  and  prove  a  consideration. 
In  this  connection,  however,  it  is  to  be  remembered — First,  that  the 
admission  of  a  consideration  by  the  terms  of  the  written  contract 
is  prima  facie  evidence  of  its  existence,  and  satisfies  the  rule;  second, 
that  negotiable  instruments  import  a  consideration,  and  are  exceptions 
to  the  rule.  1  Pars.  Cont.  430 ;  1  Daniel,  Neg.  Inst.  §  161 ;  Whitney 
V.  Stearns,  16  Me.  394.  We  do  not  think  that  the  instrument  sued 
upon  contains,  by  its  terms,  an  admission  of  such  a  consideration  as 
in  itself  relieved  the  plaintiff  from  the  necessity  of  making  proof 
of  a  consideration.  It  admits  a  contract  with  Garvey  to  accept, 
but  it  does  not  disclose  any  consideration  for  such  a  contract,  and  we 
are  not  at  liberty  to  presume  its  existence.  It  would  be  illogical  to 
treat  that  as  a  consideration  which  itself  depends  for  its  value  and 
validity  upon  the  existence  of  a  consideration.  Whether  the  writing 
imports  a  consideration  is  a  more  difficult  question,  and  depends  upon 
whether  it  is  negotiable  under  the  provisions  of  the  statute  concerning 
bonds,  bills,  and  promissory  notes.  Chapter  9,  Gen.  St.  142.  Section 
3  of  the  act  provides  that  "all  promissory  notes,  bonds,  duebills,  and 
other  instruments  in  writing,  made  by  any  person,  whereby  such  per- 
son promises  or  agrees  to  pay  any  sum  of  money  or  article  of  personal 
property,  or  any  sum  of  money  in  personal  property,  or  acknowledges 
any  sum  of  money  or  article  of  personal  property  to  be  due  to  any 
other  person  or  persons,  shall  be  taken  to  be  due  and  payable  to  the 
person  or  persons  to  whom  the  said  note,  bond,  bill,  or  other  instru- 
ment in  writing  is  made."  Section  4  provides  that  "any  such  note, 
bill,  bond,  or  other  instrument  in  writing,  made  payable  to  any  per- 
son or  persons,  shall  be  assignable  by  indorsement  thereon,  under 
the  hand  of  such  person  and  of  his  assignee,  in  the  same  manner  as 
bills  of  exchange  are,  so  as  absolutely  to  transfer  and  vest  the  prop- 
erty thereof  in  each  and  every  assignee  successively." 

Under  this  statute  all  promissory  notes  and  instruments  in  writing 
for  the  payment  of  money  are  negotiable,  whether  so  expressed  or 
not.     And  whether  the  particular  instrument  contains  the  words  "or 


46  FORM   AND   INCEPTION.  (Part   1 

order,"  or  equivalent  words,  or  not,  its  legal  effect  is  the  same  as  if 
it  did  contain  such  words.  Thackaray  v.  Hanson,  1  Colo.  366; 
Roosa  V.  Crist,  17  111.  450,  65  Am.  Dec.  679 ;  Archer  v.  Claflin,  31 
111.  306.  To  constitute  a  good  promissory  note,  no  precise  words  of 
contract  are  necessary,  provided  they  amount,  in  legal  effect,  to  a 
promise  to  pay.  In  other  words,  if  over  and  above  the  mere  ac- 
knowledgment of  the  debt  there  may  be  collected  from  the  words 
used  a  promise  to  pay  it,  the  instrument  may  be  regarded  as  a  prom- 
issory note.  1  Daniel,  Neg.  Inst.  §  36  et  seq. ;  Byles,  Bills,  10,  11, 
and  cases  cited.  See,  also,  the  following  decisions  under  statutory 
provisions  similar  to  our  own :  Bilderback  v.  Burlingame,  27  111. 
338 ;  Archer  v.  Claflin,  31  111.  306 ;  Jacquin  v.  Warren,  40  111.  459 ; 
White  V.  Smith,  77  111.  351,  20  Am.  Rep.  251 ;  Petillon  v.  Lorden,  86 
111.  361;  Stacker  v.  Hewitt,  1  Scam.  (111.)  207;  Smith  v.  Bridges, 
Breese  (111.)  18;  Williams  v.  Forbes,  47  111.  148;  Sappington  v. 
Puliam.  3  Scam.  (111.)  385;  Roosa  v.  Crist,  17  111.  450,  65  Am.  Dec. 
679 ;   Wilder  v.  De  Wolf,  24  111.  190. 

"Due  A.  B.  $325,  payable  on  demand,"  or,  "I  acknowledge  my- 
self to  be  indebted  to  A.  in  $109,  to  be  paid  on  demand  for  value  re- 
ceived," or,  "I.  O.  U.  $85  to  be  paid  May  5th,"  are  held  to  be  prom- 
issory notes,  significance  being  given  to  words  of  payment  as  in- 
dicating a  promise  to  pay.     1  Daniel,  Neg.  Inst.  §  39,  and  cases  cited. 

Hallack's  itemized  account  with  Garvey,  upon  which  the  undertak- 
ing of  the  defendant  is  indorsed,  is  in  no  sense  negotiable  paper. 
The  indorsement  thereon,  however,  signed  by  the  defendant,  is  a 
new  undertaking;  and  if,  under  our  statutes,  it  is  negotiable,  it  im- 
ports a  consideration.  Bay  v.  Freazer,  1  Bay  (S.  C.)  72.  The  word 
"accepted"  on  a  bill  of  exchange  is  an  engagement  to  pay  the  bill 
in  money  when  due.  Indorsed  upon  nonnegotiable  paper,  as  in 
this  case,  there  is  authority  for  saying  that  it  would  not  import 
a  consideration  as  in  the  case  of  such  indorsement  upon  negotiable 
paper,  and  a  consideration  would  have  to  be  alleged  and  proved. 
Byles,  Bills,  3,  note;  Jeffries  v.  Hager,  18  Mo.  272;  Richardson  v. 
Carpenter,  2  Sweeny  (N.  Y.)  366.  The  language  of  the  undertaking, 
however,  must  be  considered  as  a  whole,  and  in  this  case  we  think 
it  clearly  imports  a  promise  upon  the  part  of  the  defendant  Cowan 
to  pay  Hallack,  the  payee,  the  amount  of  the  bill  upon  which  it  is 
indorsed,  at  the  time  specified.  1  Daniel,  Neg.  Inst.  §  36  et  seq.,  and 
cases  cited. 

We  think  the  writing  comes  clearly  within  the  provisions  of  the 
statute  which  we  have  quoted;  that  is  to  say,  it  is  "an  instrument 
in  writing"  made  by  the  defendant  Cowan,  whereby  he  promises  to 
pay  in  money,  at  a  specified  date  absolute,  the  amount  of  the  bill 
upon  which  the  undertaking  is  indorsed.  As  such  it  is  a  negotiable 
instrument,  and  imports  a  consideration.  Our  statute  in  this  re- 
spect, is  substantially  the  statute  of  3  &  4  Anne,  c.  9  (1  Daniel,  Neg. 
Inst.  §  5,  note;   Id.  §  162),  the  effect  of  which  was,  in  an  action  upon 


Ch.  1)  FORM    OF   BILL   AND   OF   NOTE.  47 

a  promissory  note,  to  dispense  with  the  necessity  of  either  alleging 
or  proving  a  consideration.  Peasley  v.  Boatwright,  2  Leigh  (Va.) 
198.  In  this  view,  the  plaintiff  was  entitled  to  recover  on  the  evidence 
introduced,  and  the  defendant's  motion  for  a  nonsuit  was  properly 
overruled.  *  *  * 
Affirmed. 


GAY  V.  ROOKE. 

(Supreme  Judicial  Court  of  Massachusetts,  Middlesex,  1890.     151  Mass.  115, 
23  N.  E.  835,  7  L.  11.  A.  392,  21  Am.  St.  Rep.  434.) 

Contract  on  the  following  instrument,  declared  on  as  a  promis- 
sory note: 

"Marlboro',  Sept.  23,  1881. 

"I.  O.  U.,  E.  A.  Gay,  the  sum  of  seventeen  dolls,  ^/loo,  for  value 
received.  John  R.  Rooke." 

Writ  dated  September  19,  1887.  At  the  trial  in  the  superior 
court,  without  a  jury,  before  Dewey,  J.,  the  only  issue  was  whether 
the  plaintiff  was  entitled  to  interest  from  the  date  of  the  instrument, 
or  from  that  of  the  writ,  the  service  of  which  was  the  only  demand 
made  by  the  plaintiff. 

The  plaintiff  asked  the  judge  to  rule,  as  matter  of  law,  that  he  was 
entitled  to  interest  from  the  date  of  the  instrument.  The  judge  de- 
clined so  to  rule,  and  ruled  that  interest  could  be  recovered  from  the 
date  of  the  writ  only,  and  found  for  the  plaintiff  for  $17.05  only; 
and  the  plaintiff  alleged  exceptions. 

Devens,  J.  In  order  to  constitute  a  good  promissory  note,  there 
should  be  an  express  promise  on  the  face  of  the  instrument  to  pay 
the  money.  A  mere  promise  implied  by  law,  founded  on  an  acknowl- 
edged indebtedness,  will  not  be  sufficient.  Story,  Prom.  Notes,  §  14 ; 
Brown  v.  Gilman,  13  Mass.  158.  While  such  promise  need  not  be 
expressed  in  any  particular  form  of  words,  the  language  used  must 
be  such  that  the  written  undertaking  to  pay  may  fairly  be  deduced 
therefrom.  Commonwealth  Ins.  Co.  v.  Whitney,  1  Mete.  21.  In  this 
view,  the  instrument  sued  on  cannot  be  considered  a  promissory  note. 
It  is  an  acknowledgment  of  a  debt  only;  and,  although  from  such  an 
acknowledgment  a  promise  to  pay  may  be  legally  implied,  it  is  an 
implication  from  the  existence  of  the  debt,  and  not  from  any  promis- 
sory language.  Something  more  than  this  is  necessary  to  establish 
a  written  promise  to  pay  money.  It  was  therefore  held  in  Gray  v. 
Bowden,  23  Pick.  282,  that  a  memorandum  on  the  back  of  a  promis- 
sory note,  in  these  words,  'T  acknowledge  the  within  note  to  be  just 
and  due,"  signed  by  the  maker,  and  attested  by  a  witness,  was  not 
a  promissory  note  signed  in  the  presence  of  an  attesting  witness 
within  the  meaning  of  the  statute  of  limitations.  In  England  an  I. 
O.  U.,  there  being  no  promise  to  pay  embraced  therein,  is  treated 


48  FORM    AND   INCEPTION.  (Part   1 

as  a  duebill  only.  The  cases,  which  arose  principally  under  the 
stamp  act,  are  very  numerous,  and  they  have  held  that  such  a  paper 
did  not  require  a  stamp,  as  it  was  only  evidence  of  a  debt.  1  Daniel, 
Neg.  Inst.  (3d  Ed.)  §  36 ;  1  Rand.  Com.  Paper,  §  88;  Fesenmayer 
v.  Adcock.  16  Mees.  &  W.  449;  Mclanotte  v.  Teasdale,  13  Mees.  & 
W.  216;  Smith  v.  Smith,  1  Post.  &  F.  539;  Gould  v.  Coombs,  1  C. 
B.  543 ;  Fisher  v.  Leslie,  1  Esp.  425 ;  Israel  v.  Israel,  1  Camp.  499 ; 
Childers  v.  Boulnois,  Dowl.  &  R.  N.  P.  8;  and  Beeching  v.  West- 
brook,  8  Mees.  &  W.  412. 

While,  in  a  few  states,  it  has  been  held  otherwise,  the  law  as  gen- 
erally understood  in  this  country  is  that,  in  the  absence  of  any  statute, 
a  mere  acknowledgment  of  a  debt  is  not  a  promissory  note ;  and  such 
is,  we  think,  the  law  of  this  commonwealth.  Gray  v.  Bowden,  23 
Pick.  282 ;  Commonwealth  Insurance  Co.  v.  Whitney,  1  Mete.  21 ; 
Daggett  v.  Daggett,  124  Mass.  149;  Almy  v.  Winslow,  126  Mass. 
342;  Carson  v.  Lucas,  13  B.  Mon.  (Ky.)  213;  Garland  v.  Scott,  15 
La.  Ann.  143  ;  Currier  v.  Lockwood,  40  Conn.  349,  16  Am.  Rep.  40 ; 
Brenzer  v.  Wightman,  7  Watts  &  S.  (Pa.)  264;  Biskup  v.  Oberle, 
6  Mo.  App.  583.  Some  states  have  by  statute  extended  the  law  of 
bills  and  promissory  notes  to  all  instruments  in  writing  and  whereby 
any  person  acknowledges  any  sum  of  money  to  be  due  to  any  other 
person.  1  Randolph,  Com.  Paper,  §  88;  Rev.  St.  111.  1884,  c.  98, 
§  3;  Gen.  St.  Colo.  1883,  c.  9,  ^  3 ;  Rev.  St.  Ind.  1881,  §  5501; 
Rev.  Code  Iowa,  1873,  §  2085 ;  Rev.  Code  Miss.  1880,  •§§  1123,  1124. 

We  have  no  occasion  to  comment  upon  those  instruments  in  which 
words  have  been  used  or  superadded  from  which  an  intention  to  ac- 
company the  acknowledgment  with  a  promise  to  pay  has  been  gather- 
ed, or  where  the  form  of  the  instrument  fairly  led  to  that  conclusion. 
Daggett  v.  Daggett,  124  Mass.  149.  Almy  v.  Winslow,  126  Mass. 
342.  No  such  words  exist  in  the  instrument  sued,  nor  is  it  in  form 
anything  but  an  acknowledgment.  The  words  "for  value  received" 
recite  indeed  the  consideration,  but  they  add  nothing  which  can  be 
interpreted  as  a  promise  to  pay.  It  is  therefore  unnecessary  to  con- 
sider whether,  if  the  paper  were  a  promissory  note,  interest  should 
be  calculated  from  its  date.  Upon  this  point  we  express  no  opinion. 
If  it  is  to  be  treated  as  an  acknowledgment  of  debt  only,  as  we  think 
it  must  be,  the  plaintiff  is  not  entitled  to  interest  except  from  the 
date  of  the  writ.  Even  if  it  was  the  duty  of  the  defendant  to  have 
paid  the  debt  on  demand,  yet  if  no  demand  was  made,  if  no  time 
was  stipulated  for  its  payment,  if  there  was  no  contract  or  usage 
requiring  the  payment  of  interest,  and  if  the  defendant  was  not  a 
wrongdoer  in  acquiring  or  detaining  the  money,  interest  should  be 
computed  only  from  the  demand  made  by  the  service  of  the  writ. 
Dodge  V.  Perkins,  9  Pick.  368;  Hunt  v.  Nevers,  15  Pick.  500,  26 
Am.  Dec.  616.  "In  general,"  says  Chief  Justice  Shaw,  "when  there 
is  a  loan  without  any  stipulation  to  pay  interest,  and  where  one  has 
the  money  of  another,  having  been  guilty  of  no  wrong  in  obtaining 


Ch.  1)  FORM    OF   BILL   AND   OF   NOTE.  49 

it,  and  no  default  in  retaining  it,  interest  is  not  chargeable."   Hubbard 
V.  Charlestown  Railroad  Co.,  11  Mete.  124;  Calton  v.  Bragg,  15  East, 
223 ;  Shaw  v.  Picton,  4  Barn.  &  C.  723 ;  Moses  v.  Macferlan,  2  Burr. 
1005 ;   Walker  v.  Constable,  1  Bos.  &  P.  306. 
Exceptions  overruled. 


SECTION  4,— THE  ORDER 


RUFF  V.  WEBB. 

(Nisi  Prius,  before  Lord  Kenyon,  C.  J.,  1794.     1  Esp.  129.) 

Assumpsit  for  work  and  labour,  with  the  common  counts. 

Plea  of  the  general  issue. 

The  action  was  brought  to  recover  the  amount  of  wages  due  by 
the  defendant  to  the  plaintiff. 

The  plaintiff*  had  been  servant  to  the  defendant,  and,  on  his  dis- 
charging him  from  his  service,  had  given  him  a  draft  for  the  amount 
of  his  wages  on  an  unstamped  slip  of  paper,  in  the  following  words: 

"Mr.  Nelson  will  much  oblige  Mr.  Webb,  by  paying  to  J.  Ruff, 
or  order,  twenty  guineas  on  his  account." 

This  draft  the  plaintiff  had  taken,  but  it  did  not  appear  that  he 
had  ever  demanded  payment  of  it  from  Mr.  Nelson,  to  whom  it  was 
addressed. 

It  was  given  in  evidence  on  the  part  of  the  defendant,  that  he  lived 
in  the  country,  and  kept  cash  with  Mr.  Nelson  in  London,  and  that 
he  paid  all  his  bills  in  that  manner,  by  drafts  on  Nelson;  that  the 
plaintiff  knew  that  circumstance,  and  took  the  draft  without  any  ob- 
jection ;  and  that  if  he  had  applied  to  Nelson,  that  it  would  have  been 
paid.  This  evidence  was  relied  on  as  a  discharge,  and  bar  to  the 
action. 

Shepherd,  for  the  plaintiff,  contended  that  the  only  mode  by  which 
this  could  operate  as  a  bar  to  the  action  was  by  taking  the  draft  in 
question  as  a  bill  of  exchange;  in  which  case,  under  St.  3  &  4  Anne, 
c.  9,  §  7,  it  is  declared  that  if  any  person  shall  accept  a  bill  of  ex- 
change, in  satisfaction  of  a  debt,  that  the  same  shall  be  deemed  a  full 
and  sufficient  discharge,  if  the  person  so  accepting  such  bill  for  his 
debt  shall  not  take  his  due  course,  by  endeavoring  to  get  the  same  ac- 
cepted and  paid,  and  making  his  protest  for  nonacceptance  or  non- 
payment; but  he  contended  that  in  point  of  substance  it  was  not  a 
bill  of  exchange,  but  a  mere  request  to  pay  money,  not  accepted  by 
Nelson,  or  such  as  could  put  the  plaintiff  into  any  better  situation 
with  respect  to  his  demand.  But,  if  it  was  taken  as  a  bill  of  ex- 
Sm.&  M.B.&  N.— 4 


50  roRM  AND  INCEPTION.  (Part  1 

change,  that  it  could  not  be  given  in  evidence  at  all,  as  it  was  not 
stamped. 

It  was  answered  by  the  defendant's  counsel  that  the  plaintiff's  hav- 
ing accepted  the  draft  as  payment  was  a  waiver  of  every  objection 
to  it,  and  that  he  was  therefore  bound  by  it,  and  could  not  recur  to 
the  demand  for  wages. 

Lord  Ken  YON  said  he  was  of  opinion  that  the  paper  offered  in 
evidence  was  a  bill  of  exchange;  that  it  was  an  order  by  one  person 
to  another  to  pay  money  to  the  plaintiff  or  his  order,  which  was 
in  point  of  form  a  bill  of  exchange ;  that  as  such  it  could  not  be  given 
in  evidence,  without  being  legally  stamped ;  and,  as  the  only  mode  in 
which  it  could  operate  as  a  discharge  of  the  plaintiff's  demand  was 
as  stated  by  the  plaintiff's  counsel,  that  the  plaintiff  in  point  of  law 
was  therefore  entitled  to  recover. 


LITTLE  v.  SLACKFORD. 

(Nisi   Prius,  before  Lord  Tenterden,  C  J.,  1S28.     Mioody  &  M.  171.) 

Debt   for  money  paid. 

The  defendant,  being  indebted  to  J.  S.  for  work  done,  gave  him  an 
imstamped  paper  addressed  to  the  plaintiff  in  the  following  words: 

"Mr.  Little,  please  to  let  the  bearer  have  seven  pounds,  and  place 
it  to  my  account,  and  you  will  oblige 

"Your  humble  servant,  R.   Slackford." 

There  was  also  some  slight  evidence  that  the  defendant  had  ac- 
knowledged the  debt. 

Comyn,  for  the  defendant,  objected  that  the  paper  produced  was  a 
bill  of  exchange,  and  could  not  be  read  for  want  of  a  stamp,  and  the 
other  evidence  would  not  warrant  a  verdict. 

Lord  Tenterden,  C.  J.  I  think  no  stamp  is  necessary.  The  paper 
does  not  purport  to  be  a  demand  made  by  a  party  having  a  right  to 
call  on  the  other  to  pay.  The  fair  meaning  is,  "You  will  oblige  me 
by  doing  it."  Even  without  the  paper,  the  other  evidence  would 
probably  entitle  the  plaintiff  to  a  verdict. 

Verdict  for  the  plaintiff. 


HAMILTON  V.   SPOTTISWOODE. 

(Court  of  Exchequer,   1849.     4  Exch.   200.) 

The  parties,  pursuant  to  the  order  of  Parke,  B.,  agreed  to  state, 
for  the  opinion  of  the  court,  the  following  case: 

On  the  24th  of  September,  1842,  Alexander  Wilson  and  Patrick 
Wilson,  carrying  on  the  business  of  typefounders  in  partnership,  un- 
der the  firm  of  Alexander  Wilson  &  Sons,  were  indebted  to  William 


Ch.  1)  FORM    OF   BILL    AND    OF    NOTE.  51 

Gentle  in  £6000,  for  money  lent  by  him  to  them,  no  part  of  which  has 
been  paid,  except  as  hereinafter  mentioned.  The  defendant  and  the 
firm  of  Messrs.  Eyre  &  Spottiswoode,  of  which  the  defendant  was  a 
member,  were  partners,  and  had,  for  some  time  previously  to  the 
date  aforesaid,  dealt  with  Alexander  Wilson  &  Sons,  purchasing 
from  them,  from  time  to  time,  large  quantities  of  type  payable  quar- 
terly, and  for  which  corresponding  quarterly  accounts  used  to  be  sent 
in  by  Alexander  Wilson  &  Sons  up  to  the  31st  March,  30th  June, 
30th  September,  and  31st  December  in  each  year,  and  it  was  then  ex- 
pected that  those  dealings  would  be  continued,  as  they  afterwards 
were.  Alexander  Wilson  &  Sons  being  applied  to  for  payment,  de- 
livered to  William  Gentle  the  following  order  or  authority  in  writing, 
signed  by  them  and  directed  to  the  defendant: 

"To  Alexander  Spottiswoode,  Esq. 

"London,  24th  Sept.,  1842. 

"Dear  Sir — We  hereby  authorize  you  to  pay  on  our  account,  to 
the  order  of  William  Gentle,  Esq.,  the  sum  of  six  thousand  pounds, 
at  the  following  periods,  deducting  the  amount  from  the  quarterly 
accounts  for  type  furnished  to  you  and  to  Messrs.  Eyre  &  Spottis- 
woode, viz. : 

11th  November,  1843   £1,000 

11th  November,  1844    1,000 

11th  November,  1845    1,000 

11th  November,  1846    1,500 

11th  November,   1847    1,500 

"We  are,  dear  sir,  yours  very  truly, 

"Alexander  Wilson  &  Sons." 

The  said  order  or  authority  was  thereupon  taken  to  the  defendant, 
and  underneath  the  same  he  wrote  the  following  letter  or  memoran- 
dum, addressed  to  William  Gentle:  "Dear  Sir — ■Having  received  the 
foregoing  authority  from  Messrs.  A.  Wilson  &  Sons,  I  undertake  to 
make  you  the  payments  as  above  stated.  Middle  New-Street,  Sep- 
tember 24,  1842.  Andrew  Spottiswoode" — which  was  then,  with 
the  defendant's  consent,  handed  to  William  Gentle.     *     *     * 

The  question  for  the  opinion  of  the  court  is,  first,  whether  the 
writing  dated  24th  September,  1842,  requires  a  bill  of  exchange  or 
promissory  note  stamp. ^^ 

Pollock,  C.  B.  We  are  all  of  opinion  that  the  letters  do  not 
require  a  bill  of  exchange  or  promissory  note  stamp;  they  do  not 
import  an  absolute  intention  that  the  money  should  at  all  events  be 
paid,  but  merely  authorize  the  defendant  to  pay  it.  As  to  the  other 
point  we  will  take  time  to  consider. 

Cur.  adv.  vult. 

The  judgment  of  the  court  was  now  delivered  by 

18  The  statement  is  abridged,  and  tlie  arguments  and  a  portion  of  the 
opinion  of  Alderson.  B..  are  omitted. 


52  FORM   AND   INCEPTION.  (Part  1 

Alderson,  B.  We  intimated,  at  the  time  of  the  first  argument  in 
this  case,  our  opinion  that  the  two  letters  dated  the  24th  of  Septem- 
ber, 1842,  the  first  from  Wilson  &  Sons  to  the  defendant,  and  the 
second,  written  on  the  same  paper,  from  the  defendant  to  the  testator 
Mr.  Gentle,  do  not  require  to  be  stamped,  either  as  a  promissory  note 
or  bill  of  exchange,  but  only  constitute  and  require  to  be  stamped 
as  an  agreement.  That  opinion  we  still  retain.  We  do  not  think  this 
is  an  order  to  pay  any  particular  sum  of  money  at  all ;  but  we  are 
of  opinion  that  it  amounts  to  an  agreement,  that,  if  any  of  the  speci- 
fied portions  of  debt  mentioned  therein  be  at  any  time  unpaid  by 
Messrs.  Wilson  &  Sons  to  Mr.  Gentle,  and  if,  after  that  event  has 
occurred  and  come  to  the  knowledge  of  the  defendant,  any  quarterly 
accounts  for  type  should  become  due  from  the  defendant  to  Wilson 
&  Sons,  the  defendant  would,  so  far  as  those  accounts  would  extend, 
pay  the  debt  due  from  Wilson  &  Sons  to  Gentle,  of  which  he  might 
so  have  notice.  Such  an  agreement,  when  assented  to  by  all  the 
parties,  would  be  irrevocable.  Then,  if  so,  it  seems  to  follow  that 
the  plaintiffs  are  entitled  to  recover  in  the  present  suit.     *     ♦     * 

Judgment  for  the  plaintiffs. 


LUFF  v.  POPE. 
(Supreme  Court  of  New  York,  1S43.    5  Hill.  413.) 

On  the  merits,  it  appeared  that  the  action  was  brought  upon  the 
following  instrument ; 

"New  York,  Dec.  9,  1838. 

"Thirty  days  after  sight  pay  Henry  Pope  or  his  order  sixty-six 
dollars  and  ninety-seven  cents,  and  place  the  same  to  account  of 
yours,  Abm.  Bell. 

"To  Mr.  xMartin  Luff,  New  York." 

The  draft  was  presented  to  the  defendant  for  acceptance  two  days 
after  its  date,  and  was  duly  protested  by  a  notary  for  nonacceptance. 
The  plaintiff  proved  that  he  had  a  demand  against  Bell,  and,  on 
calling  for  payment.  Bell  said  he  had  funds  in  the  hands  of  the  de- 
fendant, and  thereupon  made  this  draft  for  the  amount  of  the  plain- 
tiff's demand.  On  presenting  the  draft  the  defendant  said  he 
would  pay  it  by  the  1st  of  February  or  the  1st  of  March ;  but  he  re- 
fused to  accept  it,  or  to  make  any  promise  in  writing.  The  plaintiff 
gave  evidence  tending  to  show  that  the  defendant  had  funds  of  Bell 
in  his  hands  sufficient  to  pay  the  bill,  and  the  defendant  gave  re- 
butting evidence.  The  defendant  moved  for  a  nonsuit,  on  the  ground 
that  there  was  no  acceptance  in  writing,  and  because  the  defendant 
positively  refused  to  accept  the  bill.  The  motion  was  denied  by  the 
justice,  on  the  ground  that  he  did  not  think  this  a  bill  of  exchange 
within  the  meaning  of  the  statute.     He  said  it  was  known  to  all  the 


Ch.  1)  FORM   OF   BILL   AND   OF    NOTE.  53 

parties  that  the  instrument  was  drawn  on  a  particular  fund,  and  he 
regarded  it  as  a  transfer  of  a  chose  in  action.  The  jury  were  after- 
wards charged  that,  if  this  was  a  bill  of  exchange  within  the  com- 
mon acceptation  of  business  men,  the  plaintiff  could  not  recover  for 
want  of  a  written  acceptance.  But  if  it  was  only  an  order,  or  instru- 
ment in  writing  to  transfer  so  much  of  the  specific  fund  of  Bell  in 
the  hands  of  Luff  as  would  pay  Bell's  debt  to  Pope,  then  it  was  not 
within  the  statute,  and  the  defendant  was  liable,  provided  he  had 
funds.  The  jury  found  for  the  plaintiff  as  before  mentioned.  Judg- 
ment of  afiirmance  having  been  perfected  in  the  superior  court,  the 
defendant  in  the  marine  court  brought  error.  ^^ 

Bronson^  j_  *  *  *  Q^  |.j^g  merits,  the  judgment  of  the  marine 
court  was  clearly  erroneous,  and  should  have  been  reversed.  There 
is  no  color  for  the  argument  that  the  instrument  on  which  the  plain- 
tiff sued  was  not  a  bill  of  exchange.  A  bill  of  exchange  is  a  written 
order  or  request  by  one  person  to  another,  for  the  payment,  absolute- 
ly and  at  all  events,  of  a  specified  sum  of  money  to  a  third  person. 
Now  what  have  we  here?  Bell  requests  Luff",  30  days  after  sight, 
to  pay  a  specified  sum  of  money  to  Pope.  It  is  payable  absolutely, 
and  without  reference  to  any  particular  fund;  and  if  it  be  not  a  bill 
of  exchange,  the  wit  of  man  cannot  devise  one.  The  justice  thought 
it  was  not  a  bill,  but  only  "an  order  or  instrument  in  writing,"  be- 
cause it  was  said  at  the  time,  and  the  proof  tended  to  establish  the 
fact,  that  Luff  had  funds  in  his  hands  belonging  to  Bell.  It  would 
be  enough  to  say  that  a  written  instrument,  which  is  perfectly  plain 
and  explicit  on  its  face,  cannot  be  changed  into  something  else  by 
anything  which  the  parties  said  at  the  time  of  making  it,  nor  by  any 
inquiry  into  extrinsic  facts.  It  must  speak  for  itself.  But  the  notion 
that  there  cannot  be  a  bill  of  exchange  where  the  drawee  has  funds, 
if  it  be  not  entirely  new,  cannot  date  back  further  than  1836.  It 
contradicts  the  very  theory,  and  all  the  right  use  of  a  bill  of  ex- 
change, which  is  always  supposed  to  be  drawn  on  funds.  Incalcula- 
ble mischief  has  resulted  from  the  modern  practice  of  drawing  with- 
out funds,  which  is  little  better  than  a  fraudulent  use  of  the  instru- 
ment. And  although  such  bills  have  been  tolerated,  we  have  not  yet 
gone  so  far  as  to  make  it  unlawful  to  pursue  the  old-fashioned  honest 
course  of  drawing,  where  the  means  for  payment  have  already  been 
provided. 

Whether  the  payee  takes  the  bill  in  satisfaction  of  a  debt  due  from 
the  drawer,  or  advances  the  money  for  it,  cannot  be  a  matter  of  any 
importance  as  between  him  and  the  drawee.  It  does  not  affect  the 
nature  of  the  instrument. 

The  statute  requires  that  the  acceptance  should  be  in  writing.  2 
Rev.  St.  768,  §  6.  Here  there  is  not  only  the  want  of  any  writing, 
but  the  defendant  positively  refused  to  accept,  and  the  bill  was  pro- 

19  The  statement  of  the  case  is  abridged,  and  a  part  of  the  opinion  omitted. 


54  FORM    AND   INCEPTION.  (Part  1 

tested  for  nonacceptance.  And  yet  the  defendant  has  been  held  Hable. 
An  examination  of  this  case  in  all  its  facts  would  go  very  far  to 
confirm  the  policy  of  the  statute.  But  it  is  enough  that  we  cannot 
repeal  it,  and  until  that  is  done  the  plaintiflf  cannot  recover.  He  must 
take  his  remedy  against  the  drawer;  and  if  Bell  has  any  money  in 
the  hands  of  the  defendant,  which  is  very  questionable,  he  must  sue 
for  it.  It  is  a  chose  in  action,  which  cannot  be  transferred  so  as  to 
give  the  assignee  a  right  to  sue  in  his  own  name,  except  in  the  form 
of  an  accepted  bill  of  exchange.  To  give  a  parol  promise  to  pay  the 
effect  of  a  written  acceptance  of  the  bill  would  be  no  better  than  a 
device  to  get  round  the  statute  and  defeat  all  the  valuable  ends  which 
it  was  designed  to  accomphsh.  If  Quin  v.  Hanford,  1  Hill,  82,  does 
not  support,  it  certainly  does  not  conflict  with  this  doctrine.  In  Har- 
rison V.  Williamson,  2  Edw.  430,  438,  the  Vice  Chancellor  said:  "A 
bill  of  exchange  has  not  the  effect  of  an  assignment  of  the  money 
for  which  it  is  drawn  in  the  hands  of  the  drawee,  unless,  perhaps, 
where  it  is  drawn  upon  a  particular  fund,  and  then,  indeed,  by  the 
law  merchant,  it  loses  its  character  as  a  bill  of  exchange."  He  un- 
doubtedly alluded  to  a  class  of  cases,  some  of  which  are  cited  in 
Quin  V.  Hanford,  where  an  order,  either  not  payable  in  money,  or 
else  drawn  on  a  particular  fund,  has,  after  acceptance  or  promise  of 
payment,  been  allowed  to  operate  as  an  equitable  assignment  of  the 
fund.  And  see  Morton  v.  Naylor,  1  Hill,  583.  This  has  been  done 
upon  a  very  liberal  construction  of  the  acts  of  the  parties,  for  the 
advancement  of  justice.  But  those  cases  have  nothing  to  do  with  a 
bill  of  exchange  proper,  which  is  an  instrument  of  a  peculiar  nature, 
and  governed  by  its  own  laws.  Although  it  is  used  for  the  purpose 
of  transferring  funds,  and  has  that  effect  in  the  result,  it  never  oper- 
ates as  an  assignment  to  the  payee  of  any  particular  money  in  the 
hands  of  the  drawee.  If  the  latter  accepts  the  bill,  the  payee  or  other 
holder  may  sue  upon  the  contract  of  acceptance.  But  if  the  drawee 
refuse  to  accept,  there  is  no  contract  between  him  and  the  holder, 
and  no  action  will  lie.  And  this  is  so,  although  the  drawee  had 
funds,  and  ought,  in  justice  to  the  drawer,  to  have  paid  the  bill. 

We  think  all  these  judgments  are  erroneous,  and  they  must  there- 
fore be   reversed. 


Ch.  1)  FORM   OF    BILL   AND   OF   NOTE.  55 

SECTION  5.— CHARACTER  OP  THE  ORDER  OR  PROMISE 
(I)  As  TO  Conditions 


JOSSELYN  V.  LACIER. 

(Court  of  King's  Bench,  1715.     10  Mod.  294,  317.) 

This  was  a  writ  of  error  upon  a  judgment  given  in  the  court 
of  common  pleas  in  an  action  of  assumpsit,  where  the  plaintiff  de- 
clared that  Evans  drew  a  bill  upon  Josselyn,  requiring  him  to  pay 
Lacier  seven  pounds  every  month  (the  first  payment  to  begin  in  De- 
cember, about  two  months  after  the  date  of  the  note)  out  of  the 
growing  subsistence  of  Evans,  and  place  it  to  his  account;  that  Lacier 
carried  the  note  to  Josselyn,  who  accepted  it,  and  promised  to  pay  it, 
secundum  tenorem  billse,  by  which  acceptance,  according  to  the  cus- 
tom of  merchants,  he  became  liable;  and  that  afterwards  he  refused 
to  pay,   etc.-° 

Parker,  Chief  Justice,  delivered  the  opinion  of  the  court. 

In  this  case,  two  points  are  considerable :  First,  whether  this  be  a 
good  bill  of  exchange?  We  are  all  of  opinion  that  it  is  not  a  bill 
within  the  custom  of  merchants;  it  concerns  neither  trade  nor  credit; 
it  is  to  be  paid  out  of  the  growing  subsistence  of  the  drawer;  if  the 
party  die,  or  his  subsistence  be  taken  away,  it  is  not  to  be  paid.  It 
may  be  never  paid,  and  yet  his  credit  unimpeached.     *     *     * 

The  judgment  was  reversed. 


MACLEED  V.   SNEE. 

(Court  of  King's  Bench,  1727.     2  Str.  7G2.) 

Error  of  a  judgment  in  C.  B.,  wherein  the  plaintiff  declares  that 
A.  B.  drew  a  bill  of  exchange  dated  25th  of  May,  whereby  he  re- 
quested the  defendant  one  month  after  date  to  pay  to  the  plaintiff 
or  order  £9.  10s.  "as  my  quarterly  half-pay,"  to  be  due  "from  24th 
of  June  to  27th  of  September  next,  by  advance."  And  the  action  is 
against  the  defendant  upon  his  acceptance. 

It  was  objected  that  this  was  no  bill  of  exchange,  because  it  is 
not  to  pay  in  all  events,  but  is  left  to  the  pleasure  of  the  person  on 
whom  it  is  drawn,  either  to  advance  the  money  or  not;  and  it  was 
compared  to  the  case  of  Josselyn  v.  Lacier,  10  Mod.  294,  317,  which 
was  to  pay  out  of  his  growing  subsistence,  and  to  the  case  of  Jenney 

2  0  Arguments  of  counsel  and  part  of  the  opinion  are  omitted. 


56  FORM    AND   INCEPTION.  (Part  I 

V.  Herle,  2  Ld.  Raym.  1361,  which  was  payable  out  of  a  particular 
fund,  and  in  both  cases  held  to  be  no  bills  of  exchange. 

Sed  Per  Curiam.  The  quarterly  half-pay  is  a  certain  fund,  which 
the  growing  subsistence  was  not;  the  mention  of  the  half-pay  is  only 
by  way  of  direction  how  he  shall  reimburse  himself,  but  the  money  is 
still  to  be  advanced  on  the  credit  of  the  person.  The  reason  it  was 
held  no  bill  of  exchange  in  Jenney  v.  Herle  was  because  it  was  no 
more  than  a  private  order  to  a  man's  servant.     Judgment  affirmed. 


CARLOS  V.  FANCOURT. 

(Court  of  King's  Bencb,  1794.     5  Term  R.  482.) 

This  was  an  action  upon  promises,  and  was  brought  in  the  court 
of  common  pleas.  The  first  count  of  the  declaration  alleged  that  the 
defendant  (below)  in  the  life-time  of  A.  Fancourt,  the  late  wife  of  the 
plaintiff  (below),  on  the  27th  of  July,  1786,  made  and  signed  his 
certain  note  in  writing,  commonly  called  a  promissory  note,  and  there- 
by promised  to  pay  to  the  said  A.  Fancourt,  then  being  the  plaintiff's 
wife,  the  sum  of  £10.  "out  of  his  the  said  defendant's  money  that 
should  arise  from  his  reversion  of  i43,  when  sold,"  and  delivered 
the  said  note  to  the  said  A.  F. ;  whereby  and  by  reason  of  which 
several  promises,  and  by  force  of  the  statute  in  such  case  made  and 
provided,  the  said  defendant  became  liable  to  pay  to  the  said  plaintiff 
the  said  sum  of  money  in  the  said  note  specified,  according  to  the 
tenor  and  effect  of  the  said  note ;  and  being  so  liable,  the  said  defend- 
ant, in  consideration  thereof  afterwards  &c,  promised  to  pay  &c, 
yet  that  he  did  not  &c.  although  often  requested  &c.  and  although 
the  said  reversion  of  the  said  £43.  was  sold  before  the  suing  forth 
of  the  original  writ  &c.  The  declaration  contained  other  counts,  for 
work  and  labour ;  money  paid ;  &c. 

The  defendant  suffered  judgment  to  go  by  default ;  and  a  general 
judgment  was  entered  up  on  the  whole  declaration.  A  writ  of  error 
was  then  brought ;  and  the  plaintiff  in  error  assigned  for  error,  that 
there  was  a  general  judgment  on  all  the  counts  in  the  declaration,  the 
first  of  which  was  founded  on  a  supposed  promissory  note,  as  a  note 
within  the  statute  made  concerning  promissory  notes,  whereas  it  was 
not  a  note  within  the  statute,  but  a  contingent  note;  and  on  which, 
as  stated  in  the  declaration,  it  appeared  to  be  uncertain  whether  or 
not  the  money  therein  specified  would  ever  become  payable,  and  was 
therefore  void  in  law;  and  that  it  did  not  appear  that  the  note  was 
given  for  value  received  or  for  any  valuable  or  legal  consideration 
whatever  &c.^^ 

Lord  Kenyox,  C.  J.  The  question  in  this  case  is  not  whether  the 
plaintiff  in  error,  who  may  have  promised  for  a  valuable  considera- 

21  Arguments  of  counsel  are  omitted. 


Ch.  1)  FORM    OF   BILL   AND   OF   NOTE.  57 

tion  to  pay  to  the  defendant  a  certain  sum  of  money  on  an  event, 
which  has  since  happened,  is  or  is  not  bound  to  perform  that  promise ; 
if  this  promise  were  made  on  a  consideration,  there  is  no  doubt 
but  that  an  action  might  be  maintained  on  it,  as  on  a  special  agree- 
ment: but  the  question  now  before  the  court  is  whether  or  not  the 
note  set  forth  upon  the  record  can  be  declared  on  as  a  negotiable 
security  under  the  statute  3  &  4  Anne,  c.  9.  The  object  of  that  act 
was  to  put  promissory  notes  on  the  same  footing  with  bills  of  ex- 
change in  every  respect.  Vide  Brown  v.  Harraden,  4  Term  R.  148. 
It  would  perplex  the  commercial  transactions  of  mankind,  if  paper 
securities  of  this  kind  were  issued  out  into  the  world  encumbered 
with  conditions  and  contingencies,  and  if  the  persons  to  whom  they 
were  offered  in  negotiation  were  obliged  to  enquire  when  these  un- 
certain events  would  probably  be  reduced  to  a  certainty.  It  has  been 
admitted,  in  the  argument,  that  if  this  were  a  bill  of  exchange  the 
declaration  could  not  be  supported :  many  cases  indeed  were  cited  by 
the  counsel  on  the  other  side  to  prove  that  position,  to  which  may  be 
added  another  in  Lord  Raymond  (vide  Jenny  v.  Herle,  2  Ld.  Raym. 
1361),  where  it  was  decided  that  a  bill,  which  was  not  payable  at  all 
events,  could  not  be  considered  as  a  bill  of  exchange :  and  this  admis- 
sion by  the  counsel  for  the  defendant  in  error  is  decisive  of  this 
case;  for  there  is  no  difference  in  this  respect  between  promissory 
notes  and  bills  of  exchange;  they  both  stand  in  pari  ratione.  If  we 
were  to  render  this  point  in  the  least  doubtful,  we  should  shake  the 
foundation  of  that  which  has  been  considered  as  clear  law  ever  since 
the  time  of  Lord  Holt.  I  am  therefore  clearly  of  opinion  that  this 
note  cannot  be  declared  upon  as  a  negotiable  instrument;  at  the  same 
time  I  have  no  doubt  but  that  an  action  might  be  framed  on  it  as  on 
a  special  agreement.  The  justice  of  the  case  is  certainly  with  the  de- 
fendant in  error:  but  we  must  not  transgress  the  legal  limits  of  the 
law,  in  order  to  decide  according  to  conscience  and  equity.  We  need 
have  no  reluctance  in  reversing  the  judgment  of  the  common  pleas, 
because  as  this  was  a  judgment  by  default,  that  court  had  no  op- 
portunity of  exercising  their  judgment  upon  the  question. 

ASHHURST,  J.  Before  the  statute  of  Anne  promissory  notes  were 
not  assignable  as  choses  in  action,  nor  could  actions  have  been  brought 
on  them,  because  the  considerations  do  not  appear  on  them; 
and  it  was  to  answer  the  purposes  of  commerce  that  those  notes  were 
put  by  the  statute  on  the  same  footing  with  bills  of  exchange.  Then 
they  cannot  rest  on  a  better  footing  than  bills  of  exchange,  but  must 
stand  or  fall  on  the  same  rules  by  which  bills  of  exchange  are  gov- 
erned. Certainty  is  a  great  object  in  commercial  instruments;  and 
unless  they  carry  their  own  validity  on  the  face  of  them,  they  are  not 
negotiable;  on  that  ground  bills  of  exchange,  which  are  only  payable 
on  a  contingency,  are  not  negotiable,  because  it  does  not  appear  on 
the  face  of  them  whether  or  not  they  will  ever  be  paid.  The  same 
rule  then  that   governs  bills   of  exchange  in  this   respect  must  also 


58  FORM    AND   INCEPTION.  (Part  1 

govern  promissory  notes.  And  therefore,  though  this  might  have 
been  declared  on  as  a  special  agreement,  stating  the  consideration  for 
the  promise,  and  the  sale  of  the  reversion  of  £43.,  yet  this  action 
cannot  be  maintained.  This  does  not  come  within  the  custom  of 
merchants  respecting  bills  of  exchange,  nor  is  it  a  negotiable  instru- 
ment within  the  statute  of  Anne,  because  as  a  bill  of  exchange  it 
would  not  be  good. 

Grose  J.  The  plaintiff  below  could  only  declare  either  on  this  in- 
strument, as  a  note  under  the  statute  of  Anne,  or  on  the  special  con- 
tract that  existed  between  the  parties.  He  has  declared  on  the  for- 
mer; but  this  is  not  a  negotiable  instrument,  because  it  is  not  payable 
at  all  events.  It  has  been  said  however  that  there  is  a  difference  in 
this  respect  between  promissory  notes  and  bills  of  exchange :  but  no 
decision  has  been  cited  to  warrant  such  a  distinction;  and  without 
such  an  authority  I  think  that  we  ought  not  to  establish  it;  for  the 
words  of  the  statute  of  Anne  are  "therefore  to  the  intent  to  encour- 
age trade  and  commerce,  which  will  be  much  advanced  if  such  notes 
shall  have  the  same  effect  as  inland  bills  of  exchange,  and  shall  be 
negotiated  in  like  manner  &c."  It  clearly  appears  therefore  to  have 
been  the  intention  of  the  Legislature  to  put  promissory  notes  on  the 
same  foundation  as  bills  of  exchange.  Now  if  this  had  been  a  bill 
of  exchange,  the  declaration  drawn  on  it  as  on  a  bill  within  the 
custom  of  merchants  would  have  been  bad,  because  the  money  was 
only  to  be  paid  on  a  contingency.  Then  if  the  plaintiff  below  had 
declared  on  this  as  on  a  special  contract,  he  should  have  shown  not 
only  that  there  was  a  consideration  for  the  promise,  but  also  that  the 
reversion  was  sold  for  at  least  £10. ;  whereas  here  it  is  merely  averred 
that  the  reversion  was  sold,  without  saying  for  how  much.  In  what- 
ever way  therefore  this  question  is  considered,  I  think  the  declaration 
cannot  be  supported. 

Judgment  reversed.*" 

22  Accord:  Fulton  v.  Varney,  117  App.  Dlv.  572.  102  N.  Y.  Supp.  608 
(1907).  See  Hibbs  v.  Brown,  190  N.  Y.  167,  82  N.  E.  1108  (1907).  In  Allison 
V.  Hollembeak,  138  Iowa,  479,  114  N.  W.  1059  (1908),  the  following  indorse- 
ment was  held  to  make  a  note  nonnegotiable:  "This  note  is  secured  by  pur- 
chase-money mortgage  on  160  acres  of  land  In  Guthrie  Co.,  la.,  and  payee 
herein  agrees  to  look  to  mortgage  security  for  the  payment  of  this  note." 
In  Nat.  Sav.  Bk.  v.  Cable,  7.3  Conn.  568,  48  All.  428,  429  (1901),  the  follow- 
ing instrument  was  held  not  a  bill :  "New  Haven,  Conn.,  Aug.  16,  99.  Treas. 
Nat.  Sav.  Bk.  New  Haven :  Pay  J.  O.  Cable,  or  order,  ?300.  or  what  may  be 
due  on  my  deposit  book.  No.  E632.  [Signed]  John  D.  Edwards."  The  court 
said:  "It  is  payable  out  of  a  particular  fund.  It  Is  to  pay  $300,  or  what 
may  be  due  on  a  specified  book.  The  amount  to  be  paid  is  made  to  depend 
upon  the  adequacy  of  a  specific  fund.  Such  an  order  is  conditional,  and  so 
not  negotiable.    Neg.  Inst  Law,  §§  1,  3." 


Ch.  1)  rORM    OF   BILL   AND   OF   NOTE.  59 

JURY  V.  BARKER. 

(Court  of  Queen's  Bench,  1858.    El.,  Bl.  &  El.  459.) 

Action  by  the  indorsee  of  a  promissory  note  against  the  maker. 

Plea,  to  the  first  count  (on  the  promissory  note) :  That  the  sup- 
posed promissory  note  in  that  count  mentioned  was  and  is  in  the 
words  and  figures  following,  that  is  to  say : 

"London,  29th  Oct.,  1857. 

"I  promise  to  pay  to  Mr.  J.  C.  Saunders,  or  his  order,  at  three 
months  after  date,  the  sum  of  one  hundred  pounds  as  per  memo- 
randum of  agreement.  Henry  John  Barker. 

"Payable  at  105  Upper  Thames  Street,  London." 

Demurrer.     Joinder. 

O'Malley,  for  the  plaintifif.  The  defendant  contends  that  the  words 
"as  per  memorandum  of  agreement"  destroy  the  negotiability  of  the 
instrument  as  a  promissory  note  under  St.  3  &  4  Anne,  c.  9.  But  that 
is  not  so;  those  words  do  not  limit  the  absolute  promise  in  writing, 
signed  by  the  maker,  to  pay  a  certain  sum  to  a  certain  person  at  a 
certain  time;  and  that  is  all  that  the  statute  requires.  The  note  here 
shows  the  existence  of  a  prior  agreement,  and  earmarks,  as  it  were, 
the  promissory  note,  so  as  to  prevent  the  supposition  that  the  pay- 
ment is  to  be  in  respect  of  any  other  matter  than  the  sum  of  money 
due  under  that  agreement.  But  the  note  is  still  an  absolute  and  un- 
conditional promissory  note. 

[Lord  Campbell,  C.  J.  The  plea,  to  be  good,  should  have  set  out 
the  agreement,  and  shown  that  such  agreement  made  the  note  con- 
ditional.] 

Raymond,  for  the  defendant.  The  instrument  is  not  a  promissory 
note  within  either  the  law  of  merchants  or  St.  3  &  4  Anne,  c.  9.  It  is 
not,  upon  the  face  of  it,  an  unconditional  promise  to  pay:  the  words 
"as  per  memorandum  of  agreement"  are,  at  least,  ambiguous,  and 
might  refer  to  some  arrangement  which  would  render  the  note  value- 
less to  endorsees.  [Erle,  J.  The  words  might  mean  only  "as  I 
agreed  to  do."]  But  they  might  have  another  meaning,  and  one 
which  would  render  the  promise  to  pay  conditional.  The  note  must, 
on  the  face  of  it,  be  an  absolute  promise  to  pay. 

Lord  Campbell,  C.  J.  The  note  here  is  an  absolute  and  uncondi- 
tional promise,  as  to  the  payer,  the  payee,  the  amount,  and  the  date. 
If  the  addition  of  the  words  in  question  make  the  promise  conditional, 
it  is  on  the  defendant  to  show  that;  and  he  has  not  done  so. 

Coleridge  and  Erle,  JJ.,  concurred.     Crompton,  J.,  was  absent. 

Judgment  for  the  plaintiff.^' 

2  8  Accord:  Markey  v.  Oorey,  108  Mich.  184,  66  N.  W.  493.  36  L.  R.  A. 
117,  62  Am.  St  Rep.  698  (1895).    Compare  Dilley  v.  Van  Wie,  6  Wis.  209  (1858). 


60  FOKM  AND  INCEPTION.  (Part  1 

WELLS  V.  BRIGHAM. 
(Supreme  Judicial  Court  of  Massacliusetts,  1850.    6  Cush.  6.  52  Am.  Dec.  750.) 

This  was  an  action  of  assumpsit,  tried  before  Byington,  J.,  in  the 
court  of  common  pleas,  by  the  plaintiff,  as  the  payee,  against  the 
defendant,  as  the  drawee  and  acceptor  of  a  draft  drawn  by  one 
George  Clay,  dated  the  2d  of  January,  1848,  of  which  the  follow- 
ing is  a  copy:  "Mr.  Brigham — Dear  Sir:  You  will  please  pay 
Elisha  Wells  $30,  which  is  due  me  for  the  two-horse  wagon  bought 
last  spring,  and  this  may  be  your  receipt."  The  plaintiff  declared 
on  the  common  counts,  and  filed  the  draft  as  a  bill  of  particulars. 
The  defendant  objected  to  the  giving  of  the  draft  in  evidence  under 
the  common  counts;  also  that  the  draft  did  not,  on  the  face  of  it, 
import  a  consideration  between  the  payee  and  the  drawer;  and  that 
the  plaintiff  must  prove  such  consideration  affirmatively.  But  the 
judge  overruled  these  objections.     *     *     * 

The  jury  found  a  verdict  for  the  plaintiff  and  the  defendant  ex- 
cepted.-* 

Sh.wv,  C.  J.  This  is  assumpsit  by  the  payee  against  the  acceptor, 
on  a  draft  for  $30,  drawn  by  one  George  Clay  upon  the  defendant, 
payable  to  the  plaintiff.  The  first  question  is,  whether  this  is  a 
cash  draft,  or  inland  bill  of  exchange;  if  it  is,  the  nature  of  the  draft 
answers  most  of  the  questions  which  have  been  discussed.  It  is  not 
payable  to  the  order  of  the  payee,  but  that  is  not  essential  to  make 
it  a  bill  of  exchange.  The  King  v.  Box,  6  Taunt.  325.  The  parties 
are  all  specially  named,  the  drawer,  the  drawee,  and  the  payee.  The 
draft  is  payable  at  a  time  fixed,  to  wit,  on  demand ;  on  no  contingency 
or  condition,  but  absolutely ;  for  a  sum  certain,  out  of  no  special  fund, 
but  by  the  drawee  generally.  The  fact,  that  the  draft  indicates  a 
debt  due  to  the  drawer  as  the  consideration,  between  drawer  and 
drawee,  does  not  make  it  the  less  a  cash  order  or  draft.  The  drawee, 
by  his  acceptance,  admits  such  debt,  and  is  estopped  to  deny  it,  as 
against  the  payee.  It  seems  to  us,  therefore,  that  this  document 
possesses  the  characteristics  of  a  cash  draft,  and  upon  a  general  ac- 
ceptance thereof,  which  may  be  by  parol,  binds  the  drawee  to  the 
holder.  The  acceptor  has  no  right  to  require  proof  of  consideration, 
as  between  the  drawer  and  the  payee ;  the  draft  itself  is  proof  of 
the  holder's  title.  The  statement  of  the  origin  of  the  debt,  the  pur- 
chase of  a  wagon,  did  not  make  it  the  less  payable  absolutely,  and 
at  all  events,  and  not  conditionally  or  out  of  a  particular  fund.  Plau- 
soullier  v.  Hartsinck.  7  Term  R.  733.     *     *     * 

Exceptions  overruled. 

2«  Part  of  the  case  relating  to  another  point  is  omitted. 


Ch.    1)  FORM   OF    BILL   AND    OF    NOTB.  61 

MABIE  V.   JOHNSON. 
(Supreme  Court  of  New  York,  General  Term,  1876.    8  Hun.  .309.) 

BoARDMAN,  J.  This  action  was  brought  upon  a  negotiable  promis- 
sory note  as  follows : 

"Guilford,  Nov.  29,  1870. 

"For  one  Hinckley  knitting  machine,  warranted,  I  promise  to  pay 
J.  H.  Wells  or  bearer  thirty  dollars  one  year  from  date  with  use. 

"Daniel  Johnson." 

This  note  was  transferred  for  value  to  the  plaintiff,  before  it  be- 
came due,  without  any  knowledge  of  the  transaction  out  of  which 
the  note  arose,  except  what  is  contained  therein,  nor  did  the  plaintiff 
have  any  notice  or  reason  to  suspect  that  the  defendant  had  any  de- 
fense  to   said   note. 

Upon  the  trial  before  the  justice,  the  defendant  offered  to  prove 
a  parol  warranty  of  the  machine  in  certain  respects,  with  a  view  of 
showing  a  breach  of  said  warranty,  and  recouping  the  damages.  This 
evidence  was  rejected.  The  county  court  held  that  such  decision  was 
erroneous  upon  the  ground  that  the  word  "warranted"  in  the  note 
was  sufficient  notice  of  the  defendant's  equities  to  put  the  plaintiff 
upon  inquiry  as  to  the  terms  of  the  warranty,  and  that  he  took  the 
note  subject  to  all  damages  sustained  by  the  defendant  for  a  breach 
of  such  warranty;  that  the  plaintiff  stood  in  no  better  situation  in 
this  respect  than  the  payee  would  have  done,  had  he  brought  suit  on 
the  note. 

I  think  the  learned  county  judge  is  in  error  in  the  view  he  took 
of  the  case,  and  that  within  the  authorities  the  plaintiff  was  a  bona 
fide  holder  of  the  note  in  suit,  so  as  to  deprive  the  defendant  of  his 
defense.  The  progress  of  the  law  on  this  subject  is  given  in  1  Par- 
sons on  Bills,  258  et  seq.  The  result  of  the  English  decisions  is  there 
laid  down  to  be  "that  the  holder  of  negotiable  paper  does  not  lose 
his  rights  by  proof  that  he  took  the  paper  negligently."  That  notice 
of  facts  which  would  defeat  his  recovery  must  not  be  ambiguous. 
The  same  doctrine  is  maintained  in  the  American  courts.  Welch  v. 
Sage,  47  N.  Y.  143,  7  x\m.  Rep.  423;  Magee  v.  Badger,  34  N.  Y. 
247,  90  Am.  Dec.  691 ;  Belmont  Bank  v.  Hoge,  35  N.  Y.  65 ;  Lord  v. 
Wilkinson,  56  Barb.  593,  and  the  cases  cited.  In  Alagee  v.  Badger, 
supra.  Porter,  J.,  says :  "He,  the  purchaser,  is  not  bound,  at  his 
peril,  to  be  upon  the  alert  for  circumstances  which  might  probably 
excite  the  suspicions  of  wary  vigilance.  He  does  not  owe  the  party 
who  puts  negotiable  paper  afloat  the  duty  of  active  inquiry  to  avert 
the  imputation  of  bad  faith."  In  Lord  v.  Wilkinson,  supra,  and 
Raphael  v.  Bank  of  England,  17  C.  B.  161  (s.  c,  33  Eng.  L.  &  Eq. 
276),  actual  notice  of  the  theft  of  the  securities  was  given,  yet  it  was 
held  that  the  forgetting,  or  omitting  to  look  for  the  notice,  was  no*- 


62  FORM    AND   INCEPTION.  (Part   1 

evidence  of  mala  fides.  More  than  negligence  must  be  proved ;  fraud, 
mala  fides,  must  be  shown. 

These  cases  seem  to  me  to  sustain  the  position  of  the  justice  upon 
the  trial.  The  words,  "for  one  Hinckley  knitting  machine,  warrant- 
ed," express  the  consideration  of  the  note.  Giving  to  the  words  the 
broadest  meaning  possible,  they  do  not  imply  that  there  has  been  a 
breach  of  the  warranty,  by  which  the  defendant  has  sustained  dam- 
ages. They  cannot  be  construed  as  notice  to  the  purchaser,  of  a  de- 
fense to  the  note  in  the  hands  of  the  payee.  If  they  do,  it  must  be 
because  the  law  will  presume  a  breach  wherever  there  is  a  warranty. 
That  would  be  preposterous.  There  was  nothing,  therefore,  which 
showed,  or  tended  to  show,  to  the  purchaser,  or  even  to  excite  his 
suspicions,  that  any  defense  to  the  note  in  suit  existed,  when  he  pur- 
chased it.  He  is  therefore  entitled  to  protection  against  defendant's 
counterclaim. 

It  follows  that  the  judgment  of  the  county  court  should  be  re- 
versed, and  that  of  the  justice  be  affirmed,  with  costs. 


TITLOW  V.   HUBBARD. 
(Supreme  Court  of  Indiana,   1878.     63   Ind.  6.) 

NiBLACK,  J.  Erastus  W.  Hubbard  brought  this  action  against 
Aaron  Titlow  and  Sophia  J.  Titlow,  his  wife,  to  foreclose  a  mortgage 
on  certain  real  estate. 

The  complaint  averred  that  the  said  Aaron  Titlow,  on  the  20th 
day  of  April,  1871,  executed  to  the  said  Hubbard  his  promissory  note 
for  the  sum  of  $2,500,  payable  on  or  before  the  20th  day  of  April. 
1875,  with  10  per  cent,  interest,  to  be  paid  annually,  and  reasonable 
attorney's  fees,  and  without  relief  from  valuation  laws,  and  that,  to 
secure  the  payment  of  said  promissory  note,  the  defendants  executed, 
on  the  same  day,  a  mortgage  on  certain  real  estate,  specifically  de- 
scribed in  said  mortgage,  copies  of  which  said  note  and  mortgage 
were  filed  with  the  complaint. 

The  complaint  also  averred  that  said  note  was  due  and  remained 
unpaid. 

Wherefore  judgment  was  demanded  against  the  said  Aaron  Tit- 
low, upon  said  note,  and  against  both  of  the  defendants,  for  the  fore- 
closure of  said  mortgage. 

Aaron  Titlow  demurred  to  the  complaint,  for  want  of  sufficient 
facts,  but  his  demurrer  was  overruled.  Sophia  J.  Titlow  made  de- 
fault. 

The  court  trying  the  cause  made  a  finding  for  an  amount  as  due 
upon   the   note   for  principal,   interest  and  attorney's   fees,   and    ren- 


Ch.  1)  FORM    OF   BILL    AND    OF   NOTE.  63 

dered  judgment  for  said  amount  against  the  said  Aaron  Titlow,  and 
against  both  the  defendants  for  a  foreclosure  of  the  mortgage. 

Upon  the  assignment  of  errors  upon  the  record,  the  first  question 
which  arises,  in  its  natural  order,  is  that  of  the  sufificiency  of  the 
complaint. 

The  copy  of  the  note,  filed  with  the  complaint,  was  as  follows : 
"$2,500.  Delphi,  April  20,  1871. 

"On  or  before  the  20th  day  of  x\pril,  1875,  I  promise  to  pay  E.  W. 
Hubbard  or  order  the  sum  of  twenty-five  hundred  dollars,  with  ten 
per  cent,  interest,  payable  annually,  and  attorney's  fees  if  prosecuted 
for  collection  thereof,  waiving  valuation  laws  in  the  collection  there- 
of, subject  to  certain  conditions  contained  in  a  written  agreement  of 
this  date  between  parties  hereto.  A.  Titlow." 

This  note,  as  it  is  called,  shows  upon  its  face  that  it  was  but  one 
of  two  instruments  in  writing,  which  together  constituted  one  entire 
agreement  between  the  parties  concerning  the  payment  of  the  money 
to  which  it  relates.  The  plain  inference,  from  its  language,  is  that 
this  other  agreement  in  writing  between  the  parties,  to  which  it 
refers,  constituted  as  much  a  portion  of  the  foundation  of  the  action 
as  did  the  note  itself.  This  other  agreement  in  writing,  or  a  copy  of 
it,  ought,  therefore,  also  to  have  been  filed  with  the  complaint.  2 
Rev.  St.  1876,  p.  73,  §  78;  also  note  1  on  the  same  page;  Stafford  v. 
Davidson,  47  Ind.  319. 

It  is  an  essential  requisite  of  a  promissory  note  that  there  must  be 
certainty  as  to  the  fact  of  payment.  It  must  be  payable  at  all  events, 
and  not  dependent  upon  a  condition  or  contingency.  Chitty,  Bills, 
134;  1  Parsons,  Notes  &  Bills,  42. 

The  obligation,  therefore,  above  set  out,  is  not  technically  a  promis- 
sory note,  but  an  agreement,  in  writing,  to  pay  money,  subject  to  cer- 
tain conditions  which  are  not  contained  in  the  instrument  itself,  and 
which  are  not  disclosed  by  any  averment  of  the  complaint. 

Such  an  instrument,  standing  by  itself  and  unaided  by  suitable  ex- 
planatory averments,  did  not,  we  think,  constitute  a  sufficient  founda- 
tion for  an  action.  It  was,  by  its  terms,  too  indefinite  and  uncertain 
to  authorize  a  demand  of  judgment  upon  it. 

In  any  view  which  we  are  able  to  take  of  the  complaint,  it  appears 
to  us  to  have  been  bad  upon  demurrer. 

As  the  judgment  will  have  to  be  reversed,  for  want  of  a  sufficient 
complaint,  it  is  unnecessary  for  us  to  review  any  of  the  proceedings 
subsequent  to  the  overruling  of  the  demurrer  to  the  complaint. 

The  judgment  is  reversed,  with  costs,  and  the  cause  remanded^ 
with  instructions  to  sustain  the  demurrer  to  the  complaint. 


64  FORM    AND   INCEPTION.  (Part   1 

NICHOLS  V.  RUGGLES. 
(Supreme  Judicial  Ck>urt  of  Maiue,  1884,  76  Ale.  25.) 

Replevin  of  a  horse,  brought  against  a  constable  who  had  attached 
it  as  the  property  of  James  Newcomb,  on  a  writ  in  favor  of  C.  K. 
Johnson.  The  plaintiff  claimed  title  under  the  following  instru- 
ment: "Bangor,  Sept.  8,  1882.  I,  James  Newcomb,  of  Carmel, 
Maine,  bought  of  Lemuel  Nichols,  Bangor,  Maine,  one  black  horse, 
name  Nig,  7  years  old,  for  ($80.00)  eighty  dollars  and  interest  on 
same  until  paid  for,  which  I  agree  to  pay  out  of  my  next  quarter's 
mail  pay,  which  becomes  due  Jan.  1,  1883,  on  route  184  from  Carmel 
to  Kenduskeag,  which  he  is  now  carrying.  The  above  horse  is  to 
remain  said  Nichols'  until  fully  paid  for.     James  Newcomb."  ^° 

D.ANFORTH,  J.  The  only  question  presented  by  the  report  in  this 
case  is  whether  the  instrument  under  which  the  plaintiff  claims  title 
to  the  horse  replevied  should  have  been  recorded  under  Rev.  St.  c. 
Ill,  §  5.    If  so,  the  plaintiff  fails  in  his  title  and  in  his  action. 

The  statute  provides  that  "no  agreement  that  personal  property 
bargained  and  delivered  to  another,  for  which  a  note  is  given,  shall 
remain  the  property  of  the  payee  till  the  note  is  paid,  is  vahd,  unless 
it  is  made  and  signed  as  a  part  of  the  note;  nor  when  so  made  and 
signed  in  a  note  for  more  than  thirty  dollars,  unless  it  is  recorded 
like  mortgages  of  personal  property." 

It  is  conceded  that  the  instrument  comes  within  the  statute  de- 
scription in  every  respect  except  that  it  does  not  contain  the  note 
therein  required.  The  objections  are  that  the  price  to  be  paid  was 
not  payable  in  money  and  that  its  payment  depended  upon  a  contin- 
gency. But  an  examination  will  show  that  neither  of  these  objec- 
tions are  well  founded. 

The  statute  uses  the  word  "note"  only,  omitting  the  qualifying 
adjective  "promissory',"  and  whether  the  construction  is  to  be  so 
limited  as  to  apply  only  to  such  promissory  notes  as  are  recognized  by 
the  commercial  law,  with  all  the  requisites  required  by  that  law,  may 
well  be  doubted.  It  is  certain  that  the  term  "note"  without  the 
qualification  is  often  used  in  a  more  extensive  sense  than  with  it,  and 
it  is  equally  certain  that  when  used  to  express  a  promise  to  pay, 
whether  in  property  or  money,  it  is  equally  within  the  mischief  to 
be  prevented. 

In  this  case,  however,  the  promise  is  both  absolute  and  to  pay  in 
money.  There  is  no  condition  attached  to  it  and  the  amount  is  fixed 
and  definite.  It  is  said  that  it  is  to  be  paid  from  a  particular  fund. 
*  This  may  be  true;  but  it  is  evident  that  the  intention  of  the  parties 
was  that  its  payment  was  not  to  be  confined  to  that  fund,  bu*  that 
it  was  to  be  paid  whether  the  fund  should  fail  or  otherwise.    Besides 

«6  Arguments  of  counsel  are  omitted- 


f 


Ch.  1)  FORM   OP   BILL   AND   OF   NOTE.  65 

there  is  nothing-  in  the  instrument  indicating  any  uncertainty  or  con- 
tingency as  to  the  fund;  and  if  there  were  it  would  not  render  the 
promise  contingent.  Story  on  Prom.  Notes,  §  26 ;  Bryam  v.  Hunter, 
36  Me.  217;  Redman  v.  Adams,  51  Me.  429.  The  fund  is  estab- 
Hshed  by  contract  and  is  more  than  sufficient  to  pay  the  amount 
promised.  The  service  by  which  it  is  to  be  produced  was  to  be  ren- 
dered by  the  promisor  and  if  he  fails  to  perform  the  service  there 
can  be  no  pretense  that  such  failure  would  relieve  him  from  the  ob- 
ligation of  his  promise  which  is  unconditional  in  its  terms.  Sears  v, 
Wright,  24  Me.  278. 

The  promise  is  also  to  pay  in  money.  The  promise  to  perform  the 
service  under  the  contract  for  carrying  the  mail  is  one  thing;  that 
to  pay  for  the  horse  another  and  a  very  different  thing.  The  former 
is  for  service  to  be  performed ;  the  latter  for  a  definite  amount  and 
no  words  to  indicate  that  it  is  to  be  paid  in  anything  but  money. 

Judgment  for  the  defendant  and  for  a  return  of  the  horse  re- 
plevied. 


SIEGEL,   COOPER  &  CO.  v.  CHICAGO  TRUST  &  SAVINGS 

BANK. 

(Supreme  Court  of  Illinois.     Jan.  21,  1890.     131  111.  569,  23  N.  E.  417,  7  L. 
R.  A.  537,  19  Am.   St.  Rep.   51.) 

Shope,  C.  J.    This  was  an  action  of  assumpsit,  by  appellee,  against 
appellants,  upon  the  following  instrument: 
"$300.00  Chicago,  March  5,  1887. 

"On  July  1,  1887,  we  promise  to  pay  D.  Dalziel,  or  order,  the  sum 
of  three  hundred  dollars,  for  the  privilege  of  one  framed  advertising 

sign,  size x inches,  one  end  of  each  of  159  street-cars 

of  the  North  Chicago  City  Railway  Co.,  for  a  term  of  three  months, 
from  May  15,  1887.  Siegel,  Cooper  &  Co." 

—which  was  indorsed  by  Dalziel,  the  payee,  to  appellee,  for  value, 
on  the  day  of  its  execution. 

The  first  question  presented  is,  is  this  instrument  negotiable?  And 
this  question  has  been  answered  affirmatively  by  the  circuit  and  appel- 
late courts.  The  appellate  court  having  affirmed  the  judgment  in 
favor  of  the  plaintiff,  the  case  is  brought  here  by  appeal,  upon  cer- 
tificate of  importance  granted  by  that  court. 

It  appears  that,  before  the  time  when  the  privilege  of  advertising 
was  to  commence,  Dalziel  forfeited  any  right  he  may  have  acquired 
to  use  the  cars  in  the  manner  indicated,  and  the  privilege  specified 
never  was  furnished  appellant;  and  it  is  insisted  that  the  instrument 
is  a  simple  contract,  only,  and  that  therefore  the  same  defense — 
failure  of  consideration's  available  against  the  indorsee  of  the  paper 
for  value,  and  before  due,  as  might  be  interposed  against  such  paper 
Sm.&  M.B.&  N.— 5 


1)6  FORM    AND   INCEPTION.  (Part   1 

in  the  hands  of  the  payee.  It  is  also  insisted  that  the  instrument 
shows,  on  its  face,  that  payment  depended  upon  a  condition  precedent 
to  be  performed  by  the  payee,  and  tlierefore  the  indorsees  took  it 
with  notice,  and,  by  the  failure  of  the  payee  to  perform  the  condi- 
tion, no  right  of  recovery  exists  in  the  indorsee. 

It  is  not  contended  that  the  indorsee  had  any  other  notice  than 
that  contained  in  the  instrument  itself,  and  it  is  apparent  that  at  the 
time  of  its  indorsement,  which  was  the  day  of  its  execution,  no  right 
to  the  consideration  had  accrued  to  the  makers.  It  is  a  promise  to 
pay  a  certain  sum  of  money  at  a  day  certain,  for  a  consideration 
thereafter  to  be  rendered,  and  depends  for  its  validity  upon  the  im- 
plied promise  of  the  payee  to  furnish  the  consideration  at  the  time 
and  in  the  manner  stipulated ;  that  is,  it  is  a  promise  to  pay  a  sum 
certain  on  a  particular  day,  in  consideration  of  the  promise  of  the 
payee  to  do  and  perform  on  his  part.  A  promise  is  a  valuable  con- 
sideration for  a  promise. 

But  the  question  remains  whether  the  statement  or  the  recital  of 
the  consideration  on  the  face  of  the  instrument  impairs  its  negotia- 
bility, and,  in  this  instance,  amounts  to  a  condition  precedent.  The 
mere  fact  that  the  consideration  for  which  a  note  is  given  is  recited 
in  it,  although  it  may  appear  thereby  that  it  was  given  for  or  in  con- 
sideration of  an  executory  contract  or  promise  on  the  part  of  the 
payee,  will  not  destroy  its  negotiability,  unless  it  appears,  through 
the  recital,  that  it  qualifies  the  promise  to  pay,  and  renders  it  con- 
ditional or  uncertain,  either  as  to  the  time  of  payment  or  the  sum  to 
be  paid.  Daniel,  Neg.  Inst.  §§  TOO-TO?;  Davis  v.  McCready,  17  N. 
Y.  230,  72  Am.  Dec.  461;  State  Nat.  Bank  v.  Cason,  39  La.  Ann. 
865,  2  South.  881 ;  Bank  v.  Michael,  96  N.  C.  53,  1  S.  E.  855;  Good- 
loe  V.  Taylor,  10  N.  C.  458 ;    Stevens  v.  Blunt.  7  Mass.  240. 

In  State  Nat.  Bank  v.  Cason,  supra,  it  is  said :  "PlaintiflF  received 
the  note  before  maturity,  and  before  a  failure  of  the  considera- 
tion. Even  if  it  were  known  to  him  that  the  consideration  was  fu- 
ture and  contingent,  and  that  there  might  be  offsets  against  it,  this 
would  not  make  him  liable  to  the  equities  between  the  defendant  and 
payee.  It  cannot  affect  the  negotiability  of  a  note  that  its  considera- 
tion is  to  be  hereafter  realized,  or  that,  from  some  contingency,  it 
may  never  be  enjoyed." 

The  most  that  can  be  said  of  a  recital  in  the  instrument  itself  of 
the  consideration  upon  which  it  rests  is  that  the  indorsee,  taking  it 
before  maturity,  is  chargeable  with  notice  of  the  recital.  Such  re- 
cital, however,  is  not  sufficient,  of  itself,  to  advise  him  that  there 
was,  or  would  necessarily  be,  a  failure  of  consideration,  but  if,  at 
the  time  of  the  indorsement,  the  consideration  has  in  fact  failed,  the 
recital  might  be  sufficient  to  put  him  upon  inquiry,  and,  in  connec- 
tion with  other  facts,  amount  to  notice.  Henneberry  v.  Morse,  56 
111.  394.     The  case  at  bar  does  not,  however,  fall  within  the  rule  just 


Ch.  1)  FORM   OF    BILL   AND    OF   NOTE.  67 

stated,  for  the  assignment  was  made  the  same  day  the  note  was 
made,  and  by  the  terms  of  the  recital  it  was  apparent  the  payee  was 
required  to  do  no  act  till  the  15th  of  May  following,  an  interval  of 
70  days. 

There  is  a  distinction,  clearly  recognized  in  the  authorities,  between 
an  instrument  payable  at  a  particular  day,  and  one  payable  upon  the 
happening  of  some  event;  and  the  rule  is  that,  where  the  parties  in- 
sert a  specific  date  of  payment,  the  instrument  is  then  payable  at  all 
events,  and  this  although,  in  the  same  instrument,  an  uncertain  and 
different  time  of  payment  may  be  mentioned,  as  that  it  shall  be  pay- 
able upon  a  particular  day,  or  upon  the  completion  of  a  house,  or  the 
performance  of  other  contracts,  and  the  like.  McCarty  v.  Howell, 
24  111.  341,  and  authorities,  supra.  But  the  doctrine  of  this  and 
kindred  cases,  where  there  are  both  a  certain  day  of  payment  and 
one  more  or  less  contingent,  need  not  be  here  invoked,  for  the  time 
of  payment  in  the  instrument  under  consideration  is  not  made  to  de- 
pend upon  the  happening  or  not  happening  of  any  event,  but  is  spe- 
cific and  certain,  and  must  occur  by  the  efflux  of  time  alone. 

If,  therefore,  it  be  conceded,  as  it  must,  that  a  condition  inserted 
in  a  promissory  note,  postponing  the  day  of  payment  until  the  hap- 
pening of  some  uncertain  or  contingent  event,  will  destroy  its  nego- 
tiability and  render  the  instrument  a  mere  agreement,  yet  under  the 
authorities,  if  by  the  instrument  the  maker  promises  to  pay  a  sum 
certain  at  a  day  certain  to  a  certain  person  or  his  order,  such  instru- 
ment must  be  regarded  as  negotiable,  although  it  also  contains  a  re- 
cital of  the  consideration  upon  which  it  is  based,  and  although  it  fur- 
ther appear  that  such  consideration,  if  executory,  may  not  have  been 
performed.  Here  the  money  was  payable,  absolutely  on  the  1st  day 
of  July,  1887,  a  time  when  the  contract  for  the  advertising  could  not 
have  been  completed.  If  the  instrument  had  remained  the  property 
of  the  payee,  and  upon  its  maturity  and  performance  to  that  time, 
suit  had  been  brought,  it  is  clear  that  no  plea  of  partial  failure  of 
consideration  could  have  been  sustained,  for  the  reason  that  the  en- 
tire term  had  not  then  expired. 

No  analysis  of  the  instrument  itself  is  necessary.  The  most  careful 
examination  of  it  will  fail  to  disclose  a  condition  precedent  to  the  pay- 
ment of  the  money  at  the  time  stipulated.  Nor  is  there  anything  in  the 
recital  of  the  consideration  to  put  the  indorsee  upon  inquiry  at  the  time 
the  indorsement  was  made.  Indeed,  it  is  clear  that  at  that  time  no  in  luirv 
would  have  led  to  notice  that  Dalziel  would  fail  to  comply  with  his  con- 
tract on  the  loth  of  May  thereafter,  when  the  term  was  to  commence. 
All  that  the  recitals  would  give  notice  of  was  that  the  note  was  given 
in  consideration  of  an  agreement  on  the  part  of  the  payee  that  the 
privilege  of  advertisement  named  should  be  enjoyed  by  the  makers 
for  three  months  from  May  15,  1887.  Giving  to  the  language  em- 
ployed its  broadest  possible  meaning,  it  cannot  be  construed  as  no- 


68  FORM    AND    INCEPTION.  (Part    1 

tice  to  the  indorsee  of  the  future  breach  of  the  contract  by  Dalziel. 
The  presumption  of  law  would  be  that  the  contract  would  be  carried 
out  in  good  faith  and  the  consideration  performed  as  stipulated.  The 
makers  had  put  their  promissory  note  into  the  hands  of  Dalziel  upon 
an  expressed  consideration  which  they  were  thereafter  to  receive,  and 
for  the  performance  of  which  they  had  seen  fit  to  rely  upon  the  un- 
dertaking of  Dalziel,  and  we  are  aware  of  no  rule  by  which  they 
can  hold  this  indorsee  for  value,  before  due  and  before  the  time  of 
performance  was  to  begin,  chargeable  with  notice  that  the  promise 
upon  which  the  makers  relied  would  not  be  kept  and  performed. 
Wade  on  Notice,  §  94a;  Loomis  v.  Mowry,  8  Hun,  312;  Davis  v. 
McCready,  supra. 

It  is  also  contended  that  the  court  erred  in  giving  the  eighth  in- 
struction in  behalf  of  appellee,  as  to  the  meaning  of  the  words  "good 
faith."  Without  pausing  to  discuss  the  instruction,  we  think  it  clear 
tliat  appellants  were  not  prejudiced  thereby,  and  that  no  inference 
unfavorable  or  prejudicial  to  them  could  have  been  drawn  therefrom 
by  the  jury.  While,  therefore,  the  instruction  may  be  regarded  as  in- 
accurate, it  worked  no  injury,  and  appellants  cannot  complain.  See 
Comstock  et  al.  v.  Hannah,  76  111.  530. 

Other  minor  objections  are  urged,  which,  it  is  sufificient  to  say,  we 
have  examined  with  care,  but  we  find  no  prejudicial  error. 

The  judgment  of  the  Appellate  Court  will  be  affirmed. 

Judgment  affirmed.^' 


FIRST   NAT.   BANK   OF  HUTCHINSON  v.   LIGHTNER. 

(Supreme  Court  of  Kansas,  1906.     74  Kan.  736,  88  Pac.  59,  8  L.  K.  A.  [N. 
S.]  231,  118  Am.  St  Rep.  353.) 

The  court  made  the  following  special  findings  of  fact  and  conclu- 
sions of  law : 

"That  the  Snyder  Planing  Mill  Company  entered  into  a  contract 
with  the  defendant,  Lightner,  for  the  erection  of  a  certain  barn  at 
the  contract  price  of  $3,500.  That  prior  to  the  completion  of  said 
barn,  and  on  September  28,  1903,  the  Snyder  Planing  Mill  Company 
was  duly  adjudicated  bankrupt,  and  the  defendant,  Lightner,  was 
compelled  to  and  did  complete  the  barn. 

"That  prior  to  the  adjudication  of  the  Snyder  Planing  Alill  Com- 
pany as  bankrupt,  at  the  request  of  said  company,  Lightner  accepted 
two  orders,  one  for  $1,000  and  one  for  $1,500  which  said  orders  and 
acceptances  were  identical  with  the  exception  of  the  amounts  and 
dates.    The  one  for  $1,500  reads  as  follows: 

««  Accord:  McNight  v.  Parsons,  136  Iowa,  390,  113  N.  W.  858,  22  L.  R. 
A.  (N.  S.)  718.  125  Am.  St.  Rep.  205  (1907). 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE.  61) 

"  'Hutchinson,  Kansas,  Aug.  10,  1903. 

"  'G.  W.  Lightner,  Offerle,  Kansas— Dear  Sir :  Pay  to  the  order  of 
the  First  National  i^ank  of  Hutchinson,  Kansas,  on  account  of  con- 
tract between  you  and  the  Snyder  Planing  Mill  Co.  $1,500. 

"  'The  Snyder  Planing  Mill  Co., 

"  'Per  J.  F.  Donnell,  Treas. 

'  'Accepted.     G.  W.  Ughtner.' 

"Said  two  orders,  so  accepted,  were  by  the  Snyder  Planing  Mill 
Company  hypothecated  with  the  First  National  Bank  of  Hutchinson, 
Kan.,  to  secure  two  certain  demand  notes  drawing  10  per  cent,  in- 
terest and  of  even  amounts  with  said  orders ;  the  $1,000  order  being 
hypothecated  about  August  22,  1903,  and  the  $1,500  order  on  or  about 
August  11,  1903.  That  the  proceeds  of  said  notes  were  at  said  dates 
duly  received  from  said  bank,  and  used  by  the  Snyder  Planing  Mill 
Company.     Said  notes  are  still  due  and  unpaid. 

"The  said  orders  were  so  accepted  by  L,ightner  on  or  about  August 
10,  1903,  and  that  about  September  30th  Ughtner  took  up  the  $1,000 
order  by  giving  therefor  his  check  for  $1,000  to  the  cashier  of  plain- 
tiff, which  was  as  follows : 

"  'Kinsley,   Kansas,   Sept.   30,  1903. 

"  'The  National  Bank  of  Kinsley :  Pay  to  E.  W.  Eagan,  cashier, 
or  order,  $1,000.00:     One  thousand  dollars. 

"  'George   W.   Lightner.' 

"That  said  Lightner  stopped  payment  on  said  check  prior  to  its 
presentation,  and  no  part  thereof  has  been  paid,  nor  has  any  part  of 
the  $1,500  order  been  paid.  That,  prior  to  the  giving  of  the  two  orders, 
Lightner  paid  the  Snyder  Planing  Mill  Company  $1,000  upon  said 
contract,  and  that  he  was  compelled  to  expend  $1,624.04  to  complete 
the  barn.  That  there  was  a  balance  due  and  unpaid  on  said  contract 
of  $872.96  when  this  action  was  commenced. 
**  ********* 

"First.  That  said  orders  were  nonnegotiable,  and  were  subject  to 
the  same  defenses  in  the  hands  of  the  First  National  Bank  of  Hutch- 
inson, Kan.,  as  if  they  had  remained  in  the  hands  of  the  Snyder 
Planing  Mill  Company. 

"Second.  That  the  plaintiff  is  entitled  to  judgment  in  this  action  in 
the  sum  of  $970  with  interest  from  this  date  at  6  per  cent,  per  annum 
and  for  costs.  Chas.  E.  Lobdell,  Judge." 

Plaintiff  brings  the  cause  here  upon  a  transcript,  and  alleges  error 
in  the  conclusions  of  law  upon  which  the  judgment  is  based  and  er- 
ror in  overruling  the  motion  for  a  new  trial. ^^ 

Porter,  J.  (after  stating  the  facts  as  above).  The  main  controversy 
is  whether  the  orders  given  by  the  planing  mill  company  to  the  bank, 
and  accepted  by  defendant,  are  negotiable  instruments.  It  is  true 
that  no  specific  time  of  payment  is  mentioned,  but  that  does  not  affect 

2  7  The  statement  of  the  case  is  abridged. 


70  FOUM   AND  INCEPTION.  (Part  1 

their  validity  as  such  instruments,  and,  where  no  date  is  mentioned, 
they  are  payable  on  demand.  4  A.  &  E.  Enc.  of  Law  (2d  Ed.)  133 
and  note  3 ;  Douglass  v.  Sargent  &  Bro.,  32  Kan.  413,  4  Pac.  861. 
Each  of  them,  therefore,  possesses  all  the  essential  elements  of  a  bill 
of  exchange  unless  the  words  quoted  make  them  payable  out  of  a 
particular  fund  and  conditionally  so  that  the  acceptance  is  thereby 
qualified.  The  law  is  well  settled  that  a  bill  or  note  is  not  negotiable 
if  made  payable  out  of  a  particular  fund.  1  Daniel  on  Neg.  Inst. 
(5th  Ed.)  §  50;  White  v.  Gushing,  88  j\Ie.  339,  34  Atl.  164,  32  L.  R. 
A.  590,  51  Am.  St.  Rep.  402.  But  a  distinction  is  recognized  where 
the  instrument  is  simply  chargeable  to  a  particular  account.  In  such 
a  case  it  is  beyond  question  negotiable ;  payment  is  not  made  to  de- 
pend upon  the  sufficiency  of  the  fund  mentioned,  and  it  is  mentioned 
only  for  the  purpose  of  informing  the  drawee  as  to  his  means  of  re- 
imbursement. 1  Daniel  on  Neg.  Inst.  (5th  Ed.)  §  51;  Tiedeman  on 
Bills  &  Notes,  §  20.  In  Ridgely  Bank  v.  Patton  et  al.,  109  111.  479, 
it  is  said :  "A  bill  or  note,  without  afifecting  its  character  as  such, 
may  state  the  transaction  out  of  which  it  arose,  or  the  consideration 
for  which  it  was  given."  "So,  also,  the  insertion  into  a  bill  or  note  of 
memoranda,  explaining  the  nature  of  the  business  or  debt,  for  which 
the  instrument  is  given,  will  not  make  it  nonnegotiable,  for  such  a 
memorandum  does  not  make  the  payment  conditional."  Tiedeman 
on  Com.  Paper,  §  26. 

The  test  in  every  case  is  said  to  be:  "Does  the  instrument  carry 
the  general  personal  credit  of  the  drawer  or  maker,  or  only  the  credit 
of  a  particular  fund?"  4  A.  &  E.  Enc.  of  Law,  89.  A  promise  to 
pay  a  certain  sum  "out  of  my  next  quarter's  mail  pay,  which  becomes 
due  January  1,  1883,"  was  held  in  Nichols  v.  Ruggles,  76  Me.  25,  to 
be  an  absolute  promise  to  pay  a  certain  sum  of  money.  In  Haussoul- 
lier  against  Hartsinck.  7  Term  R.  (Durnford  &  East),  733,  it  was 
held  that  an  instrument  promising  to  pay  a  certain  sum  "being  a  por- 
tion of  a  value,  as  under  deposit  in  security  for  the  payment  hereof," 
was  a  promissory  note  payable  at  all  events.  In  Pierson  v.  Dunlop, 
2  Cowp.  571,  an  order  which  was  to  be  charged  "to  freight"  was  held 
negotiable.  A  note  expressed  to  be  in  payment  of  certain  tracts  of 
land  was  held  negotiable.  Bank  v.  Michael,  96  N.  C.  53,  1  S.  E.  855. 
Likewise  a  note  which  stated  that  it  was  given  in  consideration  of 
certain  personal  property,  the  title  of  which  was  not  to  pass  unless 
the  note  was  paid.  Chicago  Railway  Co.  v.  Merchants'  Bank,  136 
U.  S.  268,  10  Sup.  Ct.  999,  34  L.  Ed.  349. 

This  court  held  in  Clark  v.  Skeen,  61  Kan.  526,  60  Pac.  327,  49 
L.  R.  A.  190,  78  Am.  St.  Rep.  337,  that  "a  note  for  the  payment  of  a 
certain  sum  at  a  fixed  date  is  not  rendered  nonnegotiable  by  a  stip- 
ulation that,  upon  default  in  the  payment  of  interest,  the  whole 
amount  shall  become  due  at  the  option  of  the  holder,  and  then  draw 
a  greater  rate  of  interest."    In  Corbett  v.  Clark  and  Another,  45  Wis. 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE.  71 

403,  30  Am.  Rep.  763,  an  order  to  pay  a  certain  sum  "and  take  the 
same  out  of  our  share  of  the  grain,"  referring  to  grain  harvested  or 
growing-  on  certain  farms,  accepted  by  the  drawee,  was  said  to  be  a 
vahd  bill  of  exchange,  and  the  order  and  acceptance  absolute,  the 
words  above  quoted  merely  indicating  the  means  of  disbursement.  In 
Redman  v.  Adams,  51  Me.  429,  a  bill  directing  the  drawee  to  charge 
the  amount  against  the  drawer's  share  of  fish  caught  on  a  certain 
schooner  is  held  valid  and  negotiable. 

One  of  the  leading  cases  is  Macleed  v.  Snee,  2  Str,  765.  There  a 
bill  of  exchange  was  dated  May  25th  for  the  payment  of  a  certain 
sum  one  month  after  date,  "as  my  quarterly  half-pay  to  be  due  from 
24th  of  June  to  27th  of  September  next,  by  advance."  This  was  held 
a  negotiable  bill  of  exchange.  In  Spurgin  v.  McPheeters,  42  Ind. 
527,  an  instrument  in  the  following  form  was  said  to  possess  all  the 
requisites  of  a  bill  of  exchange:  "Greencastle,  Ind.,  Aug.  22d,  1870. 
Mr.  D.  M.  Spurgin — Sir,  please  pay  to  Jesse  McPheeters,  or  order,  the 
sum  of  one  hundred  and  nineteen  dollars  on  said  bill  of  1%  in.  lum- 
ber, and  oblige  the  firm  of  Geo.  W.  Hinton  &  Co."  In  Whitney  v. 
Eliot  National  Bank,  137  Mass.  351,  50  Am.  Rep.  316,  the  drafts  or 
bills  of  exchange  were  in  the  ordinary  form  except  that  they  contained 
the  direction  to  "charge  the  same  to  account  of  250  bbls.  meal  ex 
schooner  Aurora  Borealis."  The  court  said:  "This  direction  to 
charge  the  amount  of  the  bills  to  a  particular  account,  we  think,  does 
not  make  them  payable  conditionally,  or  out  of  a  particular  fund ; 
they  are  still  payable  absolutely,  and  are  negotiable,  and  do  not  con- 
stitute an  assignment  of  a  particular  fund,  or  of  a  part  of  a  particular 
fund.  *  *  *  Macleed  v.  Snee,  2  Str.  762 ;  Redman  v.  Adams, 
51  Me.  429 ;  Corbett  v.  Clark,  45  Wis.  403,  30  Am.  Rep.  763 ;  Cour- 
sin  V.  Ledlie,  31  Pa.  506 ;    Spurgin  v.  McPheeters,  42  Ind.  527." 

The  rule  with  regard  to  words  which  refer  to  the  consideration  is 
well  stated  in  Siegel  et  al.  v.  Chicago  Trust  &  Sav.  Bank,  131  111.  569, 
23  N.  E.  417,  7  L.  R.  A.  537,  19  Am.  St.  Rep.  51,  as  follows:  "The 
mere  fact  that  the  consideration  for  which  a  promissory  note  is  given 
is  recited  in  it,  although  it  may  appear  thereby  that  it  was  given  for 
or  in  consideration  of  an  executory  contract,  or  promise  on  the  part 
of  the  payee,  will  not  destroy  the  negotiability  of  the  note,  unless  it 
appears  through  the  recital  that  it  qualifies  the  promise  to  pay,  and 
renders  it  conditional  or  uncertain,  either  as  to  the  time  of  payment 
or  the  sum  to  be  paid."  The  following  authorities  are  also  in  point: 
Matthews  v.  Crosby,  56  N.  H.  21;  Shepard  v.  Abbott,  137  Mass. 
224;  Id.,  179  Mass.  300,  60  N.  E.  782;  Schmittler  v.  Simon,  101 
N.  Y.  554,  5  N.  E.  452,  54  Am.  Rep.  737;  Hillstrom  v.  Anderson, 
46  Minn.  382,  49  N.  W.  187 ;  Bank  of  Kentucky  v.  Sanders  &  Wier, 
3  A.  K.  Marsh.  (Ky.)  184,  13  Am.  Dec.  149 ;  4  A.  &  E.  Enc.  of  Law, 
89 ;  7  Cyc.  580. 


72  FORM   AND   INCEPTION.  (Part  1 

Our  negotiable  instrument  law  (chapter  70,  §  10;  Gen.  St.  1905, 
§  4542),  wiiich  is  merely  declaratory  of  the  common  law  upon  the 
subject  reads  as  follows:  "When  promise  is  unconditional.  An  un- 
qualified order  or  promise  to  pay  is  unconditional,  within  the  mean- 
ing of  this  act,  though  coupled  with  (1)  an  indication  of  a  particular 
fund  out  of  which  reimbursement  is  to  be  made,  or  a  particular  ac- 
count to  be  debited  with  the  amount;  or  (2)  a  statement  of  the  trans- 
action which  gives  rise  to  the  instrument;  but  an  order  or  promise 
to  pay  out  of  a  particular  fund  is  not  unconditional."  Plaintifif  and 
defendant  agree  upon  the  abstract  proposition  of  law  involved  in  the 
controversv.  Counsel  for  defendant  concedes  that  an  instrument, 
negotiable  in  itself,  is  not  changed  in  character,  or  rendered  nonne- 
gotiable  "by  a  recital  of  the  consideration  or  a  direction  as  to  how 
the  drawee  shall  reimburse  himself,"  but  insists  that  the  insertion  of 
the  words  "on  account  of"  has  the  same  effect  as  the  words  "out 
of  the  proceeds  of."  The  controversy  is  thus  narrowed  down  to 
whether  the  words  "on  account  of  contract  between  you  and  the  Sny- 
der Planing  Mill  Co."  amount  to  a  direction  to  pay  out  of  a  particular 
fund,  or,  on  the  other  hand,  are  to  be  considered  as  simply  indicat- 
ing the  fund  from  which  the  drawee,  Lightner,  might  reimburse  him- 
self. 

Many  of  the  cases  attach  but  little  importance  to  the  words  "ac- 
count of,"  and  give  the  same  effect  to  them  as  to  the  words  "out  of." 
7  Cyc.  579.  In  the  case  of  Pitman  v.  Breckenridge  &  Crawford,  3 
Grat.  (Va.)  127,  cited  by  defendant,  the  phrase,  "on  account  of  brick 
work  done,"  on  a  certain  building,  was  held  to  be  a  direction  to  pay 
out  of  a  particular  fund.  The  case  itself  is  of  little  value  as  an  au- 
thority ;  it  cites  no  cases,  gives  no  reason,  and  simply  holds  the  bill 
nonnegotiable.  The  language  in  Brill  et  al.  v.  Tuttle,  81  N.  Y.  454,, 
457,  37  Am.  Rep.  515  ("and  charge  the  same  to  our  account  for  la- 
bor and  materials  performed  and  furnished"),  was  held  to  be  ambig- 
uous, and  other  circumstances  were  considered  as  controlling.  The 
bill  was  held  not  negotiable.  The  following  order  was  held  not  ne- 
gotiable, in  Conroy  v.  Ferree,  68  Minn.  325,  71  N.  W.  383,  but  the 
opinion  merely  states  that  the  order  is  drawn  upon  a  special  fund 
without  any  discussion  of  the  reasons :  "Starbuck,  j\Iinn.,  Sept.  14, 
1895.  T.  E.  Thompson  and  C.  L.  Brevig— Pay  to  the  order  of  A.  G. 
Englund  one  hundred  fifty  dollars  ($150.00)  on  earnings  for  the 
threshing  season  of  1895,  whatever  they  may  be,  and  charge  to  the 
account  of  A.  H.  Ferree.  $150.00.  Accepted  Sept.  14,  1695.  By 
C.  L.  Brevig." 

We  are  of  the  opinion  that  these  orders  cannot  be  construed  as 
drawn  upon  a  particular  fund.  Beyond  question,  there  are  many  au- 
thorities which  hold   similar  expressions  to  indicate  an   intention   to 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE.  73 

charge  a  particular  fund.  See  Banbury  v.  Lisset,  2  Str.  1211 ;  Aver- 
ett's  Adm'r  v.  Booker,  15  Grat.  (Va.)  163,  76  Am.  Dec.  203;  Rice 
V.  Porter's  Adm'rs,  16  N.  J.  Law,  440  ;  7  Cyc.  578  (b).  The  weight 
of  authority  and  reason  supports  the  proposition  that  the  words 
amount  to  no  more  than  an  indication  of  the  fund  from  which  the 
drawee  is  to  reimburse  himself.  The  words  used  are  substantially 
the  same  as  though  the  orders  read  "and  charge  to  account  of  con- 
tract with  Snyder  Planing  Mill  Company,"  or  "credit  to  account  of 
contract,"  etc.  The  $1,000  check  we  consider  in  the  same  light  as  the 
order  for  which  it  was  substituted. 

Defendant  in  error  argues  that  certain  collateral  circumstances 
appearing  in  the  evidence  must  be  taken  into  consideration;  among 
other  things,  the  fact  that  the  bank  held  these  orders  for  a  time  after 
their  execution  as  indicating  the  intention  with  which  the  orders  were 
taken.  It  is  argued  that  there  being  an  ambiguity  in  the  language, 
we  must  consider  the  construction  placed  upon  these  orders  by  the 
parties  themselves.  This  case  is  here  upon  a  transcript  which  con- 
tains none  of  the  evidence,  merely  the  pleadings,  findings  of  fact  and 
of  law,  the  judgment  and  motion  for  a  new  trial.  Had  the  trial  court 
rested  the  decision  upon  the  existence  of  these  outside  matters  the 
findings  of  fact,  which  are  very  complete,  would  doubtless  have  re- 
ferred to  them.  The  conclusions  of  law  are  so  framed  as  to  leave  no 
doubt  that  the  court  held  the  instruments  to  be  nonnegotiable  on  ac- 
count of  the  language  used  in  the  instruments  themselves.  In  our 
view  they  were  negotiable  and  the  language,  moreover,  not  even 
ambiguous.  It  follows  that  defendant  was  not  entitled  to  recoup  his 
damages  for  the  failure  to  complete  the  barn ;  and  the  findings  of  the 
court,  therefore,  require  a  judgment  for  plaintiff  for  the  amount  due 
upon  the  order,  and  the  $1,000  check. 

The  cause  will,  therefore,  be  reversed  and  remanded,  with  direc- 
tions to  enter  judgment  in  favor  of  plaintiff.  All  the  Justices  con- 
curring.^^ 

28  See  Shepard  v.  Abbott,  170  Mass.  300,  60  N.  E.  782  (1901)  ;  Waddell 
V.  Bank,  48  Misc.  Rep.  578,  97  N.  Y.  Supp.  305  ^1905). 

In  Bavins  v.  London,  etc..  Bank,  [190O]  1  Q.  B.  270,  275  (C.  A.),  the  follow- 
ing instrument  was  held  not  to  be  a  check  because  conditional: 

"The    Great    Northern    Ry.    Co. 
"No.  Accountants'  drawing  account.  Ix)ndon,  July  7,  1898. 

"The  Union  Bank  of  London,  Limited,  No.  2  Princes  St.,  Mansion  House, 
B.  C  :  Pay  to  J.  Bavins  Jr.  and  Sims  the  sum  of  69  pounds  7  s.  provided 
the  receipt  at  foot  hereof  is  duly  signed,  stamped  and  dated.     £69-7. 

"[Signatures.] 

"Received  from  Great  Northern  Ry.  Co.  the  above  named  sum  as  per  par- 
ticulars furnished.    This  receipt  is  not  to  be  detached  from  the  cheque. 

"[Signature]    . 

"Dated  ,  189—." 

A,  L.  Smith.  L.  J.,  said:  "In  my  opinion  Kenedy,  J.,  was  quite  right  in 
holding  that  this  order  was  not  a  check  within  the  definition  given  by  the 


/ 


74  FOiiM  AND  INCEPTION  (Part  1 

(II)  As  TO  Certainty 
AYREY  V.  FEAMSIDES. 

(Court  of  Exchequer,  1S38.     4  Mees.  &  W.  168.) 

Debt  on  an  instrument  (declared  on  as  a  promissory  note)  whereby 
the  defendants  jointly  and  separately  promised  to  pay  to  the  piaintiits, 
or  order,  the  sum  of  il3.  on  demand,  for  value  received,  with  mterest 
at  £5.  per  cent.,  "and  all  fines  according  to  rule."  There  was  also  a 
count  on  an  account  stated.  The  defendant  pleaded  to-  the  first  count, 
payment ;  to  the  second,  nunquam  indebitatus ;  and  at  the  trial,  be- 
fore the  undersheriflf  of  Yorkshire,  the  plaintiff  had  a  general  verdict. 

W.  H.  Watson  having  obtained  a  rule  nisi  to  arrest  the  judgment, 
on  the  ground  that  the  instrument  declared  on  could  not  be  considered 
as  a  promissory  note  within  the  statute,  but  only  as  an  agreement, 
for  which  no  consideration  was  shown  in  the  declaration. 

Wightman  showed  cause.  The  words,  "and  all  fines  according  to 
rule,"  are  altogether  insensible,  and  may  be  rejected  as  surplusage ; 
their  presence,  therefore,  does  not  vitiate  the  instrument,  which,  in  all 
other  respects,  is  a  complete  promissory  note.  It  was  certainly  held  in 
Smith  v.  Nightingale,  2  Stark.  N.  P.  375  (which  appears  to  be  the 
nearest  case  to  the  present),  that  an  instrument  whereby  the  party 
promised  to  pay  a  sum  certain,  "and  also  all  other  sums  that  might  be 
due,"  was  not  a  promissory  note  within  the  statute.  But  there,  the 
last  words,  althoucrh  not  capable  of  any  definite  construction,  were  not 
so  insensible  as  that  they  could  be  rejected  as  surplusage,  since  they 

Bill.«;  of  Exchance  Act.  18S2.  §  73.  bocaiise  it  was  not  an  unconditional  order 
in  writin?:  for  the  payment  of  money  within  section  ?,.  subsec.  1,  of  that  act." 
In  Natlian  v.  Opdens.  93  L.  T.  R.  (N.  S.)  TmS  (100.^),  the  following  instru- 
ment was  held  to  Ik?  an  unconditional  order,  and  to  be  a  check: 

"Second  and  Final  Bonus  Distribution. 

"Liverpool.  November  10.  1902. 
"The  Lancashire  and  Yorkshire  Bank.  Limited:     Pay   Mr.   H.  Nathan  or 
order  one  hundred  and  twenty-six  pounds  five  and  five  pence. 

Ogdens.  Limited  (in  liquidation), 
"p.  pro.  Joseph   Hood,   Liquidator. 
"fSiirned]  Oswald  Clement. 

"The  receipt  at  back  hereof  must  be  signed,  which  signature  will  be  taken 
as  an  indorsement  of  this  check." 

On  the  back  of  the  check: 

"November,  1902. 

"Received  from  Mr.  Joseph  Hood  (liquidator  of  O^deus.  Limited),  this 
check  for  fl2G.  5s.  nd.,  being  my  share  of  the  second  and  final  bonus  distribu- 
tion of  the  company.  [Signed]     H.  Nathan. 

"H.  J.  Nathan." 

A.  T.  Lawrence,  J.,  said:  "I  think  the  check  was  a  negotiable  instrument, 
notwithstanding  the  words  above  quoted  at  the  foot  thereof.  I  think  the 
order  to  pay  is  unconditional,  and  that,  though  the  words  at  the  foot  of  the 
check  are  imperative  in  terms,  they  are  not  addressed  to  the  bankers,  and  do 
not  affect  the  nature  of  the  order  to  them." 


Oh.  1)  FORM   OF  BILL  AND   OF  NOTE.  75 

showed  that  some  more  money  was  due,  only  they  did  not  specify  the 
amount  with  suthcitnt  preci^iun.  but  here,  uie  words  do  not  import 
any  promise  to  pay  money;  and  there  is  nothing  to  sliow  what  they 
have  reference  to,  or  what  is  tlie  nature  of  the  tmes  spoken  of.  Be- 
sides, the  instrument  must  be  either  a  promissory  note  or  an  agree- 
ment at  common  law;  and  it  clearly  is  not  the  latter:  for  the  words 
in  question  have  no  intelligible  meaning  in  themselves,  neither  could 
evidence  be  admitted  to  explain  them  aliunde,  if  they  were  declared 
on  as  a  contract. 

Watson  in  support  of  the  rule.  It  does  not  follow  that,  because  the 
precise  amount  or  even  nature  of  the  fines  referred  to  is  not  specified, 
the  words  can  be  rejected  as  surplusage.  If  any  construction  can  by 
possibility  be  put  upon  them  which  can  make  them  sensible,  they  can- 
not be  rejected;  and  it  is  plain  that  they  may  refer  to  money  due  for 
pecuniary  forfeitures,  as,  for  instance,  for  violation  of  the  rules  of  a 
benefit  society,  of  which  the  parties  were  members.  Smith  v.  Night- 
ingale is  directly  in  point.  There  Lord  Ellenborough  says :  "The  in- 
strument is  too  indefinite  to  be  considered  as  a  promissory  note,  for 
it  contains  a  promise  to  pay  interest  for  a  sum  not  specified,  and  no 
otherwise  ascertained  than  by  reference  to  the  defendant's  books; 
and,  since  the  whole  constitutes  one  entire  promise,  it  cannot  be  di- 
vided into  parts."  So  here,  the  instrument  contains  a  promise  to  pay 
some  amount  not  specified,  and  not  to  be  ascertained  but  by  extrinsic 
evidence. 

Parke,  B.  This  instrument  being  declared  on  as  a  promissory  note, 
the  question  is,  whether  the  words,  "and  all  fines  according  to  rule," 
can  be  rejected  as  being  altogether  insensible,  and  therefore  mere  sur- 
plusage :  and  I  think  they  cannot.  It  is  quite  possible  that  they  have 
a  meaning,  and  may  import  that  certain  pecuniary  fines  or  forfeitures 
are  to  be  paid  by  the  defendants ;  and  if  so,  this  is  certainly  no  prom- 
issory note  within  the  statute,  but  is  a  specific  agreement  to  do  cer- 
tain things,  the  consideration  for  doing  which  not  being  stated,  the 
declaration  is  clearly  bad.  The  judgment  will  not,  however,  be  ar- 
rested altogether  but  on  the  authority  of  Teach  v.  Thomas,  2  Mees.  & 
W.  427,  which  was  confirmed  this  morning  by  the  whole  court  in  the 
case  of  Corner  v.  Shew,  4  Mees.  &  W.  163,  a  venire  de  novo  must  be 
awarded. 

Rule  accordingly. 


LOWE  v.  BLISS. 

(Supreme  Court  of  Illinois,  ISGO.    24  111.  16S,  76  Am.  Dec.  742.) 

This  was  an  action  in  assumpsit.  Declaration  filed  December  4th. 
Counts:  (1)  On  a  promissory  note  of  plaintiflf  in  error  (defendant 
below),  dated  July  28,  1858,  made  at  New  York,  promising  "to  pay 


76  FORM  AND  iN-CLirxiON.  (Part  1 

Geo.  Bliss  &  Co."  (defendants  in  error),  "plaintiffs,  the  sum  of  two 
hundred  and  twenty-two  and  *Vioo  dollars,  withthe  current  rate  of  ex- 
change on  New  York,  for  value  received,  in  ninety  days  after  the 
date  thereof,"  alleging  nonpayment.  (2)  The  common  counts  for 
goods  sold,  money  lent,  had  and  received,  and  an  account  stated. 

With  declaration,  copy  of  note  sued  on,  as  follows: 
"222.47.  New  York,  July  28,  1858. 

"Ninety  days  after  date,  I,  the  subscriber,  of  Aroma,  county  of 
Kankakee,  state  of  Illinois,  promise  to  pay  to  the  order  of  George 
Bliss  &  Co.,  two  hundred  twenty-two  and  *'/ioo  dollars,  at  the  Kan- 
kakee Bank,  Kankakee,  111.,  value  received,  with  current  rate  of  ex- 
change on  New  York.  David  N.  Lowe." 

Defendant  pleaded  the  general  issue. 

The  issue  was  tried  by  the  court,  jury  waived,  and  finding  for 
plaintiffs  below,  for  $227.28. 

Motion  for  new  trial  overruled,  and  judgment  for  verdict  and 
costs,  and  30  days  given  to  file  bill  of  exceptions." 

Walker,  J.  *  *  *  The  question  is  then  presented  whether  this 
instrument  was  admissible  under  the  common  counts  without  proving 
a  consideration.  Promissory  notes,  bills  of  exchange,  and  sealed  in- 
struments, all  import  a  consideration,  and  when  they  form  the  basis 
of  an  action,  a  consideration  need  neither  be  averred  nor  proved, 
but  it  is  not  so  with  other  instruments.  This  instrument  is  not  under 
seal,  nor  is  it  a  bill  of  exchange.  Was  it  a  promissory  note?  That 
is  defined  to  be  "a  promise  or  agreement  in  writing  to  pay  a  speci- 
fied sum.  at  a  time  therein  limited,  or  on  demand,  or  at  sight,  to  a 
person  therein  named,  or  to  his  order,  or  to  the  bearer."  Chit,  on 
Bills,  516.  Bayley  on  Bills,  p.  1,  defines  a  promissory  note  to  be  a 
written  promise  to  pay  money  absolutely  and  at  all  events.  And  in 
the  application  of  the  rule  the  doctrine  seems  to  be  adhered  to  with 
entire  unanimity,  that  a  note  or  bill  must  be  for  a  specific  sum,  or  at 
least  for  a  sum  that  may  be  ascertained  by  computation,  independent 
of  all  extrinsic  evidence.  If  an  instrument  be  for  a  specified  sum  of 
money,  and  also  for  the  payment  of  something  else,  the  value  of 
which  is  not  ascertained,  but  depends  upon  extrinsic  evidence,  it 
would  not  be  a  bill  or  note.  Had  this  promise  been  for  the  sum  of 
money  named,  and  for  the  value  of  four  days'  labor,  no  one  would 
have  supposed  it  to  be  a  promissory  note,  because  proof  would  have 
to  be  resorted  to  for  the  purpose  of  ascertaining  the  value  of  the  labor, 
and  consequently  it  would  not  be  for  a  specified  sum  of  money. 
Such  a  promise  leaves  the  sum  agreed  to  be  paid  wholly  uncertain. 
We  know  that  the  current  rate  of  exchange  between  commercial 
points  is  fluctuating,  and  subject  to  constant  change,  depending  upon 
the  balance  of  trade  and  other  causes  incident  thereto.     It  is  as  sub- 

««  The  statement  is  abridged,  and  a  part  of  the  opinion  omitted. 


Ch.  1)  FORM  OF  BILL  AND  OF   NOTE.  77 

ject  to  fluctuation  as  the  value  of  labor  or  the  price  of  grain,  cattle, 
or  other  articles  of  property.  And  it  has  never  been  held  that  a  court 
may  judicially  fix  the  price  of  any  of  those  commodities  independent 
of  proof,  and  yet  to  do  so,  would  be  no  more  unreasonable  than  to 
take  judicial  notice  of  the  rate  of  exchange  between  different  com- 
mercial places.  We  are  aware  of  no  decision  that  has  ever  held  that 
a  court  may  take  notice  of  such  facts,  nor  has  any  decision  been  re- 
ferred to  which  holds  such  an  instrument  to  be  a  promissory  note. 
Nor  can  it  be  successfully  urged  that  custom  has  changed  the  law 
and  rendered  such  instruments  valid  promissory  notes.  These  in- 
struments owe  their  negotiability  and  evidence  of  the  receipt  of  a 
consideration  to  the  operation  of  the  statute,  and  not  to  the  common 
law.  Prior  to  the  adoption  of  the  statute  of  Anne,  in  Great  Britain, 
and  our  statute  regulating  negotiable  instruments,  they,  neither  in 
that  country  nor  in  this  state,  possessed  such  qualities.  And  under 
the  British  statute  they  must  be  for  the  payment  of  a  certain  speci- 
fied sum  of  money,  and  so  under  our  statute,  and  not  mere  mutual 
agreements  or  covenants  to  have  that  effect. 

Unless  the  instrument  declared  upon  possesses  all  the  qualities 
of  a  bill  or  note,  or  be  under  seal,  if  declared  upon  specially,  a  con- 
sideration must  be  averred  and  proved,  or  if  ofifered  under  the  com- 
mon counts,  it  must  be  proved,  to  authorize  a  recovery.  This  in- 
strument being  a  simple  contract  not  under  seal,  and  neither  a  note 
or  bill,  is  subject  to  all  the  rules  which  are  applied  to  other  simple 
contracts.  When  it  was  ofifered  under  the  common  counts,  as  it 
imports  no  consideration,  to  authorize  a  recovery,  a  sufificient  consider- 
ation should  have  been  proved.  When  offered  under  the  common 
counts,  it  dispensed  with  no  proof  that  would  have  been  required 
under  a  properly  framed  special  count.  It,  unlike  a  note  or  bill,  af- 
forded no  evidence  of  either  money  lent,  advanced,  or  had  and  re- 
ceived to  the  use  of  the  plaintiff.     *     *     * 

Judgment  reversed. 


GAAR  V.  LOUISVILLE  BANKING  CO. 
(Court  of  Appeals  of  Kentucky,  1875.     11  Bush,  ISO,  21  Am.  Rep.  209.) 

This  suit  was  brought  in  the  Louisville  chancery  court  by  appellee 
against  appellants  and  others  on  this  instrument: 

"Louisville,  Ky.,  January  27,  1873. 

"Four  months  after  date  pay  to  the  order  of  J.  M.  Bryant  ninety- 
four  hundred  and  twenty  and  four  hundredths  dollars,  value  re- 
ceived, negotiable  and  payable  at  the  office  of  the  Louisville  Bank- 
ing Company. 

"$9,420.04.  [Signed]     W.  H.  Beynroth." 


78  FORM   AND   INCEPTION.  (Pail   1 

Addressed  to  Morris,  Southwick  &  Co.,  Louisville,  Ky.,  accepted 
by  them,  and  indorsed  by  J.  M.  Bryant,  H.  S.  Gaar,  P.  G.  Kelsey, 
and  J.  T.  Morris.     On  the  back  of  that  paper  this  agreement  appears: 

"The  drawers,  indorsers,  and  acceptors  of  this  bill  agree  to  pay  a 
reasonable  attorney's  fee  to  any  holder  thereof,  if  the  same  shall 
hereafter  be  sued  upon,  and  also  pay  interest  at  the  rate  of  ten  per 
cent,  per  annum  after  maturity  until  paid,  and  all  are  equally  bound 
as  drawers,  indorsers,  as  if  this  bill  were  in  the  form  of  a  joint  note 

"[Signed]      jMorris,   Southwick  &  Co. 
"W.  H.  Beynroth. 
"J.  M.  Bryant. 
"H.   S.   Gaar." 

The  first  paragraph  of  the  petition  declared  on  it  as  a  bill  of  ex- 
change. 

In  the  third  paragraph,  the  writing  indorsed  on  the  back  of  the  bill 
was  set  up,  and  judgment  was  prayed  thereon  for  10  per  cent,  inter- 
est on  the  amount  of  the  bill  from  its  maturity  until  paid,  and  for 
$500  as  an  attorney's  fee.  Gaar  and  Bryant  demurred  to  the  peti- 
tion ;  and  their  demurrer  having  been  overruled  they  answered,  and 
a  trial  was  had,  which  resulted  in  a  verdict  and  judgment  against  them 
for  the  amount  of  the  bill,  with  interest  thereon  at  10  per  cent,  per  an- 
num from  maturity  until  paid,  and  from  that  judgment  they  have  ap- 
pealed. ^^ 

CoFER,  J.  The  ground  of  the  demurrer  is,  that  although  the  writ- 
ing declared  on  in  the  first  paragraph  when  taken  by  itself  is  a  bill 
of  exchange,  the  writing  indorsed  on  the  back  thereof,  in  which  the 
signers  agreed  to  pay  an  attorney's  fee  in  case  the  bill  should  be  sued 
on,  destroyed  its  negotiability.  This  argument  is  based  on  the  fact 
that  the  amount  of  the  attorney's  fee  agreed  to  be  paid  was  not  as- 
certained, and  hence  it  is  contended  that  the  bill  was  for  an  uncertain 
amount. 

A  bill  of  e'xchange  has  been  defined  to  be  a  written  order  or  request 
by  one  person  to  another  for  the  payment  of  a  sum  of  money,  ab- 
solutely, and  at  all  events ;  and  as  bills  are  designed  to  take  the 
place  and  perform  the  office  of  money,  there  must  be  no  chance  of 
mistake  as  to  the  amount  of  money  of  which  they  thus  take  the  place. 
On  this  point  therefore  the  adjudged  cases  are  quite  stringent.  The 
sum  must  be  stated  definitely,  and  must  not  be  connected  with  any 
indefinite  or  uncertain  sum.  1  Parsons  on  Notes  and  Bills,  37 ; 
Story  on  Bills,  §§  42-45. 

It  has  accordingly  been  held  that  an  instrument  in  the  form  of  a 
note  promising  to  pay  a  specified  sum  at  a  designated  place  on  a 
named  day,  "current  rate  of  exchange  added,"  was  not  a  note,  be- 
cause the  current  rate  of  exchange  was  unascertained  and  uncertain. 

3  0  The  statement  of  facts  is  abridged  from  the  statement  of  Gofer,  J.  Part 
of  the  opinion  is  omitted. 


Ch.  1)  FORM   OF  BILL  AND   OF  NOTD.  79 

Atkinson  v.  Manks,  1  Cow.  (N.  Y.)  707.  And  in  Davis  v.  Wilkin- 
son, 10  Adol.  &  E.  98,  it  was  held  that  the  following  instrument  was 
not  a  note:  "I  agree  to  pay  to  D.  £695.  at  four  installments,"  the 
first  on,  etc.,  "being  £300.,"  and  so  on,  specifying  three  others  amount- 
ing in  the  aggregate  to  £600.  "The  remaining  £95.  to  go  as  a  set-off 
for  an  order  of  R.  to  T.,  and  the  remainder  of  his  debt  owing  from 
D.  to  him." 

In  Cushman  v.  Haynes,  20  Pick.  (Mass.)  133,  it  was  held  that  an 
acceptance  for  an  uncertain  amount — to  wit,  "the  balance  of  goods 
not  then  sold" — was  not  negotiable. 

Other  cases  to  the  same  effect  might  be  cited,  but  it  is  deemed  un- 
necessary, as  the  rule  of  the  law  merchant  undoubtedly  is  that  it  is 
an  indispensable  quality  of  a  note  or  bill  that  it  shall  be  for  a  definite 
sum  in  order  that  it  may  be  negotiable. 

But  it  by  no  means  follows  from  this  conclusion  that  the  negotia- 
bility of  the  paper  sued  on  was  destroyed  by  the  agreement  indorsed 
thereon  that  the  parties  would  pay  an  attorney's  fee  if  the  debt  had 
to  be  sued  for. 

In  the  cases  cited,  and  others  referred  to  by  counsel,  the  amount 
to  be  paid  at  the  maturity  of  the  note  or  bill  was  uncertain,  and  it 
was  that  fact  which  destroyed  their  negotiability;  but  in  this  case 
the  amount  to  be  paid  at  maturity  was  fixed  and  certain,  and  it  was 
only  in  the  event  that  the  bill  was  not  paid  when  due  that  any  un- 
certainty arose. 

The  reason  for  the  rule  that  the  amount  to  be  paid  must  be  fixed 
and  certain  is  that  the  paper  is  to  become  a  substitute  for  money, 
and  this  it  can  not  be  unless  it  can  be  ascertained  from  it  exactly 
how  much  money  it  represents.  As  long  therefore  as  it  remains  a 
substitute  for  money  the  amount  which  it  entitles  the  holder  to  de- 
mand must  be  fixed  and  certain ;  but  when  it  is  past  due  it  ceases 
to  have  that  peculiar  quality  denominated  negotiability,  or  to  per- 
form the  office  of  money;  and  hence  anything  which  only  renders 
its  amount  uncertain  after  it  has  ceased  to  be  a  substitute  for  money, 
but  which  in  no  wise  affected  it  until  after  it  had  performed  its  of- 
fice, can  not  prevent  its  becoming  negotiable  paper.  Until  the  paper 
in  question  matured  the  amount  due  upon  it  was  fixed  and  certain, 
and  it  might  therefore  take  the  place  of  money;  when  it  became 
overdue,  that  fact  put  an  end  to  its  career,  and  then  for  the  first  time 
the  amount  to  which  the  holder  was  entitled  became  uncertain,  or 
rather  might  be  made  uncertain  by  bringing  an  action  on  the  bill 
against  the  parties  who  signed  the  agreement  indorsed  thereon. 

We  are  therefore  of  the  opinion  that  the  demurrer  was  properly 
overruled. ^^     *     *     * 

31  Contra:     First  Bank  v.  Larsen,  60  Wis.  206,  19  N.  W.  67,  50  Am.  Rep. 
■365    (1884);    American   Machinery   Co.   v.  Druge   Bros.,   82   Vt.   470,   74   Atl. 
84  (1909). 


80  FOUM  AND  INCEPTION.  (Part  1 

The  act  of  March  14,  1871,  which  made  it  lawful  to  contract  in 
writing  for  any  rate  of  interest  not  exceeding  10  per  cent.,  was  in 
force  when  the  bill  sued  on  was  made.  A  part  of  the  fifth  section 
of  that  act,  which  is  nearly  the  saine  as  section  4  of  article  2  of  chap- 
ter 60  of  the  General  Statutes,  is  in  these  words:  "If  any  rate  of 
interest  exceeding  the  rate  authorized  by  the  first  section  of  this  act 
(ten  per  cent.)  shall  be  charged  the  whole  interest  shall  be  forfeited." 
It  is  claimed  by  the  appellants  that  as  the  bill  was  to  bear  10  per  cent, 
interest  after  maturity,  and  in  addition  thereto  the  bank  took  their 
obligation  to  pay  an  attorney's  fee  in  the  event  suit  was  brought  on 
the  bill,  the  bank  contracted  for  a  rate  of  interest  exceeding  10  per 
cent.,  and  thereby  forfeited  all  right  to  any  interest,  and  that  the 
judgment  for  interest  is  therefore  erroneous. 

Waiving  the  question  whether  the  repeal  of  the  statute  then  in 
force  operated  to  relieve  the  appellant  from  the  forfeiture  denounced 
by  that  section,  we  are  of  the  opinion  no  such  forfeiture  was  incurred. 

This  objection  to  the  judgment  raises  the  question  whether  the 
agreement  to  pay  an  attorney's  fee  can  be  regarded  as  an  agreement 
to  pay  a  rate  of  interest  exceeding  ten  per  cent.  Interest  is  the  pre- 
mium allowed  by  law  for  the  use  of  money,  while  usury  is  the  taking 
of  more  for  the  use  of  money  than  the  law  allows. 

If  therefore  the  agreement  to  pay  an  attorney's  fee  in  case  the  bill 
had  to  be  sued  on  can  be  regarded  as  the  taking  or  contracting  for 
more  than  10  per  cent,  for  the  use  of  the  money  loaned  on  the  bill 
it  is  usurious,  and  the  bank  thereby  forfeited  its  right  to  any  interest. 

But  we  do  not  regard  such  a  contract  as  an  agreement  to  pay 
usury ;  it  was  an  agreement  to  pay  a  penalty  in  default  of  payment  of 
principal  and  lawful  interest  at  maturity,  or  before  suit.  Whenever 
the  debtor,  by  the  terms  of  his  contract,  can  avoid  the  payment  of  a 
larger  by  the  payment  of  a  smaller  sum  at  an  earlier  day  the  contract 
is  not  usurious,  but  the  diflference  between  the  two  sums  is  a  penalty, 
Blydenburg  on  Usury,  p.  39;  Cutlen  v.  How,  8  Mass.  257;  Moore 
v.  Hylton,  16  N.  C.  429;  Tyler  on  Usury,  97;  Jordan  v.  Lewis,  2 
Stew.  (Ala.)  426. 

But  when  he  cannot  discharge  his  contract  according  to  its  terms 
at  maturity  by  the  payment  of  the  debt  and  lawful  interest  the  con- 
tract is  usurious. 

In  this  case  the  contract  might  have  been  discharged  according 
to  its  terms  at  any  time  before  suit  was  commenced  by  the  payment 
of  the  principal  and  lawful  interest,  and  it  results  therefore  that  the 
forfeiture  denounced  by  the  statute  was  not  incurred. 

We  have  been  referred  by  counsel  to  the  case  of  Thomasson  v. 
Townsend,  10  Bush,  114,  as  holding  that  such  an  agreement  is  usur- 
ious. Speaking  of  the  agreement  to  pay  an  attorney's  fee  in  the 
event  the  mortgage  was  foreclosed,  the  court  said:  "It  is  in  the 
nature  of  a  penalty  to  be  imposed  in  case  the  mortgagor  should  fail 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE.  81 

to  pay  off  and  satisfy  the  mortgage  debt  before  judgment."  It  was 
also  said  that  "such  contracts  are  in  their  nature  usurious."  But 
when  the  whole  opinion  is  considered  together  it  is  clear  that  the 
court  did  not  regard  the  contract  as  usurious  in  fact  or  in  law,  but  as 
a  penalty  merely;  for  it  is  said  that,  while  if  the  debtor  resists  its 
enforcement,  the  court  will  relieve  against  it  as  a  penalty;  yet  "when 
a  judgment  is  rendered  by  default  in  a  case  like  this,  upon  a  petition 
setting  out  the  contract  in  accordance  with  the  rules  of  pleading, 
the  defendant  will  be  without  remedy.  This  is  the  extent  of  the  rule 
intimated  in  the  opinion  in  Smith  v.  Kahn  &  Will  (MS.  opinion, 
November  7,  1871).  In  this  case  the  defendant  was  in  court  resist- 
ing the  enforcement  of  the  penalty." 

The  court  not  only  treated  it  as  a  penalty  and  called  it  by  that 
name,  but  said  if  judgment  was  allowed  to  go  by  default  upon  appro- 
priate pleading  the  defendant  would  be  without  remedy,  which  can 
never  be  the  case  when  the  record  shows  that  judgment  has  been  ren- 
dered for  usury.  There  is  therefore  nothing  in  the  opinion  in  that 
case  inconsistent  with  the  conclusion  reached  in  this  case,  but  on  the 
contrary  that  opinion  is  an  authority  in  support  of  it.^^     *     *    * 

Judgment  affirmed. 


SMITH  v.  CRANE. 

(Supreme  Court  of  Minnesota,  1885.     33  Minn.  144,  22  N.   W.   633.   53  Am. 

Rep.    20.) 

Plaintiff,  as  indorsee  for  value  and  before  maturity,  brought  this 
action  in  the  municipal  court  of  Mankato  upon  the  promissory  note 
set  out  in  the  opinion.  The  answer  denies  that  the  note  is  negotiable, 
denies  that  plaintiff  is  the  holder  and  owner  of  the  note,  denies  that 
it  was  transferred  before  maturity,  alleges  that  it  was  given,  with 
two  other  notes,  in  payment  for  a  harvester  and  binder  which  was 
accompanied  with  a  written  warranty,  alleges  a  breach  of  the  war- 
ranty and  a  return  of  the  harvester  and  binder  in  accordance  with 
the  provisions  of  the  warranty,  and  asks  that  the  damages  for  the 
breach  be  set  off  against  the  note.     *     *     * 

The  court  also  charged,  against  plaintiff's  objection,  that  "the  in- 
strument offered  in  evidence  (the  note  in  suit)  is  not  a  promissory- 
note,  but  is  subject  to  all  equities  existing  between  the  defendant 
and  D.  M.  Osborne  &  Co.,  whether  it  was  assigned  before  or  after 
maturity."  Defendant  had  a  verdict,  and  plaintiff  appeals  from  an 
order  refusing  a  new  trial. ^^ 

32  Contra:  First  Bank  v.  Larsen,  supra;  Young  v.  Bank  (Tex.  Civ.  App.v 
117  S.  W.  476  (1909).  But  the  plaintiff  must  prove  the  amount  of  his  coun- 
sel  fees. 

83  The  statement  is  abridgea,  and  a  part  of  the  opinion  omitted. 

Sm.&M.B.&N.— 6 


S2 


FORM   AND    INCEPTION.  (Part    1 


Bfrry,  J.  "$100.  Good  Thunder,  July  24,  1882.  For  value  re- 
ceived on  or  before  the  first  day  of  January,  1884,  I,  or  we,  or  either 
of  us,  promise  to  pay  to  the  order  of  D.  M.  Osborne  &  Co.  the  sum 
of  one  hundred  dollars,  at  the  office  of  Gebhard  &  Moore,  in  :Man- 
kato,  with  interest  at  ten  per  cent,  per  annum  from  date  until  paid; 
seven,  if  paid  when  due.  W.  J.  B.  Crane."  A  negotiable  promissory 
note  must  be  certain  as  to  amount.  Jones  v.  Radatz,  27  ]\Iinn.  240, 
6  N.  W.  800.  It  is  so  certain  when  the  sum  to  become  absolutely 
payable  upon  it  at  any  given  time  is  ascertainable  upon  its  face.  1 
Daniel,  Neg.  Inst.  §  53;  Towne  v.  Rice,  122  Mass.  67;  Jones  v. 
Radatz,  supra. 

The  defendant's  position  is  that  the  foregoing  instrument  is  ren- 
dered uncertain  as  to  amount  by  the  interest  clause,  and  therefore  is 
not  a  negotiable  promissory  note.  As  to  the  legal  effect  of  such  a 
clause  the  authorities  disagree.  Some  hold  that  the  contract  reserves 
the  higher  rate  of  interest,  with  a  provision  for  its  abatement,  upon  a 
condition  to  be  performed,  and  that,  therefore,  the  difference  between 
the  two  rates  is  not  a  penalty,  but  the  contract  is  to  be  enforced  ac- 
cording to  its  literal  terms.  The  cases  holding  this  view  rest  upon 
Xicholls  V.  Maynard,  3  Atk.  519.  See  Walmesley  v.  Booth,  Barn.  Ch. 
478,  481;  Bonafous  v.  Rybot,  3  Burr.  1370;  Waller  v.  Long,  6  Munf. 
(Va.)  71.  Other  authorities  hold  that  the  clause  is  the  same  in  effect 
as  if  it  had  reserved  the  lower  rate  of  interest,  with  a  provision  that 
if  the  indebtedness  is  not  paid  at  maturity,  interest  shall  run  at  a 
higher  rate.  Seton  v.  Slade,  7  Ves.  265.  And  see  Stanhope  v.  Man- 
ners, 2  Eden,  197;  Brockway  v.  Clark,  6  Ohio,  45;  Longworth  v. 
Askren,  15  Ohio  St.  370;  Brown  v.  Barkham,  1  P.  Wms.  652.  If 
this  be  the  true  construction  of  the  clause,  it  is  generally  agreed  that 
the  difference  between  the  two  rates  is  to  be  treated  as  a  penalty.  Tal- 
cott  V.  Marston,  3  Minn.  339  (Gil.  238) ;  Newell  v.  Houlton,  22  Minn. 
19 ;  and  cases  last  cited. 

In  our  opinion  the  view  taken  by  the  authorities  last  mentioned, 
as  to  the  legal  effect  of  the  interest  clause  under  consideration,  is  the 
more  sensible,  and  most  in  accordance  with  what  would  seem  to  be 
the  real  object  of  the  parties  to  the  contract.  What  the  payee  really 
wants  is  his  money  at  the  due  date  of  the  contract,  and  to  secure  this 
he  holds  an  increase  of  the  rate  of  interest  over  the  debtor's  head. 
In  other  words,  the  increase  is  a  penalty  for  the  debtor's  delinquency. 
Treating  the  increase  as  a  penalty,  it  follows,  under  the  decisions  of 
the  court  before  cited,  that  the  note  in  suit  will  in  law  draw  the  same 
rate  of  interest  before  as  after  maturity — that  is  to  say,  7  per  cent. 
— and  that,  therefore  (whatever  might  be  the  case  if  the  interest 
clause  were  upheld  according  to  its  literal  temis),  the  sum  absolutely 
payable  upon  the  instrument  at  any  given  time  is  thus  made  certain 
a<;  the  principal,  and  7  per  cent,  interest.  *  *  * 
Order  reversed,  and  new  trial  granted. 


Ch.  1)  FORM  OF  BILL  AND   OF   NOTE.  83 

COOKE  V.  COLEHAN. 

(Court  of  King's  Bench,  1744.    2  Str.  1217.) 

On  error  from  C.  B.  a  note  to  pay  to  A.  or  order,  six  weeks  after 
the  death  of  the  defendant's  father,  for  vahie  received,  was  held  to  be 
a  negotiable  note  within  the  statute  3  Anne,  c.  9,  for  there  is  no  con- 
tingency, whereby  it  may  never  become  payable,  but  it  is  only  uncer- 
tain as  to  the  time,  which  is  the  case  of  all  bills  payable  at  so  many 
days  after  sight.  In  Communi  Banco  it  held  three  arguments,  and 
was  held  good  upon  a  solemn  resolution  delivered  by  Chief  Justice 
WlLLfiS. 


EVANS  V.  UNDERWOOD. 

(Court  of  King's  Bench,  1749.    1  Wils.  262.) 

Action  upon  a  promissory  note  brought  by  Evans  the  indorsee 
against  Underwood  the  drawer:  The  note  set  out  in  the  declara- 
tion is,  "I  promise  to  pay  to  George  Pratt,  or  order,  eight  pounds, 
upon  the  receipt  of  his  the  said  George  Pratt's  wages  due  from  his 
majesty's  ship  the  Suffolk,  it  being  in  full  for  his  wages  and  prize- 
money,  and  short  allowance  money  for  the  said  ship;"  the  indorse- 
ment by  Pratt  is  set  out,  and  it  is  averred  that  the  defendant  re- 
ceived the  said  wages  from  the  said  ship.  Upon  non  assumpsit 
pleaded,  the  jury  gave  a  verdict  for  the  plaintiff;  and  now  it  was 
moved  in  arrest  of  judgment,  that  this  note  was  not  negotiable  within 
St.  4  &  5  Anne,  c.  9. 

Mr.  Hume  Campbell  for  the  plaintiff,  to  show  this  was  a  nego- 
tiable note  cited  several  cases,  and  principally  relied  upon  Andrews 
V.  Franklin,  which  was  in  Hilary  term  3  Geo.  I  in  this  court;  case 
upon  a  promissory  note  to  pay  money  within  two  months  after  the 
ship  called  the  Devonshire  should  be  paid  off,  and  the  plaintiff  de- 
clared upon  the  statute;  it  was  there  insisted  that  the  note  was  not 
negotiable,  the  promise  to  pay  being  upon  a  contingency  which  might 
never  happen.  Sed  Per  Curiam.  The  paying  off  the  ship  was  moral- 
ly certain,  and  the  note  is  within  the  statute  and  negotiable.  And  in 
(^olehan  v.  Cooke,  Mich.  15  Geo.  H  in  C.  B.,  J.  Cooke  on  27th  of 
May,  1732,  made  a  promissory  note,  whereby  he  promised  to  pay  to 
H.  Denham,  or  order,  £150  six  weeks  after  the  death  of  his  father 
J.  Cooke,  Esq.,  for  value  received,  which  was  indorsed  to  Colehan ; 
J.  Cooke  the  father  died  April  2,  1741.  And  the  indorsee  brought  an 
action,  and  had  judgment  in  the  Common  Pleas,  that  the  note  was 
negotiable  after  three  arguments  for  their  was  no  contingency  whereby 
the  note  might  never  become  payable,  and  was  only  uncertain  as  to 
the  time ;  and  the  judgment  of  the  C.  B.  was  affirmed  upon  a  writ  of 
error  in  B.  R.  Mich.  term.  18  Geo.  II,  and  the  court  said  that  no  certain 


84  FORM   AND    INCKPTION.  (Part   1 

precise  form  of  words  are  necessary  to  be  used  in  a  bill  of  exchange  or 
Mole  of  hand,  and  that  "I  promise  to  be  accountable  to  A.  or  his  order, 
for  ilOO  value  received,"  would  be  a  good  negotiable  promissory  note. 

On  the  other  side  it  was  said  by  Mr.  Ford  for  the  defendant, 
that  the  case  of  Andrews  and  Franklyn  was  never  determined,  and 
that  in  the  case  of  Colehan  v.  Cooke,  the  payment  was  certain  in 
all  events,  for  the  father  must  die  some  time  or  other,  but  it  was 
uncertain  whether  the  ship  Suffolk  would  ever  be  paid  off  or  not. 

Lee,  C.  J.  The  case  of  Andrews  v.  Franklyn  is  very  like  the 
present;  we  will  look  into  that  case  and  see  whether  it  was  deter- 
mined ;  the  court  inclined  to  give  judgment  for  the  plaintiff,  and  after 
looking  into  the  case  cited,  did  so,  ut  audivi.^* 


JONES  v.  EISLER. 

(Supreme  Court  of  Kansas,  1SG5.     3  Kan.  134.) 

This  action  was  brought  September  11,  1863,  in  Franklin  county 
district  court,  on  a  note,  as  follows:  "$237.37.  Ottawa  Creek, 
April  20th,  1860.  For  value  received  (in  cutting  stone)  by  Gouliep 
Anders,  I  promise  to  pay  when  I  receive  it  from  government  for  losses 
sustained  in  August,  1856,  or  as  soon  as  otherwise  convenient,  the  sum 
of  two  hundred  and  thirty-seven  dollars  and  thirty-seven  cents. 
John  T.  Jones" — which  note  bore  the  following  indorsements,  viz. : 
"April  9,  1860.  Received  of  the  within  note  twenty  dollars."  "June 
18.  1860.  Received  of  the  within  five  dollars."  "Nov.  10th.  Re- 
ceived of  the  within  two  dollars  and  fifty  cents" — each  signed.     The 

8<  "There  Is  another  interesting  question  !n  the  case,  a  brief  discussion 
of  which  may  be  of  servic-e  in  the  conduct  of  the  new  trial  which  we  find 
it  necessary  to  order.  Under  the  decision  of  the  Supreme  Court  of  Illinois 
in  Kelley  v.  Hemmingway,  13  111.  OW,  it  would  seem  that  the  Instrument 
uix)n  which  the  present  suit  was  brought  is  not  a  promissory  note  at  all. 
The  instrument  there  under  consideration  read  as  follows :  'Castleton,  April 
27th,  1844.  Due  Henry  D.  Kelley  fifty-three  dollars  when  he  is  twenty-one 
years  old,  with  interest.  David  Kelley.'  The  court  held  that,  inasmuch  as 
the  payment  was  conditioned  upon  the  attainment  of  his  majority  by  the 
payee — an  event  which  might  never  hapi)en — it  was  made  dependent  on  a 
contingency,  and  therefore  lacked  one  of  the  essential  elements  of  a  promis- 
sory note,  which  is  that  the  money  shall  be  certainly  payable.  This  case 
is  cited  by  Story  and  Daniel  as  authority  for  the  proposition  that  a  written 
promise  to  pay  money  when  the  payee  shall  come  of  age  is  not  a  good  prom- 
issory note ;  'for  non  constat  that  he  will  ever  arrive  at  that  period  of  life.' 
Story,  Prom.  Notes  (7th  Ed.)  §  28;  1  Daniel,  Neg.  Inst.  (4th  Ed.)  §  46.  And 
we  do  not  find  that  the  correctness  of  the  decision  has  ever  been  questioned 
Numerous  judicial  declarations  can  be  cited  to  the  effect  that  contingency 
as  to  payment  Is  fatal  to  the  character  of  an  instrmuent  as  a  promissory 
note.  As  was  said  by  Brown,  J.,  in  Carnwright  v.  Gray,  127  N.  Y.  92,  27  N. 
B.  S.'i5,  12  L.  R.  A.  S45,  24  Am.  St.  Rep.  424,  'the  agreement  to  pay  must  not 
depend  on  any  contingency,  but  be  absolute  and  at  all  events.'  "  Rice  v.  Rice, 
43  App.  Div.  4.3S,  GO  N.  Y.  Supp.  97,  100  (1S99), 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE.  85 

petition  set  forth  a  copy  of  the  note  and  of  the  indorsements,  setting 
forth  the  amount  claimed  due  thereon,  and  asked  judgment. 

The  answer  set  up  the  three-year  statute  of  Hmitation.  A  de- 
murrer to  the  answer  was  sustained,  and  the  defendant  brings  error. ^' 

Crozier,  C.  J.  The  first  question  presented  by  the  record  is: 
When  did  the  note  sued  on  become  due?  The  note  is  not  a  condi- 
tional one.  The  maker  owed  the  payee  who  had  performed  labor  for 
him.  He  declares  in  the  paper  that  he  has  received  the  considera- 
tion, which  all  must  admit  was  a  valuable  one.  The  existence  of  the 
debt  was  not  made  to  depend  upon  a  condition  or  contingency.  Ev- 
erything necessary  to  constitute  a  promissory  note,  except  the  tune 
of  payment,  is  clearly  expressed.  As  to  the  time  the  language  is 
peculiar.  It  could  not  have  been  contemplated  that  if  Jones  never 
got  his  money  from  the  government,  or  never  should  be  in  a  situa- 
tion when  he  could  conveniently  pay,  that  the  money  never  was  to  be 
payable.  Jones  evidently  expected,  within  a  reasonable  time  to  get 
money  from  the  government,  or  failing  in  that,  within  a  like  time, 
it  would  otherwise  be  convenient  to  pay.  After  having  performed 
work  to  the  full  amount  of  the  note,  it  could  not  have  been  intended 
that  Anders  should  never  get  his  money  unless  Jones  got  his  from  the 
government,  or  should  find  it  otherwise  convenient  to  pay.  The  in- 
tention of  the  parties  doubtless  was,  that  it  should  in  any  event  be 
payable  in  a  reasonable  time,  and  such  is  the  legal  effect  of  the  in- 
strument. 

What  was  such  reasonable  time  was  in  this  case  determined  by  the 
parties  themselves.  A  payment  was  made  June  18,  1860,  about  60 
days  after  the  note  was  made.  The  parties  considered  this  a  reason- 
able time,  and  it  would  have  been  so  in  law  in  case  a  formal  demand 
had  been  made.  The  payment  was  equivalent,  under  the  circum- 
stances, to  a  demand.  The  money  then  became  due,  at  least  as  early 
as  June  18,  1860,  at  which  time  the  statute  of  limitation  would  begin 
to  run.  The  maker  pleaded  the  statute,  which  was  a  good  defense, 
unless  there  was  a  subsequent  payment  or  written  acknowledgment 
within  three  years  preceding  the  commencement  of  the  suit.  The 
petition  alleges  a  payment  on  the  10th  of  November,  without  stating 
any  year.  As  a  matter  of  fact,  a  court  or  jury  might  infer  that  it  was 
in  1860,  but  as  a  matter  of  allegation  in  pleading,  the  court  could  not 
interpolate  those  or  any  other  figures  in  pleading;  facts  must  be 
plainly  and  concisely  stated,  not  inferentially  stated.  Had  the  peti- 
tion averred  a  payment  on  the  10th  of  November,  1860,  the  court  or 
jury  upon  a  trial  might  have  been  justified  in  finding  as  a  fact,  upon 
the  production  of  the  note  with  all  of  the  indorsements,  that  a  pay- 
ment had  been  made  at  that  time,  or  parol  testimony  might  have  been 

SB  The  statement  is  abridged,  and  the  arguments  and  a  portion  of  the 
opinion  omitted. 


86  FOUM  AND  INCEPTION.  (Part  1 

introduced  to  show  it.  But  no  proof  upon  that  subject  could  have 
been  received  against  the  objection  of  the  defendant,  for  the  reason 
that  there  was  no  allegation  of  the  time  of  the  payment. 

The  court  below,  therefore,  erred  in  sustaining  the  demurrer  to 
the  answer,  setting  up  the  statute  of  limitations.     *     *     * 

Reversed. 


WHITE  V.  SMITH. 
(Supreme  Court  of  Illinois,  1S75.     77  111.  351,  20  Am.  Rep.  251.) 

Mr.  Justice  Sheldon  delivered  the  opinion  of  the  court. 

This  was  an  action,  brought  by  plaintiff  below,  as  assignee,  upon 
the  following  instrument  in  writing: 
"$50.00  Monticello,  III,  April,  17,  1866. 

"For  value  received,  I  promise  to  pay  to  the  Monticello  Railroad 
Company,  or  order  the  sum  of  $50,  to  be  paid  in  such  installments 
and  at  such  times  as  the  directors  of  said  company  may,  from  time 
to  time,  assess  or  rcciuire.  J.  W.  White." 

The  declaration  averred  that  the  directors,  on  the  1st  of  June. 
1866,  made  an  assessment  of  5  per  cent.,  which  was  paid ;  on  the  7th 
of  May,  1867,  another  assessment  of  10  per  cent.,  which  was  paid; 
on  the  7th  of  January,  1868,  another  assessment  of  35  per  cent.,  of 
which  there  was  notice  to  defendant,  demand,  and  refusal  of  pay- 
ment; and  that,  on  January  6,  1869,  another  assessment  of  50  per 
cent,  was  made,  and  like  notice,  demand,  and  refusal  of  payment, 
the  several  assessments  amounting  to  the  whole  sum  of  money  in  the 
instrument  mentioned,  and  that  afterwards  the  instrument  was  in- 
dorsed and  assigned  to  the  plaintiff. 

The  court  below  overruled  a  demurrer  to  the  declaration  and  ren- 
dered judgment  for  the  plaintiff. 

The  error  assigned  is  the  overruling  of  the  demurrer,  and  the  ques- 
tion made  is  whether  the  instrument  in  suit  is  a  negotiable  promis- 
son»'  note. 

Plaintiff  in  error  asserts  it  not  to  be.  because,  by  its  terms,  it  is 
uncertain  whether  the  money  will  ever  become  payable  or  not ;  that 
the  payment  depended  on  an  act  to  be  performed  by  the  directors, 
\hich  act  might  never  be  performed  by  them,  or  that  the  railroad 
company,  from  some  cause,  might  cease  to  exist  before  any  assess- 
ment had  been  made  by  the  directors. 

The  principle  is  undoubted,  that,  to  constitute  a  valid  promissory 
note,  it  must  be  for  the  payment  of  money  which  will  certainly  be- 
come due  and  payable  one  time  or  other,  though  it  may  be  uncertain 
when  that  time  will  come.  And  where  the  payment  depends  upon  a 
contingency,  it   will  make   no   difference   that   the   contingency   does. 


Ch.  1)  FORM   OF  BILL   AND   OF   NOTE.  87 

in  fact,  happen  afterwards,  on  which  the  payment  is  to  become  ab- 
sokite,  for  its  character  as  a  promissory  note  cannot  depend  upon  fu- 
ture events,  but  solely  upon  its  character  when  created. 

The  instrument  in  question  does,  seemingly,  depend  for  its  pay- 
ment upon  a  contiivg-ency.  But  there  is  a  class  of  cases,  says  Judge 
Story,  "which,  at  first  view,  seem  to  import  that  payment  is  to  be 
made  only  upon  the  occurrence  of  events  which  may  never  happen, 
and  yet  which  are  uniformly  held  to  be  absolutely  payable  at  all 
events.  Thus,  if  a  note  be  made  payable  at  sight,  or  at  10  days  after 
sight,  or  in  10  days  after  notice,  or  on  request  or  on  demand,  in  all 
these  and  the  like  cases  the  note  will  be  held  valid  as  a  promissory 
note  and  payable  at  all  events,  although,  in  point  of  fact,  the  payee 
may  die  without  ever  having  presented  the  note  for  sight,  or  with- 
out having  given  any  notice  to  or  made  any  request  or  demand  upon 
the  maker  for  payment.  But  the  law,  in  all  cases  of  this  sort,  deems 
the  note  to  admit  a  present  debt  to  be  due  to  the  payee,  and  payable 
absolutely  and  at  all  events,  whenever  or  by  whomsoever  the  note 
is  presented  for  payment  according  to  its  purport."  Story,  Prom. 
Notes,  §  29. 

We  are  inclined  to  hold  that  this  instrument  may  be  regarded  as 
one  falling  under  this  class.  The  money  here  is  payable  to  the 
company  in  such  installments  and  at  such  times  as  its  directors  may 
from  time  to  time  require.  The  directors  are  the  managing  officers 
of  the  corporation,  so  that  the  money  is  really  payable  in  such  in- 
stallments and  at  such  times  as  the  payee  may  require.  It  was,  in 
effect,  payable  on  demand,  or  in  installments  on  demand.  In  the 
case  of  a  note  payable  "on  having  twelve  months'  notice,"  it  might 
be  said  that  it  was  not  certain  that  notice  would  ever  be  given.  In 
reference  to  a  note  so  payable  "on  having  twelve  months'  notice," 
Abbott,  C.  J.,  in  Clayton  v.  Gosling,  5  Barn.  &  C.  360,  said:  "Nor 
is  the  time  of  payment  contingent,  in  the  strict  sense  of  the  expression, 
for  that  means  a  time  which  may  or  may  not  arrive.  This  note  was 
made  payable  at  a  time  which  we  must  suppose  would  arrive."  The 
same,  we  think,  with  equal  truth,  may  be  said  in  respect  to  the  pres- 
ent note. 

We  cannot  well  distinguish,  in  principle,  this  case  from  the  one 
of  Goshen  Turnpike  Co.  v.  Hurtin,  9  Johns.  (N.  Y.)  217,  6  Am.  Dec. 
273.  The  promise  there  was  to  pay  the  company  $125  for  five  shares 
of  the  capital  stock  of  the  corporation,  in  such  manner  and  propor- 
tion and  at  such  time  and  place  as  the  president,  directors  and  com- 
pany should  from  time  to  time  require.  It  was  held  that  the  note  was 
a  good  promissory  note  within  the  statute,  the  statute  there,  relative 
to  promissory  notes,  being  the  same  in  substance  as  that  of  3  &  4 
Anne;  that  the  note  was  payable  absolutely,  and  not  depending  on 
any   contingency;    that  it  was,   in   effect,  payable  on  demand.      S«e, 


88  FoiJM  AND  iNCKPTiON.  (Part  1 

also,  Dutchess  Cotton  Manufactory  v.  Davis,  14  Johns.  (N.  Y.)  238, 
7  Am.  Dec.  459. 

We  are  disposed  to  hold  that  there  was  no  error  in  overruling 
the  demurrer,  and  the  judgment  will  be  affirmed. 

Judgment  affirmed. 


WOODBURY,  WILLIAMS  &  ENGLISH  v.  ROBERTS. 

(Supreme  Court  of  Iowa.  1SS2.    59  Iowa,  348,  13  N.  W.  312,  44  Am.  Rep.  G85.) 

Action  upon  a  promissory  note.  The  cause  was  submitted  to  the 
circuit  court  upon  the  question  of  the  negotiability  of  the  note,  un- 
der a  written  stipulation  of  the  attorneys  of  the  parties,  and  the 
court  decided  that  the  instrument  is  not  negotiable.     Plaintiffs  appeal. 

Beck,  J.     The  only  question  in  the  case  involves  the  negotiability 
of  the  note  in  suit,  of  which  the  following  is  a  copy : 
"$300.  Dallas  Township,  Iowa,  March  18,  1880. 

"Three  months  after  date,  I  promise  to  pay  to  the  order  of  Warren 
Roberts  three  hundred  dollars,  at  the  First  National  Bank  of  Burling- 
ton, Iowa,  value  received,  with  interest  at  10  per  cent,  per  annum, 
including  attorney's  fees  and  all  costs  of  collection.  The  makers  and 
indorsers  of  this  obligation  further  expressly  agree  that  the  payee, 
or  his  assigns,  may  extend  the  time  of  payment  thereof  from  time 
to  time  indefinitely  as  he  or  they  may  see  fit. 

"[Signed]      Warren  Roberts." 

Indorsed  on   the  back:    "Warren   Roberts." 

When  an  instrument  is  not  certain,  or  is  not  capable  of  being  made 
certain,  as  to  the  time  of  payment,  the  law  does  not  regard  it  as  ne- 
gotiable paper.  By  the  terms  of  the  condition  of  the  note  in  suit  it 
would  never  fall  due,  but  could  be  indefinitely  extended  at  the  will 
of  the  maker  and  indorser,  who,  it  will  be  observed,  is  the  same  party. 
When  the  instrument  was  executed  the  time  of  its  maturity  was  con- 
tingent upon  the  option  of  the  maker  of  the  note.  It  was  impossible 
to  determine  when  it  would  become  due  by  the  assent  of  the  maker. 
The  time  of  payment  was  uncertain  and  was  not  capable  of  being 
made  certain.  Nothing  happened  after  its  execution  to  remove  this 
uncertainty. 

Notes  which  by  their  terms  are  payable  on  or  before  a  fixed  time 
or  a  specified  event  are,  it  is  true,  uncertain  as  to  the  time  at  which 
they  are  payable.  But  there  is  no  uncertainty  as  to  the  time  when 
they  become  absolutely  due.  Paper  of  this  character  is  regarded  by 
the  courts  as  negotiable.  But  the  note  before  us  may  never  fall  due, 
for  payment  may  be  extended  indefinitely. 

The  rules  applicable  to  commercial  paper  were  transplanted  into 
the  common  law  from  the  law  merchant.  They  had  their  origin  in  the 
customs  and  course  of  business  of  merchants  and  bankers,  and  are 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE.  89 

now  recognized  by  the  courts  because  they  are  demanded  by  the 
wants  and  convenience  of  the  mercantile  world.  Surely  these  rules 
ought  not  to  be  extended  to  paper,  the  like  of  which  was  never  heard 
of  in  mercantile  transactions.  What  business  man  would  expect  a 
banker  to  discount  his  paper  in  the  form  of  the  note  in  question  in  this 
case?  What  merchant  ever  ofifered  to  give  or  was  asked  to  receive 
a  promissory  note  containing  a  like  condition?  We  may  safely  say 
that  notes  of  this  kind  are  unknown  to  commercial  transactions.  Why, 
then,  extend  to  them  the  rules  of  the  commercial  law  ? 

By  regarding  such  paper  as  nonnegotiable  no  prejudice  will  re- 
sult to  the  mercantile  and  financial  business  of  the  country,  but 
sharpers  will  be  defeated  in  their  attempts  to  swindle  the  confiding 
and  unwary,  a  result  in  accord  with  sound  public  policy  and  good 
morals. 

Miller  v.  Poage,  56  Iowa,  96,  8  N.  W.  799,  41  Am.  Rep.  82,  and 
Smith  v.  Van  Blarcom,  45  Mich.  371,  8  N.  W.  90,  support  the  con- 
clusions we  have  reached  that  the  note  in  suit  is  not  negotiable. 
The  case  last  named  holds  a  note  to  be  nonnegotiable  which  contains 
the  precise  condition  found  in  the  note  before  us. 

The  judgment  of  the  circuit  court  is  affirmed.^' 


ROBERTS  V.  SNOW. 

(Supreme  Court  of  Nebraska,  1889.     27  Neb.  42.5,  43  N.  W.  241.) 

Reese,  C.  J.  This  action  was  instituted  in  the  district  court  of 
Holt  county  upon  a  written  instrument  of  which  the  following  is 
a  copy : 

"Marshalltown,  Iowa,  July  16,  1877. 

"For  value  received  I  hereby  promise  to  pay  to  Peter  Housel,  or 
order,  four  hundred  dollars  ($400),  with  ten  per  cent,  interest  per 
annum,  payable  semi-annually  in  advance,  and  on  default  of  prompt 
payment  of  the  interest  for  thirty  days  after  it  is  due,  then  this  note, 
principal  and  interest,  shall  be  due  and  collectible  without  defalca- 
tion or  discount,  together  with  an  attorney  fee  of  ten  per  cent,  for 
collection.  [Signed]      B.  L.  Snow." 

"Attest:     C.  C.  Housel." 

86  Compare  Farmer  v.  Bank,  130  Iowa.  463,  477,  107  N.  W.  170  (1906). 
Contra:  First  National  Bank  v.  Buttery,  17  N.  D.  326,  116  N.  W.  341,  16 
L.  R.  A.  (N.  S.)  878  (1908).  In  that  case  the  court,  referring  to  a  clause  like 
that  discussed  in  the  principal  case,  said:  "This  phrase  does  not  express 
an  agreement  to  extend  time,  but  leaves  the  matter  of  extension  optional 
with  the  holder,  and  not  obligatory  upon  him,  and  the  note  on  its  face  gives 
the  time  when  it  becomes  due.  In  this  respect  it  must  be  distinguished  from 
a  provision  to  the  effect  that  the  time  of  payment  shall  be  extended  indefi- 
nitely, in  which  case  the  uncertainty  of  time  renders  the  instrument  non- 
negotiable.  To  us  it  is  clear  that  it  has  the  same  effect  as  though  the  note 
read  'on  the  first  day  of  October,  1903,  or  thereafter  on  demand.' " 


90  FORM    AND    INCEPTION.  (Part  1 

Upon  the  back  of  the  instrument  are  the  following  indorsements: 

"Pay  to  the  order  of  C.  C.  Housel.  Peter  Housel,  by  C.  C.  Hous- 
el.  Executor  of  the  Estate  of  Peter  Housel,  Deceased."  "Pay  to  the 
order  of  B.  F.  Roberts.    C.  C.  Housel."     *     *     * 

The  cause  is  presented  to  this  court  by  plaintiff  by  proceeding 
in  error,  presenting  a  large  number  of  assignments,  but  it  is  not 
deemed  necessary  to  examine  all.  It  appears  that  the  question  under- 
lying the  whole  controversy  in  this  case  is  as  to  the  character  of  the 
instrument  on  which  the  suit  was  founded.  It  is  insisted  by  plaintiff 
in  error  that  the  writing  is  a  negotiable  promissory  note,  and  is  entitled 
to  be  treated  as  such,  with  all  the  incidents  which  attach  to  nego- 
tiable paper;  while  upon  the  other  hand  it  was  contended  by  defend- 
ant in  error  that  it  is  not  a  negotiable  instrument,  and  that  therefore 
the  action  by  plaintiff  in  error  could  not  be  maintained,  he  not  being 
the  actual  owner  thereof  by  assignment.  This  contention  is  based 
upon  the  fact  that  the  instrument  does  not  fix  a  time  certain  within 
which  the  money  must  be  paid. 

It  is  our  opinion  that  the  instrument  in  question  falls  clearly  within 
the  definition  of  commercial  paper,  and  that  it  was  payable  on  de- 
mand, at  any  time  after  its  e.xecution,  and  should  have  been  treated 
by  the  district  court  as  a  promissory  note  payable  upon  demand.  In 
1  Randolph  on  Commercial  Paper,  §  119,  it  is  said:  "If  no  time  of 
payment  is  expressed,  which  is  usually  the  case  in  checks,  and  fre- 
quently so  in  promissory  notes  and  drafts,  the  instrument  is,  by  in- 
tendment of  law,  payable  on  demand,  and  is  as  valid  and  negotiable 
as  though  the  time  of  payment  were  fully  expressed" — citing  a  large 
number  of  authorities,  among  which  are  Jones  v.  Brown,  11  Ohio  St. 
601;  Holmes  v.  West.  17  Cal.  623;  Porter  v.  Porter,  51  Me.  376; 
Keyes  v.  Fenstermaker,  24  Cal.  329;  Bank  v.  Price,  52  Iowa,  570, 
3  N.  W.  639 ;   Libby  v.  Mikelborg,  28  Minn.  38,  8  N.  W.  903. 

The  rule  seems  to  be  that  in  cases  of  this  kind  the  legal  intend- 
ment, that  the  notes  are  payable  upon  demand,  cannot  be  changed 
by  parol  proof  any  more  than  could  the  expressed  terms  of  a  written 
instrument  be  changed.  See  Thompson  v.  Ketcham,  8  Johns.  (N.  Y.) 
192,  5  .\m.  Dec.  332;  Koehring  v.  Muemminghoff,  61  Mo.  403,  21 
Am.  Rep.  402 ;  Self  v.  King.  28  Tex.  552. 

But  it  may  be  contended  that  it  is  shown  upon  the  face  of  the  note 
itself  that  such  was  not  the  intention  of  the  parties  at  the  time  of 
its  execution,  for  it  is  provided  that  the  interest  shall  be  payable  semi- 
annually, and  that  the  note  shall  become  due  and  collectible  on  the 
expiration  of  30  days  after  default  of  the  payment  of  the  interest; 
but  this  would  make  no  difference  as  far  as  the  note  was  concerned. 
.\s  held  in  Jones  v.  Brown,  supra,  the  fact  that  the  parties  provided 
for  the  payment  of  the  interest  in  case  the  note  should  not  be  paid 
immediately,  would  not  change  the  legal  effect  of  the  contract.     Upon 


Ch.  1)  FORM   OF   BILL  AND   OF   NOTE.  91 

this  subject,  see  Loring  v.  Gurney,  5  Pick.  (Mass.)  15;  Meador  v. 
Bank,  56  Ga.  605 ;  Holmes  v.  West,  17  Cal.  623. 

Aside  from  what  would  seem  a  rather  inflexible  rule  of  law,  as 
applied  to  instruments  of  the  kind  under  consideration,  a  careful  ex- 
amination of  the  note  in  question  satisfies  us  that  no  other  construc- 
tion can  be  given  to  its  language. 

There  is  nothing  upon  the  face  of  the  instrument  itself,  nor  pleaded 
by  the  answer,  nor  submitted  in  the  evidence  in  the  case,  which  shows 
that  any  relation  existed  between  the  parties  to  the  instrument  by 
which  it  could  be  presumed  or  supposed  that  it  was  their  purpose 
that  the  note  should  never  mature.  If  it  cannot  be  treated  as  a  prom- 
issory note  payable  upon  demand,  then  the  only  event  which  could 
occur  by  which  the  note  could  be  made  to  mature,  according  to  its 
own  language,  would  be  a  default  of  30  days  in  the  payment  of  the 
semi-annual  interest;  and  if  such  default  should  never  be  made,  the 
note  would  never  mature,  and  therefore  could  never  be  collected 
■except  by  the  voluntary  payment  of  the  maker.  This,  evidently,  was 
not  the  intention  of  the  parties  to  the  instrument.     *     *     * 

Reversed  and  remanded. ^^ 


LOUISVILLE  BANKING  CO.  v.   GR^VY  et  al. 

(Supreme  Court  of  Alabama,  1899.     123  Ala.  251,  26  South.  205,  82  Am.   St. 

Rep.  120.) 

This  action  was  brought  by  the  appellant,  the  Louisville  Banking 
Company,  against  C.  Crozier  Gray  and  George  Gray,  and  counted 
upon  a  promissory  note  which  was  given  by  the  defendants  to  the 
Commercial  Bank  of  Selma,  and  made  payable  at  the  Commercial 
Bank  of  Selma,  on  December  12,  1896,  and  which  note  was  indorsed 
by  the  said  Commercial  Bank  of  Selma  and  was  alleged  in  the  com- 
plaint to  be  the  property  of  the  plaintiff.  The  defendants  filed  sev- 
eral pleas,  in  which  they  set  up  payment  of  said  note,  and  they  also 
filed  the  following  special  plea: 

"No.  10.  The  defendants,  by  leave  of  the  court,  for  further  an- 
swer to  the  complaint  in  this  cause,  say :  That  the  promissory  note 
sued  on  in  this  suit  is  in  words  and  figures  in  substance  as  follows: 
'$500.00.  Selma,  Ala.,  Nov.  9th,  1896.  On  the  12th  day  of  Dec, 
1896,  we  promise  to  pay  to  the  order  of  the  Commercial  Bank  of 
Selma,  Ala.,  the  sum  of  five  hundred  and  "^/loo  dollars,  at  the  Com- 
mercial Bank  of  Selma,  Selma,  Ala.  Due  Dec.  15,  1896.  The  makers 
and  indorsers  of  this  note  waive  the  right  to  claim  exemption  under 
the  constitution  and  laws  of  this  or  any  other  state,  and  authorize 
said   bank  to  appropriate  on  this  note,  whether  due  or  not,  at  any 

ST  Part  of  the  opinion  is  omitted. 


yii 


FOHM  AND  iNcin'TioN.  (Part  1 


time,  at  its  option,  without  notice  or  legal  proceedings,  any  money 
which  they,  or  any  one  or  more  of  them,  may  have  jointly  or  several- 
ly in  said  bank,  on  deposit  or  otherwise;  and  further  agree  to  pay 
all  costs  of  collection,  including  a  reasonable  attorney's  fee,  upon 
failure  to  pay  said  note  at  maturity.  Demand,  protest,  and  notice  of 
dishonor  and  all  other  requirements  to  hold  them  are  hereby  waived 
by  the  indorsers  of  this  note.  [Signed]  C.  Crozier  Gray.  George 
Grav.'  And  defendants  aver  that  before  the  commencement  of  this 
suit  they  paid  said  note  to  said  Commercial  Bank  of  Selma,  Ala., 
without  notice  that  the  plaintiff  held  or  owned  said  note,  and  without 
notice  that  said  Commercial  Bank  of  Selma  did  not  hold  or  own  the 
same,  and  thev  aver  that  when  they  so  paid  said  note  the  same  was 
due." 

The  plaintiff  demurred  to  the  defendants'  tenth  plea,  upon  the  fol- 
lowing grounds:  (1)  It  appears  from  said  plea  that  said  note  is  com- 
mercial paper,  and  governed  by  the  commercial  law;  (2)  that  it  does 
not  appear  from  said  plea  that  the  plaintiff  is  bound  by  payment  to 
the  Commercial  Bank  of  Selma ;  (3)  that  it  does  not  appear  from 
said  plea  that  said  Commercial  Bank  of  Selma  held  or  owned  said  note 
at  the  time  of  payment.  The  demurrer  to  the  tenth  plea  was  over- 
ruled.    To  this  ruling  the  plaintiff  duly  excepted. ^^ 

TvsoN,  J.  The  single  question  presented  for  decision  is  whether 
the  clause,  "and  authorizes  said  bank  to  appropriate  on  this  note, 
whether  due  or  not,  at  any  time,  at  its  option,  without  notice  or  legal 
proceedings,  any  money  which  they,  or  any  one  or  more  of  them,  have 
jointly  or  severally  in  said  bank,  on  deposit  or  otherwise,"  destroys 
the  negotiability  of  the  note.  The  note  sued  upon  was  a  promise  in 
writing  to  pay  $500  to  the  Commercial  Bank  of  Selma  on  the  12th 
day  of  December,  1896,  "Due  Dec.  15,  189G,  at  the  Commercial  Bank 
of  Selma,  Ala.,"  and  indorsed  by  the  bank  to  the  plaintiff. 

The  essentials  of  every  promissory  note  are:  (1)  It  must  be  in 
writing,  and  signed  by  the  maker;  (2)  it  must  contain  a  certain  prom- 
ise to  pay ;  (3)  the  fact  of  payment  must  be  certain ;  (4)  the  amount 
to  be  paid  must  be  certain;  (5)  the  medium  of  payment  must  be 
money,  and  money  only;  (6)  it  must  be  delivered;  and  to  make  it  a 
commercial  paper,  under  our  statute,  it  must  be  payable  at  a  bank  or 
private  banking  house,  or  a  certain  place  of  payment  therein  desig- 
nated.   Code.  §  RG9 ;  1  Daniel,  Neg.  Inst.  §§  27-63. 

The  only  difference  between  the  ordinary  promissory  note  and  the 
commercial  promissory  note  is  the  one  made  by  the  statute.  The  latter 
.must  have  a  designated  place  of  payment  named  in  it.  There  can  be 
no  question  that  the  note  under  consideration,  as  to  a  designated  place 
of  payment,  contains  this  statutory  requisite.  The  contention  is  that 
llie  clause  quoted  above  renders  the  date  of  payment  uncertain  or  the 

»8  The  statement  Is  abridged,  and   the  arguments  are  omitted. 


Ch.  1}  FORM   OF   BILL   AND   OF   NOTE.  93 

amount  uncertain  to  be  paid  at  the  maturity  of  the  note.  If  either 
of  these  contentions  should  prevail,  it  not  only  destroys  the  negotia- 
bility of  the  note  as  commercial  paper,  but  would  destroy  its  character 
as  a  promissory  note,  leaving  it  nothing  more  than  a  simple  contract 
to  pay  money,  and,  of  course,  subject  to  all  defenses  by  the  maker. 

The  only  one  of  these  contentions  that  is  at  all  plausible  is  the 
one  that  the  clause  renders  the  note  uncertain  as  to  the  date  of  pay- 
ment. The  makers,  at  all  events,  obligated  themselves  to  pay  $500. 
That  was  the  amount  named  in  the  paper  they  were  to  pay,  whether 
the  payment  was  made  at  maturity,  or  whether  the  bank  exercised 
its  option  to  appropriate  any  funds  in  its  possession  to  its  payment 
pro  tanto  or  in  full.  The  clause  provided  for  no  reduction  in  the  sum 
to  be  paid,  in  the  event  of  the  appropriation  by  the  bank  before  the 
day  fixed  for  its  maturity.  Had  the  appropriation  been  made  by  the 
bank  the  next  day  after  the  delivery  of  the  note,  and  the  funds  so  ap- 
propriated been  $500,  the  amount  of  the  note,  the  makers  could  not 
have  demanded  a  diminution  on  account  of  interest,  or  otherwise, 
nor  would  the  bank  have  been  liable  to  them,  or  either  of  them,  for 
a  misappropriation  of  funds. 

But  it  is  said  the  bank  had  the  right  to  apply  any  sum  less  than 
the  full  amount  of  the  note,  and,  had  it  exercised  this  right  before 
its  maturity,  would  render  uncertain  the  amount  due  by  the  makers 
at  the  maturity  of  the  note.  We  must  confess  our  inability  to  com- 
prehend how  a  sum  certain  deducted  from  a  sum  certain  could  pro- 
duce an  uncertain  sum.  It  is  needless  to  say  that  it  is  a  matter  of 
simple  arithmetical  subtraction. 

It  is  said,  further,  had  such  an  appropriation  been  made  by  the 
bank  before  its  maturity,  so  as  to  entitle  the  maker  to  a  credit  upon 
the  note  of  a  partial  payment,  the  bank  was  not  bound  to  evidence 
such  payment  by  indorsement  upon  the  note,  and  therefore  the  bank 
could  have  negotiated  the  note  to  the  plaintififs  in  due  course  of  trade, 
for  value,  without  notice  of  such  partial  payment  before  maturity. 
Though  this  would  have  been  a  palpable  fraud,  had  the  bank  done 
so — and  we  may  confess  that  it  had  the  power  to  commit  it — yet  how 
does  this  fact  afifect  the  validity  or  negotiability  of  the  note?  The 
power  was  reposed  by  the  makers,  and,  unless  the  clause  itself  renders 
the  sum  agreed  by  them  in  the  note  to  be  paid  uncertain,  certainly 
no  misconduct  or  fraud  of  the  payee  after  the  delivery  of  the  note, 
unless  expressed  in  writing  upon  it,  so  as  to  carry  notice  to  a  pur- 
chaser of  such  misconduct  or  fraud,  could  affect  his  title,  if  he  paid 
value  for  it  before  its  maturity.  The  purchaser  would  have  the  right 
to  presume,  unless  the  sum  appropriated  by  the  bank — and  it  is  not 
contended  in  this  case  that  the  bank  made  any  appropriation  what- 
ever— ^was  indorsed  somewhere  upon  the  note,  that  none  had  been 
made  by  the  bank,  and  that  the  full  amount  of  the  note  was  owing 
by  the  makers.     And  this  is  bound  to  be  true,  upon  the  plainest  prin- 


94  FORM   AND    INCEPTION.  (Part  1 

ciples  that  "fraud  is  never  presumed."  But  had  the  plaintiff — which 
it  was  not  bound  to  do — made  the  inquiry  of  the  bank,  at  the  time  of 
its  purchase  of  the  note,  if  it  had  appropriated  either  of  the  makers' 
money  to  the  debt  evidenced  by  the  note  in  suit,  the  only  truthful 
information  that  could  have  been  imparted,  under  the  facts  of  this 
case,  would  have  been  that  it  had  not  done  so.  We  will  not  pursue 
the  inquiry  into  this  phase  of  the  case  further,  but  will  now  discuss 
the  other  suggfestion:  Did  the  clause  in  the  note  render  the  note 
uncertain  as  to  its  date  of  payment? 

It  will  be  observed  that  there  was  no  obligation  imposed  upon  the 
makers  to  pay  before  December  15,  1896,  the  date  fixed  for  the  ma- 
turity of  the  note.  No  action  could  have  been  maintained  upon  it 
by  the  payee  or  the  holder  against  them  until  after  the  latter  date 
above  named.  Nor  had  they  the  right  to  mature  the  note  earlier 
tlian  that  date,  nor  to  make  partial  payments  upon  it;  nor  could  they 
have  compelled  the  holder  to  accept  the  full  payment  of  it  before 
maturity.  It  would  have  required  the  consent  of  the  holder  for  them 
to  do  any  one  or  all  of  these  things.  The  clause  imposed  no  obliga- 
tion upon  the  bank  to  apply  money  deposited  by  both  or  either  of  the 
makers  to  the  satisfaction  of  the  note  pro  tanto  or  in  full  while  it  was 
its  property.  It  was  a  mere  option,  which  it  could  have  exercised  or 
not,  at  its  pleasure.  Had  the  makers,  or  either  of  them,  placed  upon 
deposit  in  the  bank,  or  otherwise  in  its  custody  or  possession,  the 
next  day  after  the  execution  of  the  note,  and  permitted  it  to  remain 
until  its  maturity,  treble  the  sum  of  money  which  they  had  stipulated 
in  the  note  to  pay,  yea,  a  hundred  times  this  sum,  the  bank  was  un- 
der no  legal  duty  to  apply  any  portion  of  it.  A  similar  provision  in 
a  note,  and  involving  the  principle  here  announced,  was  passed  upon 
by  the  supreme  court  of  New  York  in  the  case  of  Hodges  v.  Shuler, 
22  N.  Y.  114.'"  *  *  *  Our  opinion  is  that  this  instrument  sued 
upon  was  a  commercial  promissory  note. 

Reversed. 


WISCONSIN  YE.-\RLY  MEETING  OF  FREEWILL  BAPTISTS 

v.  B ABLER. 

(Supreme  Court  of  Wiscousiu,  1902.    115  Wis.  2S9,  91  N.  W.  678.) 

This  is  an  action  in  equity,  brought  by  the  respondent,  a  corpora- 
tion, to  set  aside  the  sale  and  transfer  to  the  appellant  of  a  certain 
promissory  note  and  mortgage,  which  was  the  property  of  the  re- 
spondent, and  to  recover  the  possession  of  the  same.  The  case  was 
tried  by  the  court,  and  the  evidence  showed  that  the  respondent  was 
a  religious  corporation  organized  under  chapter  23  of  the  Private  and 

»»  See  this  ease,  post,  p.  109.    The  court's  statement  of  It  is  omitted. 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE.  95 

Local  Laws  of  Wisconsin  for  1867,  and  had  a  board  of  six  trustees^ 
its  active  officers  being  a  president,  secretary,  and  treasurer ;  that  said 
corporation  never  adopted  any  by-laws  as  to  the  management  of  its 
affairs,  and  had  no  principal  office;  that  from  time  to  time  it  received 
donations  of  money,  which  the  trustees  put  in  the  care  of  the  treas- 
urer, to  be  loaned,  and  the  interest  to  be  used  for  the  support  of 
weak  churches  and  indigent  ministers  of  the  denomination ;  that  one 
J.  F.  Sears  was  treasurer  of  the  corporation  from  the  year  1896  up 
to  June  1,  1901,  when  he  died;  that  on  March  15,  1901,  Sears  loaned 
to  one  Prisk,  from  the  funds  of  the  corporation,  $4,800,  and  took  a 
note  therefor,  payable  to  the  order  of  "J.  F.  Sears,  Treas.,  or  his  suc- 
cessor," payable  five  years  after  date,  with  interest  at  Si/o  per  cent. ; 
that  such  note  contained  a  power  of  attorney,  which  authorized  a  con- 
fession of  judgment  at  any  time  thereafter,  whether  due  or  not;  and 
said  note  was  secured  by  a  real  estate  mortgage  in  which  the  mort- 
gagee is  described  as  "J.  F.  Sears,  Treas.,  or  his  successor  in  offixe 
of  the  Wisconsin  Yearly  Meeting  of  Freewill  Baptists" ;  that  on 
April  22,  1901,  Sears  sold  and  delivered  said  note  and  mortgage  to 
appellant  for  the  sum  of  $4,827.13,  the  appellant  paying  therefor  $3,- 
900  in  checks,  and  turning  over  to  Sears  two  notes  of  $-500  each, 
which  had  before  that  time  been  given  by  Sears  to  the  appellant  for 
borrowed  money.  Sears  paying  back  to  the  appellant  $133.53 ;  that  the 
appellant,  Babler,  could  not  read  English,  but  that  the  note  was  read 
to  him  by  Sears,  and  that  the  mortgage  was  present,  and  delivered 
at  the  same  time,  but  was  not  read  by  Babler ;  that  Sears  converted 
the  money  which  he  received  from  Babler  to  his  own  use,  and  that 
the  corporation  has  received  no  part  of  it ;  that  the  sale  of  the  note 
and  mortgage  to  the  appellant  was  unauthorized,  and  without  the 
knowledge  of  the  trustees ;  that  Babler  neglected  to  make  inquiry  as 
to  whether  Sears  had  authority  to  sell  the  note  in  question. 

Upon  these  facts  the  circuit  court  found  that  the  defendant  was 
negligent  in  purchasing  the  note  and  mortgage  without  inquiry ;  that 
the  note  was  nonnegotiable ;  and  that  the  plaintiff  was  entitled  to  a 
judgment  setting  aside  the  transfer  of  the  note  and  mortgage,  and 
adjudging  that  the  same  be  delivered  by  the  defendant  to  the  plaintiff. 
From  this  judgment  the  defendant  appeals.*" 

WiNSLOW,  J.  (after  stating  the  facts  as  above).  It  is  entirely  clear 
from  the  evidence  in  the  case  and  from  the  findings  of  fact  that  the 
note  and  mortgage  in  question  were  the  property  of  the  plaintiff  cor- 
poration, and  that  no  express  authority  had  ever  been  given  to  Sears 
to  sell  them.  These  being  the  facts,  the  defendant,  Babler,  could  ac- 
quire no  title  to  the  note  by  his  transaction  with  Sears  unless  the 
note  was  negotiable  paper,  or  unless  Sears  had  either  the  apparent 
ownership  or  apparent  authority   to  sell  it,   so  that  the   corporation 

40  The  arguments  of  counsel  and  part  of  the  opinion  are  omitted. 


96  I'OKM  AND  iNCCi'TiON.  (Part  1 

would  be  estopped  to  deny  the  act.  It  is  quite  certain  that  the  note 
was  not  negotiable,  because  by  the  power  of  attorney  which  it  con- 
tained judgment  could  be  entered  upon  it  at  any  time  after  its  date, 
whether  due  or  not.  Thus  the  time  of  payment  depends  upon  the 
whim  or  caprice  of  the  holder,  and  is  absolutely  uncertain.  This  de- 
prives the  note  of  its  negotiability.  Continental  Nat.  Bank  v.  Mc- 
Gcoch,  73  Wis.  332,  41  N.  W.  409;  W.  W.  Kimball  Co.  v.  Mellon, 
80  Wis.  133,  48  N.  W.  1100. 

Chapter  35G,  Laws  1899  (the  negotiable  instrument  law),  provides 
that  the  negotiable  character  of  an  instrument  is  not  affected  by  a 
provision  authorizing  a  confession  of  judgment  if  the  instrument  is 
not  paid  at  maturity.  Section  1G75 — 5,  subd.  2.  Upon  familiar  prin- 
ciples of  statutory  construction  this  provision  makes  a  note  like  the 
present  nonnegotiable.  Nor  can  it  be  said  that  Sears  had  such  ap- 
parent ownership  or  authority  to  sell  the  note  as  would  estop  the 
plaintiff  corporation  from  denying  his  act.  The  note,  upon  its  face, 
shows  that  it  was  held  by  Sears  in  a  representative  capacity  mere- 
Jy.     *     *     * 

Judgment  affirmed.** 


THORP  V.  MINDEMAN  et  al. 

<Supreme  Court  of  Wisc-onsiu,  1904.  123  Wis.  149,  101  N.  W.  417.  68  L.  R.  A. 
146,  107  Am.  St.  Rep.  1003.) 

This  is  an  action  to  foreclose  a  note  and  mortgage  given  by  tlie 
defendants  Mindeman  and  wife  to  one  Henry  Herman,  the  defense 
being  an  entire  want  of  consideration.  The  note  was  a  promissory 
note  for  $6,500,  dated  December  11,  1900,  payable  three  years  after 
date,  with  interest  at  5  per  cent,  per  annum,  semiannually,  and  con- 
tained the  following  provisions  inserted  before  the  signature:  "The 
payment  of  this  note  is  secured  by  a  mortgage  of  even  date  herewith 
on  real  estate.  If  default  shall  be  made  in  the  payment  of  interest,  or 
in  case  of  failure  to  comply  with  any  of  the  conditions  or  agreements 
of  the  mortgage  collateral  hereto,  then  the  whole  amount  of  the  prin- 
cipal shall,  at  the  option  of  the  mortgagee,  or  his  representatives  or 
as^^igns,  (notice  of  such  option  being  hereby  expressly  waived),  be- 
come due  and  payable  without  any  notice  whatever." 

The  mortgage  accompanying  the  note  contained  the  following  pro- 
visions: "Provided,  always,  and  these  presents  are  upon  this  express 
condition,  that  if  the  said  parties  of  the  first  part,  their  heirs,  execu- 
tors and  administrators,  shall  pay  or  cause  to  be  paid  to  the  said 
party  of  the  second  part,  his  heirs,  executors,  administrators  or  as- 
signs, the  just  and  full  sum  of  sixty-five  hundred  ($6,500)  dollars 
three  years  after  date  with  interest  at  5  per  cent,  per  annum,  interest 

«i  See  Commercial  Bank  v.  Brewiug  Co.,  16  App.  D.  C.  186  (1900), 


Ch.  1)  FORM  OF  BILL  AND   OF  NOTB.  97 

payable  semiannually  according  to  the  conditions  of  one  promissory 
note  and  coupons  bearing  even  date  herewith,  executed  by  the  said 
George  Mindeman,  one  of  the  parties  of  the  first  part,  to  the  said 
party  of  the  second  part,  and  shall  moreover  pay  annually  to  the 
proper  officers  all  taxes  which  shall  be  assessed  on  the  said  premises 
and  shall  deliver  or  exhibit  receipts  therefor  to  said  party  of  the  sec- 
ond part,  his  heirs,  executors,  administrators  or  assigns,  on  or  before 
the  first  day  of  May  next  after  such  taxes  shall  have  become  due  and 
payable,  and  shall  insure  and  keep  insured  the  buildings  thereon  or 
to  be  hereafter  erected  against  loss  or  damage  by  fire  in  the  sum  of 
eight  thousand  dollars  or  over,  in  insurance  companies  to  be  approved 
by  the  said  party  of  the  second  part,  his  heirs,  executors,  administra- 
tors or  assigns,  such  insurance  to  be  payable  in  case  of  loss  to  the 
said  party  of  the  second  part,  his  heirs,  executors,  administrators  or 
assigns,  as  his  mortgage  interest  may  appear,  and  the  policy  or  poli- 
cies of  insurance  to  be  held  by  him,  and  in  default  thereof  it  shall 
be  lawful  for  the  said  party  of  the  second  part,  his  heirs,  executors, 
administrators  or  assigns,  to  effect  such  insurance,  and  the  premiums 
and  other  legal  expenses  and  charges  paid  for  affecting  the  same, 
together  with  interest  thereon  at  the  rate  of  10  per  cent,  per  annum, 
shall  be  a  lien  upon  the  said  mortgaged  premises  added  to  the  amount 
of  the  said  note,  and  secured  by  these  presents  until  the  payment  of 
said  note,  then  these  presents  shall  be  null  and  void.  But  in  case 
of  the  non-payment  of  any  sum  of  money  (either  principal,  interest 
or  taxes)  at  the  time  when  the  same  shall  become  due,  or  of  failure  to 
insure  said  building  agreeably  to  the  conditions  of  these  presents,  or 
in  case  of  failure  to  deliver  or  exhibit  such  receipt  as  above  provided, 
or  in  case  of  failure  on  the  part  of  said  parties  of  the  first  part  to 
keep  or  perform  any  other  agreement,  stipulation  or  condition  herein 
contained,  then  in  each  case  or  all  such  cases,  the  whole  amount  of 
the  said  principal  sum  shall,  at  the  option  of  the  said  party  of  the 
second  part,  his  heirs,  executors,  administrators  or  assigns,  which 
may  be  exercised  at  any  time  after  any  default,  without  any  notice 
whatever  to  the  mortgagors,  or  either  of  them,  their  heirs,  executors, 
administrators,  or  assigns,  service  or  giving  such  notice  in  any  man- 
ner being  hereby  expressly  waived,  be  deemed  to  have  become  due,  and 
the  same  with  interest  thereon  at  the  rate  aforesaid  shall  thereupon  be 
collectible  in  a  suit  at  law  or  by  foreclosure  of  this  mortgage,  in  the 
same  manner  as  if  the  whole  of  said  principal  sum  had  been  made 
payable  at  the  time  when  any  such  failure  shall  occur  as  aforesaid." 

It  appeared  from  the  testimony  of  the  defendant  Mindeman,  which 
was  taken  under  objection,  that  the  note  and  mortgage  was  given  to 
cover  advances  to  be  made  to  him  by  Herman,  but  that  none  were 
ever  in  fact  made.  September  11,  1902,  Herman  sold  the  note  and 
mortgage  to  the  plaintiff,  who  was  an  innocent  purchaser  thereof, 
and  made  the  following  indorsement  upon  the  note: 
Sm.&  M.B.&  N.— 7 


98  FORM   AND   INCEPTION.  (Part  1 

"For  value  received,  I  hereby  sell,  transfer  and  assign  the  within 
note  and  the  interest  coupons  thereto  attached  and  numbered  four 
to  six  inclusive,  (previous  interest  coupons  having  been  paid  and  sur- 
rendered), to  Josephine  Thorp,  without  recourse." 

Findings  and  judgment  of  foreclosure  were  made  and  signed,  and 
the  Mindemans  appeal  from  the  judgment  as  well  as  from  a  subse- 
quent order  appointing  a  receiver.*^ 

WiNSLOw,  J.  (after  stating  the  facts  as  above).  The  important 
question  in  this  case  is  whether  the  note  in  suit  is  negotiable.  The 
appellants  argue  that  the  note  and  mortgage  must  be  construed  to- 
gether as  one  contract ;  that,  so  construed,  the  note  requires  the  per- 
formance of  other  acts  besides  the  payment  of  money,  and  is  ren- 
dered uncertain  both  as  to  amount  and  time  of  payment,  and  hence  is 
nonnegotiable.  The  general  rule  that  agreements  contemporaneous- 
ly executed  and  pertaining  to  the  same  subject-matter  are  to  be  con- 
strued together  is  so  familiar  and  so  frequently  acted  upon  that  it 
needs  only  to  be  stated.  The  question  how  far,  if  at  all,  this  rule  im- 
ports into  a  promissory  note  the  collateral  agreements  contained  in 
an  accompanying  mortgage,  is  the  question  to  be  considered  in  this 
case. 

The  collateral  agreements  contained  in  the  mortgage,  which  the  ap- 
pellants claim  are  imported  into  the  note  and  destroy  its  negotiability. 
are:  First,  the  agreement  that,  in  case  of  failure  by  the  mortgagor 
to  insure  the  buildings  in  the  mortgagee's  favor  in  approved  insur- 
ance companies,  the  mortgagee  may  insure  the  same,  and  the  premi- 
ums paid  shall  be  a  lien  on  the  premises  "added  to"  the  amount  of 
the  note;  and,  second,  the  agreement  that  in  case  of  failure  to  so 
insure,  or  to  pay  interest  or  taxes  when  due,  or  to  deliver  or  exhibit 
tax  receipts  showing  the  payment  of  the  taxes,  then  the  whole  prin- 
cipal shall  become  due  at  the  mortj^agee's  option,  and  without  notice. 
It  will  be  observed  that  the  only  one  of  these  agreements  which  the 
note  contains  in  term?  is  the  agreement  that  the  principal  shall  become 
due  without  notice,  at  the  option  of  the  mortgagee,  upon  failure  to 
pay  interest  or  comply  with  any  of  the  other  conditions  of  the  mort- 
gage ;  but  the  argument  is,  in  effect,  that  all  of  the  collateral  agree- 
ments in  the  mortgage  have  become  a  part  of  the  note  by  virtue  of 
the  legal  principle  just  stated.  This  is  a  decidedly  revolutionary  prop- 
osition. If  it  be  true,  both  the  business  world  and  the  courts  have 
been  sadly  in  error  for  many  years.  This  court  held  at  an  early  day 
that  a  note  negotiable  on  its  face  retained  its  negotiable  character 
notwithstanding  it  was  secured  by  a  mortgage  upon  real  estate,  and, 
when  transferred  before  due,  carried  the  mortgage  with  it  relieved 
of  all  equities  (Croft  v.  Bunster,  9  Wis.  503) ;  and  that  the  words 
"secured  by  real  estate  mortgage"  upon  the  face  of  the  note  were  not 
sufficient  to  charge  the  assignee  with  notice  of  any  defense,  nor  of 

«t  Part  of  the  opinion  is  omitted. 


Ch.  1)  FORM   OF  BILL  AND   OF   NOTE.  99 

the  terms  of  mortgage  (Kelley  v.  Whitney,  45  Wis.  110,  30  Am. 
Rep.  697;  Boyle  v.  Lybrand,  113  Wis.  79,  88  N.  W.  904).  If  all 
the  agreements  contained  in  every  mortgage  are,  as  matter  of  law, 
imported  into  the  note,  these  propositions  could  not  be  true,  for  the 
general  rule  (except  as  changed  by  statute)  is  that  negotiable  instru- 
ments cannot  be  bound  up  and  fettered  with  collateral  agreements 
for  the  doing  of  other  things  besides  the  payment  of  money,  and  re- 
tain their  negotiable  character. 

Upon  the  principle  contended  for,  the  most  simple  real  estate  mort- 
gage would  deprive  the  note  which  it  secures  of  its  negotiable  char- 
acter, because  it  would  import  into  the  note  one  or  more  collateral 
agreements  which  are  not  for  the  payment  of  money.  Fortunately 
it  is  not  necessary  to  give  so  violent  a  shock  to  the  well-understood 
principles  of  law  governing  the  negotiability  of  notes  and  mortgages. 
The  appellants'  contention  really  results  from  a  confusion  of  ideas. 
They  lay  down  the  well-understood  proposition  that  contemporane- 
ous instruments  relating  to  the  same  subject-matter  are  to  be  con- 
strued together,  and  conclude  that  it  follows  that  a  note  and  mort- 
gage, though  separately  executed,  are  one  instrument,  and  that  the 
note  is  that  instrument.  The  rule  that  instruments  are  to  be  con- 
strued together  does  not  lead  to  this  result.  Construing  together  sim- 
ply means  that,  if  there  be  any  provisions  in  one  instrument  limiting, 
explaining,  or  otherwise  affecting  the  provisions  of  another,  they  will 
be  given  effect  as  between  the  parties  themselves  and  all  persons  charg- 
ed with  notice,  so  that  the  intent  of  the  parties  may  be  carried  out, 
and  that  the  whole  agreement  actually  made  may  be  effectuated.  This 
does  not  mean  that  the  provisions  of  one  instrument  are  imported 
bodily  into  another,  contrary  to  the  intent  of  the  parties.  They  may 
be  intended  to  be  separate  instruments,  and  to  provide  for  entirely 
different  things,  as  in  the  very  case  before  us.  The  note  is  given  as 
evidence  of  the  debt  and  to  fix  the  terms  and  time  of  payment.  It  is 
usually  complete  in  itself — a  single,  absolute  obligation.  The  purpose 
of  the  mortgage  is  simply  to  pledge  certain  property  as  security  for 
the  payment  of  the  note.  The  agreements  which  it  contains  ordi- 
narily have  no  bearing  on  the  absolute  engagements  of  the  note,  but 
simply  relate  to  the  preservation  of  the  security  given  by  its  terms; 
such  as  the  payment  of  taxes,  the  insurance  of  houses,  and  the  like. 

While  the  two  instruments  will  be  construed  together  whenever  the 
question  as  to  the  nature  of  the  actual  transaction  becomes  material, 
this  does  not  mean  that  the  mortgage  becomes  incorporated  into  the 
note,  nor  that  the  collateral  agreements  to  pay  the  taxes,  or  to  insure 
the  property,  or  that  the  mortgagee  might  insure  in  case  of  default  by 
the  mortgagor  and  have  an  additional  lien  therefor,  become  parts  of 
the  note.  These  agreements  pertain  to  another  subject,  namely,  the 
preservation  intact  of  the  mortgaged  property.  The  promise  to  pay 
is  one  distinct  agreement,  and,  if  couched  in  proper  terms,  is  nego- 


100  FORM   AND    INCEPTION.  (Part  1 

liable.  The  pledge  of  real  estate  to  secure  that  promise  is  another 
distinct  agreement,  which  ordinarily  is  not  intended  to  affect  in  the 
least  the  promise  to  pay,  but  only  to  give  a  remedy  for  failure  to  carry 
out  the  promise  to  pay.  The  holder  of  the  note  may  discard  the  mort- 
£jage  entirely,  and  sue  and  recover  on  his  note;  and  the  fact  that  a 
mortgage  had  been  given  with  the  note,  containing  all  manner  of 
agreements  relating  simply  to  the  preservation  of  the  security,  would 
cut  no  figure.  A  pleading  alleging  such  facts  would  be  stricken  out 
as  frivolous  or  irrelevant. 

This  idea  is  well  expressed  in  the  case  of  Garnett  v.  Myers,  65  Neb. 
280,  94  N.  W.  803,  where  it  is  said:  "If  the  terms  and  conditions  of 
the  mortgage  are  limited  to  the  proper  province  of  the  mortgage — 
that  is,  to  provide  security  for  the  indebtedness — its  provisions  relat- 
ing solely  to  the  security  will  not  affect  the  negotiability  of  the  note. 
If  the  holder  of  the  note  is  compelled  to  pay  the  taxes  or  insurance 
on  the  mortgaged  property  to  protect  the  security,  and  is  afterwards 
allowed  to  recover  the  amount  so  paid  in  addition  to  the  principal 
indebtedness,  this  does  not  affect  the  amount  of  the  indebtedness  it- 
self." 

It  may  be  added  to  this  that  provisions  to  that  effect  in  the  mort- 
gage no  not  affect  at  all  the  absolute  character  of  the  promise  to  pay 
contained  in  the  note,  and  hence  do  not  affect  its  negotiability.  A  very 
interesting  and  instructive  discussion  of  this  question  will  be  found 
in  the  opinion  in  the  case  of  Frost  v.  Fisher,  13  Colo.  App.  322,  58 
Pac.  872,  where  the  same  conclusion  is  reached. 

The  propositions  so  far  laid  down  seem  incontrovertible  if  the  prin- 
ciple is  to  be  maintained  that  a  note  negotiable  in  form  remains  ne- 
gotiable notwithstanding  it  is  secured  by  an  ordinary  real-estate  mort- 
gage. As  might  be  expected,  we  are  referred  to  no  authorities  which 
really  take  issue  with  that  principle,  or  squarely  hold  that  the  agree- 
ments of  every  mortgage  are  imported  into  the  accompanying  note. 
The  nearest  approach  to  such  a  holding,  perhaps,  is  the  case  of  Noell 
v.  Gaines,  68  Mo.  649,  where  a  provision  in  a  deed  of  trust  as  to  the 
time  of  payment  of  the  debt  was  held  to  control  the  terms  of  the  note 
in  the  hands  of  a  purchaser  with  notice.  A  very  vigorous  and  per- 
suasive dissenting  opinion  was  filed  in  this  case,  which  forms  instruc- 
tive reading  on  this  very  question ;  but,  in  any  event,  the  case  does  not 
reach  the  proposition  that  agreements  in  a  mortgage,  simply  relating 
to  the  preservation  of  the  security,  are  ever  to  be  considered  as  im- 
ported into  the  note.  Starting  from  the  fundamental  proposition  that 
the  ordinary  negotiable  note,  accompanied  by  the  ordinary  real-estate 
mortgage  with  the  ordinary  covenants  to  pay  taxes,  etc.,  form  two 
separate  contracts,  both  being  a  part  of  the  same  transaction,  but 
each  relating  to  its  own  subject-matter  and  not  interfering  with  the 
other,  just  as  a  building  contract  and  a  bond  to  secure  its  perform- 
ance are  separate  and  distinct,  let  us  consider  in  what  respect,  if  any, 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE.  101 

the  note  and  mortgage  in  this  case  differ  from  the  ordinary  note  and 
mortgage. 

As  will  be  seen  by  reference  to  the  papers  themselves,  the  mort- 
gage contains  conditions  requiring  the  payment  of  taxes  on  the  prem- 
ises by  the  mortgagor;  the  exhibition  of  the  receipts  therefor  to  the 
mortgagee ;  the  maintenance  of  insurance  on  the  buildings  in  approv- 
ed companies,  with  the  right  to  the  mortgagee  to  insure  in  case  of 
failure  of  the  mortgagor,  the  expense  to  be  a  lien  on  the  premises 
"added  to  the  amount"  of  the  note ;  also  a  provision  that  in  case  of 
failure  to  pay  interest,  taxes,  or  insurance,  or  to  exhibit  the  tax  re- 
ceipts, the  principal  sum  shall,  at  the  option  of  the  mortgagee,  become 
due  without  notice.  Turning  to  the  note,  we  find  that  it  provides  that, 
if  default  is  made  in  payment  of  interest,  or  in  case  of  failure  to  com- 
ply with  any  of  the  conditions  or  agreements  of  the  mortgage,  then 
the  principal  shall  become  due,  at  the  option  of  the  mortgagee,  with- 
out notice.  It  will  be  noticed  at  once  that  none  of  the  collateral  agree- 
ments of  the  mortgage  are  in  terms  imported  into  the  note  except 
the  agreement  that  the  principal  shall  become  due,  at  the  mortgagee's 
option,  in  case  of  failure  to  perform  any  of  the  agreements  of  the 
mortgage.  It  will  be  noticed  also  that  the  other  collateral  agreements 
contained  in  the  mortgage  are  simply  agreements  providing  for  the 
due  preservation  of  the  mortgage  security,  and  not  affecting  in  any 
way  either  the  time  of  payment  or  the  amount  of  the  note.  These 
agreements  are  the  agreement  to  pay  the  taxes  and  exhibit  the  re- 
ceipts, the  agreement  to  effect  and  maintain  insurance  on  the  buildings 
for  the  mortgagee's  benefit,  and  the  agreement  that  the  mortgagee 
may  insure  in  case  of  default,  and  have  a  lien  on  the  premises  "added" 
to  the  note  for  the  premiums  paid.  There  was,  indeed,  a  claim  made 
that  the  agreement  that  the  premiums  paid  should  constitute  a  lien 
added  to  the  note  meant  that  the  note  was  to  be  increased  by  the 
amount  paid,  so  that  the  amount  of  the  note  was  thereby  rendered  un- 
certain ;  but  we  think  it  plain  that  the  clause  simply  provides  for  the 
acquiring  of  a  lien  upon  the  premises  in  addition  to  the  lien  of  the 
note.  This  meaning  seems  so  obvious  to  us  that  we  will  spend  no 
more  time  upon  the  suggestion. 

These  last-named  collateral  agreements,  then,  being  simply  proper 
agreements  for  the  preservation  of  the  security,  and  not  intended  nor 
fitted  to  qualify  or  affect  in  any  way  the  absolute  promises  of  the  note, 
do  not,  upon  the  principles  hereinbefore  laid  down,  enter  into  or 
change  the  note  in  the  least,  nor  aft'ect  its  negotiability.*^  Such  being 
the  case,  we  have  only  to  consider  the  question  whether  the  agree- 
ment that  the  whole  principal  of  the  note  shall  be  due  at  the  mort- 
gagee's option  in  case  of  a  failure  to  pay  interest  or  perform  any  of 
the  conditions  of  the  mortgage  renders  the  note  nonnegotiable.  Upon 
this  question  appellants  place  reliance  upon  the  cases  of  Continental 

*3  Accord:    Farmers"  Bank  v.  McCall  (Okl.)  lOG  Pac.  866  (1910). 


102  FORM   AND   INCEPTION.  (Part  1 

Nat.  Bank  v.  McGeoch,  73  Wis.  332,  41  N.  W.  409,  and  W.  W.  Kim- 
ball Co.  V.  Mellon,  80  Wis.  133,  48  N.  W.  1100. 

In  the  first  of  these  cases,  an  agreement  inserted  in  the  note,  pro- 
viding that  the  payee  might  sell  collateral  securities  at  any  time  if 
they  declined  in  value,  and  apply  the  proceeds,  less  expense  of  sale, 
on  the  debt,  and  the  balance  should  forthwith  become  due,  was  held 
to  make  the  note  uncertain  as  to  amount  and  time  of  payment,  and 
hence  nonnegotinble.  In  the  Kimball  Case,  an  agreement  that,  in 
case  of  failure  to  pay  any  installment,  or  of  any  attempt  to  dispose  of 
or  remove  the  chattel  for  which  the  note  was  given,  the  holder  might 
declare  the  whole  amount  due,  and  collect  same  by  suit  or  sale  of  the 
property,  and,  if  there  was  a  deficiency  after  sale,  it  should  be  pay- 
able on  demand,  was  held  to  make  both  amount  and  time  of  payment 
uncertain,  and  hence  make  the  note  nonnegotiable.  It  must  be  ad- 
mitted that  both  of  these  cases  have  a  strong  tendency  to  support  the 
position  of  the  appellants  upon  the  proposition  that  the  time  of  pay- 
ment is  rendered  uncertain  by  the  agreement  before  us.  Especially 
is  this  true  of  the  Kimball  Case.  In  that  case  the  uncertainty  as  to 
time  resulted  from  the  fact  that,  in  case  the  giver  of  the  note  failed 
to  pay  an  installment,  or  attempted  to  dispose  of  or  remove  the  prop- 
erty sold,  the  holder  might  at  once  collect  the  whole.  In  the  present 
case  the  agreement  is  that  in  case  of  failure  to  pay  interest  or  keep 
taxes  and  insurance  paid  the  holder  may  at  once  collect  the  whole. 
In  both  cases  the  contingency  depends  upon  the  acts  or  omissions  of 
the  maker  of  the  note. 

We  should  find  it  quite  hard,  if  not  impossible,  to  differentiate  the 
two  cases  were  it  not  for  the  provisions  of  the  negotiable  instruments 
law  (chapter  356,  p.  681,  Laws  1899),  which  was  passed  since  the  de- 
cisions cited,  and  prior  to  the  giving  of  the  note  in  question.  This 
law  gives  the  general  requirements  of  negotiable  paper  in  section 
1675 — 1.  p.  682,  among  which  are  the  following:  "(1)  It  must  be 
in  writing  signed  by  the  maker  or  drawer.  (2)  Must  contain  an  un- 
conditional promise  or  order  to  pay  a  sum  certain  in  money.  (3) 
Must  be  payable  on  demand  or  at  a  fixed  or  determinable  future  time." 
The  law  then  provides,  in  section  1675 — 2,  p.  G84,  that  the  sum  is 
certain  within  the  meaning  of  the  law  though  it  is  to  be  paid  "(3)  by 
stated  installments,  with  a  provision  that  upon  default  in  payment  of 
any  installment  or  of  interest  the  whole  shall  become  due."  The  law 
further  provides,  in  section  1675 — 4,  p.  686,  that  an  instrument  is 
payable  at  a  determinable  future  time,  within  the  meaning  of  the  law, 
which  is  payable  "(4)  at  a  fixed  period  after  date  or  sight,  though 
payable  before  then  on  a  contingency."  These  two  provisions  seem 
to  cover  this  whole  case,  and  leave  really  nothing  to  discuss.  This 
note  is  payable  at  a  fixed  period  after  date,  but  may  be  made  payable 
before  that  time  upon  the  happening  of  certain  contingencies  which 
are  within  control  of  the  maker.    The  latter  clause  quoted  would  seem 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE.  103 

to  have  been  added  to  meet  just  such  cases  as  the  present.  Such 
agreements  as  we  have  here  are  of  very  frequent  occurrence,  and  it 
was  evidently  the  purpose  to  provide  for  them. 

The  case  of  Wisconsin  Yearly  Meeting  of  Freewill  Baptists  v.  Bab- 
ler,  115  Wis.  289,  91  N.  W.  678,  is  also  somewhat  relied  on  by  ap- 
pellants, but  it  evidently  has  no  bearing  on  the  case.  In  that  case  it 
was  held  that  a  clause  in  a  note  authorizing  the  confession  of  judg- 
ment at  any  time,  whether  due  or  not,  rendered  the  note  nonnegotia- 
ble,  because  the  time  of  payment  depended  entirely  on  the  whim  or 
caprice  of  the  maker.  As  an  additional  reason  for  the  ruling,  the 
fact  that  the  negotiable  instruments  law  allows  the  insertion  of  a 
clause  authorizing  a  confession  of  judgment  if  not  paid  at  maturity 
was  also  referred  to. 

While  we  have  considered  this  question  as  absolutely  settled  by  the 
negotiable  instruments  law,  it  must  not  be  supposed  that  we  have  fail- 
ed to  examine  and  carefully  consider  the  numerous  cases  cited  by  the 
appellants,  mostly  from  Western  courts,  as  having  some  bearing  upon 
this  question.  We  have  been  unable  to  find  that  any  of  these  cases 
really  conflict  with  the  general  proposition  laid  down  in  the  begin- 
ning, namely,  the  proposition  that  the  ordinary  provisions  of  a  real 
estate  mortgage  requiring  payment  of  taxes  and  other  acts  by  the 
mortgagor  for  the  preservation  of  the  mortgaged  property  are  not  im- 
ported into  the  accompanying  note  simply  because  the  papers  are  sim- 
ultaneously executed  as  a  part  of  the  same  transaction.  A  number  of 
them  are  cases  decided  by  the  Kansas  Court  of  Appeals,  and  are,  in 
substance,  to  the  effect  that,  where  a  bond  or  note  in  terms  refers 
to  the  mortgage,  and  declares  it  to  be  "a  part  of  this  contract,"  and 
the  mortgage  contains  covenants  to  pay  taxes,  insure,  keep  buildings 
in  repair,  and  the  like,  and  that  the  entire  sum  shall  become  due  in 
case  of  default  in  any  of  such  agreements,  this  renders  the  bond  or 
note  nonnegotiable.  Such  are  the  cases  of  Lockrow  v.  Cline,  4  Kan. 
App.  716,  46  Pac.  720;  Chapman  v.  Steiner,  5  Kan.  App.  326,  48 
Pac.  607,  and  Wistrand  v.  Parker,  7  Kan.  App.  562,  52  Pac.  59.  It 
goes  without  saying  that  such  cases  have  no  bearing  on  the  present 
case,  because  here  there  is  no  clause  in  the  note  making  the  mortgage 
a  part  thereof,  or  adopting  its  provisions,  except  the  provision  author- 
izing the  whole  amount  to  be  declared  due  upon  certain  contingencies. 
Another  line  of  cases,  from  Nebraska,  hold  that,  where  a  mortgage 
provides  that  the  mortgagor  shall  pay  the  taxes  levied  on  the  mort- 
gagee for  or  on  account  of  the  mortgage,  this  agreement  destroys 
the  negotiability  of  the  note,  because  it  renders  the  amount  uncertain. 
Garnett  v.  Meyers,  65  Neb.  280,  91  N.  W.  400,  94  N.  W.  803 ;  Conster- 
dine  v.  Moore,  65  Neb.  291,  91  N.  W.  399,  96  N.  W.  1021,  101  Am.  St. 
Rep.  620;  Allen  v.  Dunn,  71  Neb.  831,  99  N.  W.  680.  Such  seems  also 
to  be  the  effect  of  the  case  of  Brooke  v.  Struthers,  110  Mich.  562,  68  N. 
W.  272,  35  L.  R.  A.  536.    Without  stopping  to  consider  whether  these 


1U4  FOUM   AND    INCEl'TION.  (Part   1 

decisions  should  be  approved  or  not,  it  is  enough  to  say  that  they 
are  not  at  all  in  conflict  with  the  present  decision.  The  agreement  to 
pay  taxes  was  to  pay  taxes  which  might  be  levied  on  the  mortgagee, 
not  the  taxes  on  the  mortgaged  property;  hence  the  agreement  had 
no  connection  with  the  preservation  of  the  security,  and  was  con- 
strued by  the  courts  as  an  agreement  to  pay  an  indehnite  sum  as  a 
part  of  the  note. 

In  the  cases  of  Donaldson  v.  Grant,  15  Utah,  231,  49  Pac.  779,  and 
Gilbert  v.  Nelson,  5  Kan.  App.  528,  48  Pac.  207,  notes  containing  stip- 
ulations very  similar  to  those  found  in  the  present  case  are  pro- 
nounced nonncgotiable  upon  what  seems  to  us  very  unsatisfactory 
reasoning,  which  we  feel  no  inclination  to  follow,  especially  in  view 
of  the  positive  provisions  of  our  negotiable  instruments  law  before 
cited. 

The  cases  of  Dilley  v.  Van  Wie,  6  Wis.  209,  and  Elmore  v.  Hoff- 
man, Id.  68,  are  also  cited  as  sustaining  appellants'  contention,  but 
it  is  evident  that  they  do  not.  In  the  Dilley  Case  the  note  contained 
an  express  clause  subjecting  it  to  the  provisions  of  another  agree- 
ment, made  on  the  same  day,  by  which  it  appeared  that  the  payment 
was  subject  to  certain  equities  between  the  parties.  The  clause  was 
rightly  held  to  deprive  the  paper  of  its  negotiable  character.  In  the 
Elmore  Case  it  was  held  that  a  collateral  agreement  made  between 
the  parties  contemporaneously  with  a  note,  by  which  the  payee  agreed 
to  give  day  of  payment  on  the  note  till  the  happening  of  a  certain 
named  contingency,  was  admissible  in  evidence  to  defeat  an  action  on 
the  note  in  the  hands  of  one  who  purchased  the  note  with  notice  of 
the  contemporaneous  agreement.  We  hold,  therefore,  that  under  the 
present  negotiable  instruments  law  the  note  in  the  present  case  is 
negotiable,  and  in  so  holding  it  is  evident  that  the  cases  of  Continental 
Nat.  Bank  v.  McGeoch,  73  Wis.  332,  41  N.  W.  409,  and  W.  W.  Kim- 
ball Co.  v.  Mellon,  80  Wis.  133,  48  N.  W.  1100,  are  overruled  so  far, 
at  least,  as  they  hold  that  such  agreements  create  an  uncertainty  in 
the  time  of  payment. 

The  next  contention  made  by  the  appellants  is  that  the  written  trans- 
fer of  the  note  was  not  a  commercial  indorsement,  but  a  mere  assign- 
ment, and  hence  that  the  transferee  took  it  subject  to  all  equities. 
We  think  this  contention  cannot  be  sustained.  The  addition  of  the 
words  "without  recourse"  does  not  impair  the  negotiable  character  of 
the  instrument.  Laws  1899,  p.  701,  c.  356,  §  1676—8.  While  there  is 
doubtless  some  authority  tending  to  support  appellants'  claim,  we 
think  that  there  can  be  no  doubt  that  the  transfer  in  the  present  case 
must  be  held  to  be  a  commercial  indorsement  under  the  decisions  of 
this  court  in  the  cases  of  Crosby  v.  Roub,  16  Wis.  616,  84  Am.  Dec. 
720;  Bange  v.  Flint,  25  Wis.  544;  Murphy  v.  Dunning,  30  Wis.  296. 
In  all  of  these  cases  a  negotiable  note  was  transferred  by  attaching 
it  to  a  negotiable  bond  which  recited  that  the  note  was  thereby  "as- 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE.  105 

signed  and  transferred"  to  the  holder  of  the  bond  as  security  for  the 
payment  of  the  bond,  there  being  no  indorsement  on  the  note  itself ; 
and  this  was  held  an  indorsement  within  the  law  merchant.  Here 
there  is  an  agreement  on  the  back  of  the  note  itself,  signed  by  the 
payee,  by  which  he  sells,  assigns,  and  transfers  the  note  to  the  plain- 
tiff. The  intent  to  pass  title  and  make  the  note  transferable  by  in- 
dorsement and  delivery  afterwards  seems  very  plain.  Such,  also, 
seems  to  be  the  current  of  authority.  1  Daniel,  Neg.  Inst.  (5th  Ed.) 
§  eSSc."*  *  *  * 
Judgment  affirmed. 


COOKE  V.  HORN. 

(Court  of   Queen's   Bench,    1873.     29  L.   T.   N.    S.   369.) 

This  was  an  action  upon  a  promissory  note,  tried  before  Honyman, 
J.,  at  the  York  Summer  Assizes.  A  verdict  of  £175.  5s.  lOd.  was 
found  for  the  plaintiff,  leave  being  reserved  to  the  defendant  to  move 
to  enter  a  verdict  for  him,  on  the  ground  that  the  note  was  not  good. 

The  form  of  the  note  was  as  follows: 
"£170.  35th  April,  1872. 

"We  promise  to  pay  to  Messrs.  M.  H.  Cooke  and  Co.  il70.,  with 
interest  thereon  at  the  rate  of  £5.  per  cent,  per  annum,  as  follows: 
The  first  payment,  to  wit,  i40.  or  more,  to  be  made  on  the  1st  Feb., 
1873,  and  £5.  on  the  first  day  of  each  month  following  until  this  note 
and  interest  shall  be  fully  satisfied.  And  in  case  default  shall  be 
made  in  payment  of  any  of  the  said  instalments,  the  full  amount  then 
remaining  due  in  respect  of  the  said  note  and  interest  shall  be  forth- 
with payable." 

The  note  was  signed  by  the  defendant  and  one  John  Horn,  since 
deceased. 

J.  W.  Mellor,  on  behalf  of  the  defendant,  moved  in  pursuance  of 
the  leave  reserved.  This  instrument  cannot  be  considered  a  promis- 
sory note,  for  it  is  not  made  for  the  payment  of  a  certain  sum  at  a 
particular  day.  If  the  defendant  paid  more  than  £40.  on  the  1st  Feb., 
which  would  be  in  accordance  with  the  terms  of  his  promise,  there 
could  be  no  certainty  as  to  his  liability  for  the  remaining  instalments 
concerning  either  the  amount  or  the  day.  In  Smith  v.  Nightingale, 
2  Starkie,  375,  the  promise  was  to  pay  on  a  particular  day  a  certain 
sum,  with  interest,  "and  also  all  other  sums  which  may  be  due  to  him." 
Lord  Ellenborough  was  of  opinion  (page  376)  "that  the  instrument 
was  too  indefinite  to  be  considered  as  a  promissory  note ;  it  contained 

4*  Accord:  Baldwin  Co.  v.  Carmichael,  116  Ga.  762,  42  S.  E.  1002  (1902). 
Contra:  Osgood  v.  Artt  (C.  C.)  17  Fed.  575  (18S3).  Compare  Packer  v. 
Roberts,  140  111.  671,  29  N.  E.  068  (1892). 


1U6  FOKM    AND    INCEPTION.  (Part  1 

a  promise  to  pay  interest  for  a  sum  not  specified,  and  not  otherwise 
ascertained  than  by  reference  to  the  defendant's  books,  and  that  since 
the  whole  constituted  one  entire  promise,  it  could  not  be  divided  into 
parts.  He  also  held,  that  since  the  instrument  contained  an  agree- 
ment to  pay  the  money,  it  could  not  be  receivable  in  evidence  as  an 
acknowledgment  without  a  stamp."  Similarly,  this  note  contains  a 
promise  to  pay  interest  for  a  sum  the  amount  of  which,  after  the  1st 
Feb.,  is  not  specified.  Moreover,  the  day  of  final  payment  depends 
upon  the  contingency  of  the  defendant's  first  payment;  and  it  has 
been  held  that  a  promissory  note  cannot  be  so  indefinite,  e.  g.,  to  pay 
so  many  days  after  marriage  (Beardsley  v.  Baldwin.  2  Stra.  1151). 
[Bl.\ckburn,  J.  That  is  only  when  the  event  may  never  happen;  if 
the  period  of  payment  be  inevitable,  as  upon  a  death,  it  need  not  be 
definite.]  Here  there  is  no  statement  of  the  sum  upon  which  inter- 
est is  to  be  paid. 

Bl.\ckburx.  J.  I  do  not  think  there  should  be  any  rule  in  this 
case.  The  objection  to  the  note  is,  that  if  the  first  payment  were 
more  than  £40.,  which  the  note  provides  it  might  be,  the  subsequent 
instalments  and  the  final  time  for  payment  would  be  indefinite.  The 
amount  of  the  note,  however,  is  certain,  and  any  variation  in  the  time 
will  depend  only  upon  the  defendant.  No  case  has  been  cited  which 
is  an  authority  against  this  note ;  and  by  analogy  with  other  objec- 
tions, this  one,  as  it  seems  to  me.  ought  not  to  prevail.  I  do  not  see 
why  a  stipulation  which  enables  the  maker  of  a  note  to  reduce  his 
liability  for  interest,  should  prevent  the  instrument  containing  it  from 
being  a  promissory  note. 

QuAiN  and  Archibald,  JJ.,  concurred. 

Rule  refused. 


LEADER  v.   PLAXTE. 

(Supreme  Judicial  Court  of  M4iine.  1901.     95  Me.  339.  50  Atl.  .^4.  So  Am.  St. 

Ilei).  415.) 

Focr.KR,  J.*"     This  is  an  action  of  assumpsit  by  the  indorsee  against 
the  maker  of  a  written  instrument,  declared  upon  as  a  promissory  note, 
of  the  following  tenor,  namely : 
"$406.  Auburn,  Maine,  August  30th,  1892. 

"Within  one  year  after  date  I  promise  to  pay  to  the  order  of  Rich- 
ard F.  Leader  four  hundred  and  six  dollars  at  with  interest.  Value 
received.  Telesphore  Plante." 

Witness:     "P.  H.   Kelleher." 

Indorsed:    "Richard  F.  Leader." 

4*  Part  of  the  opioion  is  omitted. 


Cll.  1)  FORM   OF   BILL   AND   OF   NOTE.  107 

The  writing  was  indorsed  and  delivered  by  the  payee  to  the  plain- 
tiff January  2,  1893. 

It  is  claimed  in  defense  that  the  instrument  is  not  a  valid  negotiable 
promissory  note,  for  the  reason  that  the  time  of  payment  named  there- 
in is  not  stated  with  sufficient  certainty.  In  other  words,  it  is  contend- 
ed that  "within  twelve  months"  is  too  uncertain  and  indefinite  as  to 
time  of  payment  to  give  the  instrument  the  character  of  a  negotiable 
promissory  note.  It  is  familiar  law  that,  to  constitute  a  negotiable 
promissory  note,  the  time  of  payment  must  be  stated  with  certainty. 
It  is  also  a  familiar  maxim  that  that  is  certain  which  can  be  made 
certain. 

"A  valid  promissory  note  is  not  necessarily  negotiable.  To  make 
it  such  by  the  law  merchant  it  must  run  to  order  or  bearer,  be  payable 
in  money  for  a  certain  definite  sum,  on  demand,  at  sight,  or  in  a  cer- 
tain time,  or  upon  the  happening  of  an  event  which  must  occur,  and 
payable  absolutely,  and  not  upon  a  contingency."  Roads  v.  Webb,  91 
Me.  410,  40  Atl.  128,  64  Am.  St.  Rep.  246. 

It  is  well  settled  that  a  note  payable  at  the  death  of  the  maker  is 
a  valid  negotiable  promissory  note,  as  death  will  inevitably  occur,  and 
the  time  of  payment  can  thus  be  made  certain.  Martin  v.  Stone,  67 
N.  H.  367,  29  Atl.  845. 

"Within"  a  certain  period,  "on  or  before"  a  day  named,  and  "at  or 
before"  a  certain  day,  are  equivalent  terms,  and  the  rules  of  construc- 
tion apply  to  each  alike.  As  stated  by  Mr.  Justice  Strout  in  Roads  v. 
Webb,  supra,  the  question  whether  a  note  made  payable  "on  or  be- 
fore" a  day  certain  states  the  time  of  payment  with  sufficient  certain- 
ty to  constitute  a  negotiable  note  has  not  been  decided  in  this  state. 

In  Cota  V.  Buck,  7  Mete.  (Mass.)  588,  41  Am.  Dec.  464,  a  note  "to 
be  paid  in  the  course  of  the  season  now  coming"  was  held  to  be  ne- 
gotiable for  the  reason  that  the  "season  now  coming"  must  come  by 
mere  lapse  of  time. 

But  in  Hubbard  v.  Mosely,  11  Gray,  170,  71  Am.  Dec.  698,  the 
court  of  Massachusetts  held  that  a  promissory  note  payable  90  days 
after  date,  containing  a  stipulation  that  the  note  shall  be  given  up  to 
the  maker  as  soon  as  the  amount  of  it  is  received  by  the  payee,  is  not 
negotiable ;  thus  practically  overruling  the  case  of  Cota  v.  Buck. 

The  late  Massachusetts  decisions  upon  this  point  follow  the  doc- 
trine of  Hubbard  v.  Mosely.  Way  v.  Smith,  111  Mass.  523;  Stults 
v.  Silva,  119  Mass.  137. 

Mr.  Justice  Cooley,  in  Mattison  v.  Marks,  31  Mich.  423,  18  Am. 
Rep.  197,  referring  to  Hubbard  v.  Mosely,  remarks :  "It  is  to  be  re- 
gretted, perhaps,  that  the  learned  judge  who  delivered  the  opinion  did 
not  deem  it  important  to  present  more  fully  the  reasons  that  led  him 
to  his  conclusions,  instead  of  contenting  himself  with  a  simple  refer- 
ence to  the  general  doctrine  that  a  promissory  note  must  be  payable 
at  a  time  certain." 


108  FORM   AND   INCEPTION.  (Part  1 

In  Jillson  v.  Hill,  4  Gray  (Mass.)  316,  it  was  held  that  a  note  pay- 
able '"on  demand,  with  interest  within  six  months,"  was  a  promise  to 
pay  within  six  months  in  any  event,  and  sooner  if  demanded. 

We  think  that  the  great  weight  of  authority  and  of  reason  is  op- 
posed to  the  present  Massachusetts  doctrine. 

Mattison  v.  Marks,  supra,  was  a  suit  upon  a  written  instrument 
containing  a  promise  to  pay  a  sum  certain  "on  or  before"  a  day  nam- 
ed. It  was  contended  in  defense  that  it  was  not  a  promise  to  pay 
on  a  day  certain,  and  consequently  was  not  a  negotiable  promissory 
note.  The  court  held  that  the  instrument  was  a  negotiable  promissory 
note.  Mr.  Justice  Cooley,  in  delivering  the  opinion  of  the  court,  says: 
"The  legal  rights  of  the  holder  are  clear  and  certain.  The  note  is 
due  at  a  time  fixed,  and  it  is  not  due  before.  True,  the  maker  may 
pay  sooner,  if  he  shall  choose ;  but  this  option,  if  exercised,  would  be 
a  payment  in  advance  of  the  legal  liability  to  pay,  and  no  more.  Notes 
like  this  are  common  in  commercial  transactions,  and  we  are  not 
aware  that  their  negotiable  quality  is  ever  questioned  in  business  deal- 
ings." 

It  is  held  in  Curtis  v.  Horn,  58  N.  H.  504,  that  a  promissory  note, 
payable  "on  or  before  the  first  day  of  May  next,"  is  negotiable.  The 
court  say  in  the  opinion:  "It  is  now  the  common  law  that,  where 
payment  is  made  to  depend  upon  an  event  that  is  certain  to  come,  and 
uncertain  only  in  regard  to  the  time  when  it  will  take  place,  the  note 
or  bill  is  negotiable."  The  court  say  further:  "The  recent  Massa- 
chusetts cases  cited  by  the  defendant  place  the  conclusions  arrived 
at  upon  common-law  grounds ;  yet  they  fail  to  state  the  reasons  for 
overruling  Cota  v.  Ruck,  and  the  law  as  held  in  other  jurisdictions, 
and  we  are  unable  to  see  any." 

The  doctrine  thus  laid  down  by  the  courts  of  Michigan  and  New 
Hampshire  is  fully  sustained  by  numerous  authorities,  of  which  we 
cite  Bates  v.  Leclair,  49  Vt.  230 ;  Riker  v.  Manufacturing  Co.,  14  R. 
I.  402.  51  Am.  Rep.  413;  Insurance  Co.  v.  Bill,  31  Conn.  534-538; 
Jordan  v.  Tate,  19  Ohio  St.  586;  Dorsey  v.  Wolff,  142  111.  589,  32 
N.  E.  495,  18  L.  R.  A.  428,  34  Am.  St.  Rep.  99 ;  Chicago  Ry.  Equip- 
ment Co.  V.  Merchants'  Bank,  136  U.  S.  268-285,  10  Sup.  Ct.  999,  34 
L.  Ed.  349 ;  Ernst  v.  Steckman,  74  Pa.  13,  15  Am.  Rep.  542. 

Our  conclusion  is  that  the  instrument  here  in  suit  is  a  valid,  nego- 
tiable, promissory  note.     *     ♦     ♦ 

Judgment  for  plaintiflF. 


Ch.  1)  FORM  OF  BILL  AND  OF  NOTE.  109 

(III)  As  TO  Medium  of  Payment 

HODGES  V.  CLINTON. 
(Supreme  Court  of  North  Caroliua,  1792.     1  N.  C.  53.) 

Case.    The  jury  found  the  following  special  verdict: 

"The  jury  sworn,  find  that  the  defendant  did  assume,  find  no  set-oflF, 
find  the  defendant  did  not  take  the  benefit  of  the  act  of  insolvency, 
and  assess  the  plaintiff's  damage  to  £73.  16s.  and  6d.  costs,  subject  to 
the  opinion  of  the  court  whether  the  note  on  which  the  plaintiff's  ac- 
tion is  grounded  is  a  negotiable  note  within  the  statute;  if  it  is,  they 
find  for  plaintiff;  if  not,  for  defendant." 

The  note  was  for  £100.  currency,  payable  in  tobacco. 

Taylor,  for  the  defendant,  argued  that  no  decision  upon  St.  3  &  4 
Anne,  c.  9,  to  which  our  act  of  1762  was  in  analogy,  was  to  be  found, 
that  gave  negotiability  to  notes,  except  they  were  for  the  payment  of 
money  alone.  Besides  the  many  cases  establishing  the  doctrine,  that 
even  notes  payable  in  money  are  not  negotiable  if  they  are  contingent, 
the  case  of  the  East  India  bond  is  in  point  with  the  present.  Moore 
V.  Venlute.  And  if  anything  else  is  promised  besides  the  payment 
of  money,  the  note  is  not  negotiable.  1  Sharp.  629.  The  design  of 
the  act,  which  was  to  give  to  notes  a  circulation  equally  beneficial  to 
commerce  with  bills  of  exchange,  would  be  frustrated  by  a  contrary 
decision. 

Judgment  for  the  defendant. 


HODGES  V.  SHULER. 

(Court  of  Appeals  of  New  York,   1860.     22  N.  T.   114.) 

Appeal  from  the  Supreme  Court.     The  action  was  against  the  de- 
fendants as  indorsers  of  the  following  instrument  or  note: 

"Rutland  &  Burlington  Railroad  Company. 
"No.  253.  $1,000. 

"Boston,  April  1,  1850. 
"In  four  years  from  date,  for  value  received,  the  Rutland  and  Bur- 
lington Railroad  Company  promises  to  pay  in  Boston,  to  Messrs.  W. 
S.  &  D.  W.  Shuler,  or  order,  $1,000,  with  interest  thereon,  payable 
semiannually,  as  per  interest  warrants  hereto  attached,  as  the  same 
shall  become  due ;  or  upon  the  surrender  of  this  note,  together  with 
the  interest  warrants  not  due  to  the  treasurer,  at  any  time  until  six 
months  of  its  maturity,  he  shall  issue  to  the  holder  thereof  ten  shares 
in  the  capital  stock  in  said  company  in  exchange  therefor,  in  which 
case  interest  shall  be  paid  to  the  date  to  which  a  dividend  of  profits 


110  FORM   AND   INCEPTION.  (Part  1 

shall  have  been  previously  declared,  the  holder  not  being  entitled  to 
both  interest  and  accruing  profits  during  the  same  period. 

"T.  Follett,  President.  Sam.  Henshaw,  Treasurer." 

Judgment  for  plaintiff,  and  defendants  except.*® 

Wright,  J.  The  single  question  is,  whether  the  defendants  can  be 
held  as  indorsers.  It  is  insisted  that  they  cannot,  for  the  reasons: 
(1)  That  the  instrument  set  out  in  the  complaint,  is  neither  in  terms 
nor  legal  effect  a  negotiable  promissory  note,  but  a  mere  agreement; 
the  indorsement  in  blank  of  the  defendants,  operating,  if  at  all,  only 
as  a  mere  transfer,  and  not  as  an  engagement  to  fulfill  the  contract 
of  the  railroad  company  in  case  of  its  default;  and  (2)  that  if  it  be  a 
note,  the  notice  of  its  dishonor  was  insufficient  to  charge  the  defend- 
ants as  indorsers. 

Whether  the  blank  indorsement  of  the  defendants  imports  any  bind- 
ing contract,  depends  on  the  law  of  Massachusetts ;  in  which  state  it 
is  to  be  assumed,  from  the  facts  in  the  case,  that  the  original  instru- 
ment and  indorsement  were  made.  But  the  law  of  Massachusetts 
does  not  differ  from  that  of  this  state  or  of  England  in  any  particular 
material  to  the  present  inquiry.  In  Massachusetts  there  has  been  ap- 
parently a  relaxation  of  the  common-law  rule  so  far  as  to  extend  the 
remedy  against  indorsers  to  notes  payable  absolutely  in  a  medium  oth- 
er than  cash ;  but  in  all  other  respects  the  legal  rules  applicable  to 
negotiable  paper,  are  the  same  in  that  state  as  in  our  own. 

The  instrument  on  which  the  action  was  brought  has  all  the  essen- 
tial qualities  of  a  negotiable  promissory  note.  It  is  for  the  uncondi- 
tional payment  of  a  certain  sum  of  money,  at  a  specified  time,  to  the 
payee's  order.  It  is  not  an  ageement  in  the  alternative,  to  pay  in 
money  or  railroad  stock.  It  was  not  optional  with  the  makers  to  pay 
in  money  or  stock,  and  thus  fulfill  their  promise  in  either  of  two  speci- 
fied ways ;  in  such  case,  the  promise  would  have  been  in  the  alterna- 
tive. The  possibility  seems  to  have  been  contemplated  that  the  owner 
of  the  note  might,  before  its  maturity,  surrender  it  in  exchange  for 
stock,  thus  canceling  it  and  its  money  promise;  but  that  promise  was 
nevertheless  absolute  and  unconditional,  and  was  as  lasting  as  the  note 
itself.  In  no  event  could  the  holder  require  money  and  stock.  It 
was  only  upon  a  surrender  of  the  note  that  he  was  to  receive  stock: 
and  the  money  payment  did  not  mature  until  six  months  after  the 
holder's  right  to  exchange  the  note  for  stock  had  expired.  We  are  of 
the  opinion  that  the  instrument  wants  none  of  the  essential  requisites 
of  a  negotiable  promissory  note.  It  was  an  absolute  and  uncondition- 
al engagement  to  pay  money  on  a  day  fixed ;  and  although  an  election 
was  given  to  the  promisees,  upon  a  surrender  of  the  instrument  six 
months  before  its  maturity,  to  exchange  it  for  stock,  this  did  not  al- 
ter its  character,  or  make  the  promise  in  the  alternative,  in  the  sense 

««  The  statement  is  abridged,  and  a  part  of  the  opinion  omitted. 


Ch.  1)  FORM   OF  BILL  AND  OF  NOTE.  Ill 

in  which  that  word  is  used  respecting  promises  to  pay.     The  engage- 
ment of  the  railroad  company  was  to  pay  the  sum  of  $1,000  in  four 
years  from  date,  and  its  promise  could  only  be  fulfilled  by  the  pay- 
ment of  the  money,  at  the  day  named.     *     *     * 
Judgment  affirmed. 


ROBERTS  V.  SMITH  et  al. 

(Supreme  Court  of  Vermont,  1886.     58  Vt.  492,  4  Atl.  709,  56  Am.  Rep.  567.) 

Assumpsit.  Heard  on  demurrer  to  the  declaration,  December  term, 
1885 ;  Walker,  J.,  presiding.     Demurrer  overruled. 

It  was  alleged  in  the  amended  count  that  the  defendant  "made  and 
delivered  to  one  J.  S.  King  his  promissory  note  in  writing  in  words 
and  figures  as  follows,  to  wit:  'November  17,  18-19.  Two  years  from 
date,  for  value  received,  I  promise  to  pay  J.  S.  King  or  bearer,  one 
ounce  of  gold.  E.  P.  Smith' — and  thereby  promised  for  value  received 
to  pay  J.  S.  King,  or  bearer,  one  ounce  of  gold  two  years  from  date, 
which  period  has  elapsed  before  the  commencement  of  this  suit.  And 
said  plaintiflf  avers  that  thereafterwards,  to  wit,  on  the  20th  day  of 
November,  A.  D.  18-19,  at  Manchester  aforesaid,  the  said  J.  S.  King, 
for  a  valuable  consideration  to  him,  then  and  there  paid  by  said  plain- 
tiflf, then  and  there  sold,  assigned,  and  transferred  said  note,  to  said 
plaintiflf,  and  said  plaintiflf  then  and  there  became  and  still  is  the  sole 
and  absolute  owner  of  said  note,  of  all  of  which  defendant  then  and 
there  had  notice,  and  in  consideration  of  the  premises  said  defendant 
then  and  there  specially  promised  the  plaintiflf  to  pay  to  the  plaintiflf 
the  contents  of  said  note  according  to  the  tenor  and  eflfect  of  the  same ; 
yet  said  defendant,  though  requested,  has  disregarded  his  said  prom- 
ise and  has  not  paid  the  same."  *^ 

Veazey,  J.  Although  it  has  long  been  settled  in  this  state  that  a 
written  contract  having  the  usual  form  of  a  promissory  note,  but  paya- 
ble in  some  specific  article,  may  be  treated  as  a  promissory  note  as  to 
the  form  of  declaring  upon  it,  and  the  necessity  of  proof  of  considera- 
tion, and  in  some  other  respects  (Rob.  Dig.  92),  yet  such  an  instru- 
ment is  not  negotiable  because  not  payable  in  money  (Collins  v.  Lin- 
coln, 11  Vt.  268 ;  1  Dan.  Neg.  Inst.  42). 

The  instrument  declared  upon  was  not  even  a  promise  to  pay  a  giv- 
en sum  in  specific  articles,  but  only  to  pay  "one  ounce  of  gold."  It 
stands,  for  consideration,  upon  the  question  of  the  suflficiency  of  the 
declaration,  under  the  demurrer  thereto,  as  though  it  were  a  promise 
to  pay  one  bushel  of  wheat.  This  suit  is  by  a  purchaser  from  the 
payee.  The  plaintiflf  cannot  stand  upon  the  first  count,  as  the  instru- 
ment declared  upon  is  not  negotiable,  and  no  promise  by  the  defend- 
ant to  the  plaintiflf  is  alleged.     But  the  plaintiflf  relies  mainly  upon  the 

*7  Arguments  of  counsel  are  omitted. 


112  FORM   AND   INCEPTION.  (Part  1 

new  count,  and  claims  to  recover  thereon  as  the  assignee  of  a  chose 
in  action  upon  tlie  special  promise  of  the  maker  to  pay  the  same  to 
him. 

The  pleader  sets  out  the  instrument  as  a  promissory  note,  and  avers 
that  the  payee  "for  a  valuable  consideration"  to  him  paid  by  the  plain- 
tiff, sold  and  transferred  the  note  to  the  plaintiff,  and  that  the  latter 
became  and  is  the  sole  and  absolute  owner  thereof,  of  which  the  de- 
fendant had  notice,  and  "in  consideration  of  the  premises"  "specially 
promised  the  plaintiff  to  pay"  to  him  "the  contents  of  said  note  ac- 
cording to  the  tenor  and  effect  of  the  same,"  etc. 

If  the  instrument  had  contained  a  promise  to  pay  a  sum  certain  in 
specific  articles,  this  count,  so  far  as  objection  to  it  is  urged  on  the 
ground  of  insufficiency  of  the  averment  of  consideration  for  the  de- 
fendant's promise,  and  of  the  consideration  from  the  plaintiff  to  the 
original  payee,  King,  would  be  good.  Smilie  v.  Stevens,  41  Vt.  321 ; 
Moar  V.  Wright,  1  Vt.  57.  But  such  is  not  the  instrument.  It  is  but 
a  promise  to  pay ;  that  is,  deliver  a  certain  article  of  merchandise  defi- 
nite in  amount.  Because  gold  enters  into  the  composition  of  money, 
we  cannot  assume  that  "an  ounce  of  gold"  is  money,  or  that  it  has  a 
fixed  and  unvarying  value.  The  contract  in  question  lacks,  not  only 
the  quality  of  negotiability,  but  certainty  and  precision  as  to  the  amount 
to  be  paid.  Upon  failure  to  perform  there  would  be  no  definite  speci- 
fied sum  due  as  in  case  of  a  promissory  note.  The  declaration  is 
drawn  upon  the  theory  that  the  instrument  was  a  promissory  note  ex- 
cept in  rcsiicct  to  negotiability.  No  value  is  alleged  in  the  thing  prom- 
ised. The  pleader  claims  to  be  entitled  to  the  value  of  a  commodity, 
without  alleging  it  has  any  value.  It  is  plainly  impossible  to  apply  to 
this  paper  a  form  of  declaration  adapted  solely  to  a  promissory  note. 
•Although  it  has  the  form  of  a  promissory  note,  it  is  not  such,  and 
cannot  be  treated  as  such  in  pleading.  It  must  be  treated  as  a  simple 
contract  for  the  delivery  of  merchandise.  As  a  declaration  upon  such 
a  contract  it  is  wanting  in  proper  averments  as  to  consideration,  as  to 
value,  and  as  to  breach  and  damages.  Chit.  PI.  tit.  "Of  the  Declara- 
tion," *'-'n.T  et  scq. 

Judgment  reversed;  first  and  amended  counts  adjudged  insufficient; 
cause  remanded.*' 


THOMPSON  V.  SLOAN  et  al. 

(Supreme  Court  of  New  York,  1840.    23  Wend.  71,  35  Am.  Dec.  546.) 

This  was  an  action  of  assumpsit,  tried  at  the  Erie  circuit,  in  Jan- 
uary, 1839,  before  Hon.  Nathan  Dayton,  one  of  the  circuit  judges. 
The  suit  was  brought  on  a  note  made  and  dated  at  Buffalo,  in  this 

«•  A  bill  or  note  payable  In  checks  or  exchange  is  not  nesotiable  First 
I'.ank  V.  Bank.  S4  Tex.  40.  19  S.  W.  334  (1S.92) :  t^rst  Bank  v.  Slette.  G7 
Minn.  425.  69  N.   W.   1148,  64  Am.  St.  Rep.  429  (1S97). 


Cb.  1)  FORM   OF   BILL   AND   OF   NOTE.  113^ 

State,  on  the  8th  of  July,  1836,  for  $2,500,  payable  13  months  after 
date,  at  the  Commercial  Bank  in  Buffalo,  in  Canada  money.  The  note 
was  made  by  James  Sloan  and  John  Wilkeson,  payable  to  the  order  of 
Johnson,  Hodge  &  Co.,  which  firm  was  composed  of  E.  Johnson,  P. 
Hodge  and  M.  F.  Johnson,  by  the  latter  of  whom  the  note  was  in- 
dorsed in  the  name  of  the  firm.  The  suit  was  brought  against  the 
makers  and  indorsers  jointly.  The  declaration  contained  a  special 
count  upoh  the  note,  and  also  the  common  money  counts.  After 
proving  the  signatures  of  the  defendants,  the  protest  of  the  note  and 
notice  to  the  indorsers,  the  plaintiff's  counsel  offered  to  read  the  note 
in  evidence,  to  which  the  defendant's  counsel  objected,  insisting  that, 
being  payable  in  Canada  money,  it  was  not  negotiable ;  that  Canada 
money  meant  bills  of  the  Canada  banks.  The  plaintiff  thereupon  of- 
fered to  prove  that,  at  the  time  of  the  making  of  the  note,  Sloan  and 
Wilkeson,  the  makers  thereof,  desired  to  have  it  drawn  payable  in 
Canada  bank  bills,  but  that  he  objected,  and  insisted  that  it  should  be 
made  payable  in  Canada  money,  which  testimony  was  objected  to,  and 
rejected.  The  plaintiff  thereupon,  under  a  written  consent  of  the  de- 
fendants, read  in  evidence  a  copy  of  an  act  of  the  provincial  Parlia- 
ment of  Upper  Canada,  passed  20th  April,  1836,  fixing  the  weight  and 
rate  of  certain  gold  and  silver  coins,  and  declaring  that  the  same  should, 
pass  current  and  be  deemed  a  legal  tender  in  the  province,  in  payment 
of  all  debts  and  demands ;  as  thus :  "The  British  guinea,  weighing 
five  pennyweights  nine  and  a  half  grains,  Troy,  at  one  pound,  five  shill- 
lings  and  six  pence ;  the  British  sovereign,  weighing,  &c.,  at,  &c. ;  the 
eagle  of  the  United  States  of  America,  coined  before,  &c.,  weighing, 
&c.,  at,  &c. ;  the  eagle  of,  &c.,  coined  since,  &c.,  weighing,  &c.,  at, 
&c. ;  the  British  crown  at  six  shillings ;  the  Spanish  milled  dollar,  at,. 
&.C. ;  the  dollar  of  the  United  States  of  America  at,  &c. ;  the  Mexican 
dollar  at,"  &c.,  and,  after  reading  the  same,  rested.  The  counsel  lor 
the  defendant  then  offered  to  prove  the  meaning  of  the  words  "Canada 
money,"  as  generally  understood  at  Buffalo  by  persons  in  trade  there, 
which  evidence  was  objected  to  by  the  plaintiff's  counsel;  but  the  ob- 
jection was  overruled  by  the  judge,  and  the  defendants  thereupon 
called  several  witnesses,  who  proved  that  Canada  money  was  under- 
stood at  Buffalo  to  mean  bills  of  the  Canada  banks.  Upon  which  evi- 
dence the  judge  ordered  a  nonsuit  to  be  entered.  The  plaintiff  asks 
for  a  new  trial. 

CowEN,  J.  A  promissory  note  must,  in  order  to  come  within  the 
statute,  like  a  bill  of  exchange,  be  payable  in  money  only,  in  current 
specie  (Bayl.  on  Bills,  10  [Am.  Ed.  of  1S36]  ;  Ex  parte  Imeson,  2 
Rose,  225) ;  or  at  least  in  what  we  can  judicially  notice  as  equivalent 
to  money.  Accordingly  a  note  payable  in  bills  of  country  banks 
(Jones  V.  Fales,  4  Mass.  245),  in  Pennsylvania  or  New  York  paper 
currency,  current  in  Pennsylvania  or  Nev^  York  (Leiber  v.  Goodrich, 
5  Cow.  186),  in  notes  of  the  chartered  banks  of  Pennsylvania,  though 
Sm.&  M.B.&  N.— 8 


114  FORM   AND   INCEPTION,  (Part   1 

the  note  was  made  and  payable  in  the  state  of  Pennsylvania  (McCor- 
unick  V.  Trotter,  10  Serg.  &  R.  [Pa.]  9-i ;  see  Cook  v.  Satterlee,  6  Cow. 
108,  16  Am.  Dec.  432),  in  paper  medium  (Lange  v.  Kohne,  1  McCord 
[S.  C]  115;  see  McClarin  v.  Nesbit,  2  Nott  &  McC.  [S.  C]  519), 
or  in  cash  or  Bank  of  England  notes  (Ex  parte  Imeson,  before  cited, 
2  Buck,  1  S.  P.),  has  been  held  without  the  statute. 

The  farthest  we  have  gone  is  to  say  that  a  note  drawn  and  payable 
here,  in  New  York  bills  or  specie  (Keith  v.  Jones,  9  Johns.  120),  or 
in  bank  notes  current  in  the  city  of  Xew  York  (Judah  v.  Harris,  19 
Johns.  144),  is  negotiable.  In  both  cases  the  court  went  on  the  ground 
of  a  right  to  take  judicial  notice  that  New  York  bills,  and  especially 
bank  notes  current  in  the  city  of  New  York,  were  customarily  con- 
sidered and  treated  as  equivalent  to  specie.  And,  in  the  last  case, 
they  said,  though  the  defendant  might  have  a  right  to  pay  with  foreign 
bills  current  in  the  city  the  note  was  still  to  be  regarded  as  payable 
in  current  money. 

Admitting  that  the  note  in  question  imports  an  obligation  to  pay  in 
gold  and  silver,  current  in  Canada,  I  do  not  see,  on  what  principle 
we  can  pronounce  it  to  be  payable  in  money,  within  the  meaning  of 
the  rule.  It  is  not  pretended  that  coins  current  in  Canada  are,  there- 
fore, so  in  this  state.  As  gold  and  silver  they  might  readily  be  re- 
ceived, and  so  might  the  coin  of  any  foreign  country,  Germany  or 
Russia  for  instance ;  but  the  creditor  might,  and  in  many  cases  doubt- 
less would,  refuse  to  receive  them,  because  ignorant  of  their  value. 
In  law  they  are  all  collateral  commodities,  like  ingots  or  diamonds, 
which  though  they  might  be  received  and  be  in  fact  equivalent  to 
money,  are  yet  but  goods  and  chattels.  A  note  payable  in  either  would, 
therefore,  be  no  more  negotiable  than  if  it  were  payable  in  cattle  or 
other  specific  articles.  The  fact  of  Canada  coins  being  current  here 
is  not.  at  any  rate,  so  notorious  that  we  can  judicially  notice  them  as  a 
universally  customary  medium  of  payment  in  this  state ;  and  if  not, 
they  are  no  more  a  part  of  our  currency  than  Pennsylvania  bank  bills. 
I.eiber  v.  Goodrich,  before  cited.  Nor  do  I  perceive  in  the  case  any 
proof,  or  offer  to  prove,  that  such  coins  were  of  universal  currency. 

This  view  of  the  case  is  not  incompatible  with  a  bill  or  note  payable 
in  money  of  a  foreign  denomination,  or  any  other  denomination  being 
negotiable,  for  it  can  be  paid  in  our  own  coin  of  equivalent  value, 
to  which  it  is  always  reduced  by  a  recovery.  Chit,  on  Bills,  615,  616 
(Am.  Ed.  of  1839);  Deberry  v.  Darnell,  5  Yerg.  (Tenn.)  451.  A  note 
payable  in  pounds,  shillings  and  pence  made  in  any  country  is  but 
another  mode  of  expressing  the  amount  in  dollars  and  cents,  and  is 
so  understood  judicially.  The  course,  therefore,  in  an  action  on  such 
an  instrument  is  to  aver  and  prove  the  value  of  the  sum  expressed, 
in  our  own  tenderable  coin.  It  is  payable  in  no  other  (vide  Bayl.  on 
Bills,  23  [Am.  Ed.  of  1836],  and  the  cases  there  cited);  whereas  on 
the  note  in  question,  Canada  money,  a  specific  article,  would  be  a  law- 


Oh.  1)  FORM   OF   BILL   AND   OF   NOTE.  115 

ful  tender.  Canada  coppers,  for  aught  I  see,  and,  under  our  own  deci- 
sions, bank  bills  commonly  current  in  Canada,  would  also  be  tender- 
able. 

Nor  is  it  necessary  to  deny  that,  had  this  note  been  made,  indorsed, 
and  payable  in  Canada,  it  would  have  been  negotiable.  It  would  then 
on  its  face  have  been  payable  in  the  current  coin  of  the  country  where 
it  was  made.  The  objection  is  that  the  note  was  made,  indorsed,  and 
payable  here,  in  a  foreign  commodity,  which  the  payee  was  entitled 
to  demand  specifically,  and  to  reject  gold  and  silver  current  in  the 
United  States.  It  is  of  course  the  same  thing  under  the  extrinsic  evi- 
dence offered  by  the  plaintiff,  and  received  by  the  judge.  The  Cana- 
dian statute  merely  proved  what  coins  were  current  as  Canada  money, 
which  could  not  be  recognized  as  the  money  of  this  country.  In  the 
light  of  that  proof,  the  note  must  be  read  as  necessarily  payable  in 
Canada  money,  current  by  law  in  that  province.  It  did  not  improve 
the  case,  without  following  it  with  some  statute  making  that  money, 
as  such,  current  here ;  or,  at  least,  showing  that  it  was,  in  fact,  so 
notoriously  current  among  us,  that  we  should  be  entitled  to  take  judi- 
cial notice  of  the  fact.  The  latter  is  the  utmost  that,  by  our  cases,  the 
plaintiff  could  claim ;  though  we  have  gone  farther  than  the  cases  de- 
cided in  any  other  state  or  country,  so  far  as  they  were  cited  on  the 
argument,  or  have  come  under  my  observation,  except  a  case  in  Ten- 
nessee. Deberry  v.  Darnell,  5  Yerg.  451.  The  instrument  was  payable 
in  North  Carolina  notes,  yet  held  negotiable.  In  McCormick  v.  Trot- 
ter, I  fear  we  were  somewhat  justly  criticised  for  the  high  ground  on 
which  we  had  placed  all  our  state  bills  in  Keith  v.  Jones.  At  any  rate, 
Air.  Justice  Duncan  very  truly  reminded  us  that  New  York  state  bills 
had  depreciated  in  common  with  those  of  Pennsylvania.  A  remark 
which  he  made  as  to  the  note  in  that  case,  which  was  payable  in 
Pennsylvania  bills,  would,  I  apprehend,  be  nearly  applicable  to  our 
own,  at  some  stages  of  our  currency,  viz.,  that  "it  was  payable  in  more 
than  forty  kinds  of  paper  of  different  value."     *     *     * 

The  motion  to  set  aside  the  nonsuit,  and  for  a  new  trial,  is  denied.*^ 

49  Arguments  of  counsel  and  a  part  of  the  opinion  are  omitted.  In  an 
action  against  the  indorser  of  a  note  payable  in  Canada  in  "Canada  currency" 
the  court  said:  "In  Thompson  v.  Sloan,  the  Supreme  Court  of  New  York 
held  that  a  note  payable  in  Buffalo  in  'Canada  money'  was  not  negotiable. 
This,  however,  is  not,  as  we  think,  in  acc-ordance  with  the  general  current 
of  decision.  Judge  Story  says:  'If  it  be  payable  in  money,  it  is  of  no  con- 
sequence in  the  currency  or  money  of  what  country  it  is  payable.  It  may 
be  payable  in  the  currency  or  money  of  England,  France,  Spain,  Holland, 
Italy,  America,  or  any  country.'  Story  on  Bills,  §  43;  Chitty  on  Bills,  153. 
158.  We  cannot  with  any  propriety  refuse  to  reco.i:nize  the  right  of  every 
country  to  fix  its  currency,  and  it  is  impossible  for  any  civilized  govern- 
ment to  exist  without  some  legal  standard  of  money.  The  only  question  here 
is  whether  a  note  payable  in  'Canada  currency'  is  or  is  not  payable  in  money.'' 
Black  V.  Ward,  27  Mich.  191,  194,  15  Am.  Rep.  162  (1873). 


116  FORM   AND   INCEPTION.  (Part    1 

ST.  STEPHEN  BRANCH  RY.  CO.  v.  BLACK. 

(Supreme  Court  of  New  Brunswick,   1870.     2  Hann.  139.) 

This  was  an  action  on  tlie  following  promissory  note : 
"$371.00.  St.  Stephen,  2?th  August,  1867. 

"One  year  from  date  for  value  received,  I  promise  to  pay  to  my 
own  order  at  the  St.  Stephen's  Bank,  three  hundred  and  seventy  one 
dollars,  with  interest,  payable  in  U.  S.  currency. 

"Wm.  F.  Black." 

The  note  was  indorsed  by  the  defendant. 

At  the  trial  before  Allen,  J.,  it  was  proved  that  the  term  "U.  S. 
currency"  meant  the  currency  of  the  United  States  of  America.  At 
the  time  of  the  trial,  $100  in  gold  was  worth  $133 Vs  of  this  currency. 

A  verdict  was  taken  for  the  plaintiff  for  $279  (the  amount  in  the 
currency  of  this  province  which  would  produce  the  amount  of  the  note 
and  interest  in  United  States  currency),  with  leave  to  move  for  a  non- 
suit on  the  ground  that  the  writing  was  not  a  promissory  note,  not 
being  for  a  sum  certain. 

Needham  having  obtained  in  Michaelmas  term  last  a  rule  nisi :  ^'^ 

Allen,  J.,  now  delivered  the  judgment  of  the  majority  of  the 
court.  *  *  *  It  is  said  in  Chitty  on  Bills,  133,  that  it  is  not  nec- 
essary that  the  money  payable  by  a  note  should  be  that  current  in  the 
place  of  payment  or  where  the  bill  is  drawn ;  it  may  be  in  the  money 
of  any  country  whatever.  And  in  Story  on  Prom.  Notes,  §  17,  it  is 
said  that,  "provided  the  note  be  for  the  payment  of  money,  it  is  wholly 
immaterial  in  the  money  or  currency  of  what  country  it  is  made 
payable."  Is  not  this  note  for  the  payment  of  money  only?  And  may 
it  not  be  assumed  that  "United  States  currency"  means  the  money  of 
the  United  States,  and  that  the  note  is  for  the  payment  of  $371  of  the 
United  States.  Act  58  Geo.  Ill,  c.  23,  mentions  the  dollars  of  the 
United  States,  and  makes  them  current  in  this  province.  Act  15  Vict. 
c.  85,  uses  the  term  "currency,"  and  declares  it  to  mean  the  current 
money  of  this  province;  and  Act  23  Vict.  c.  48,  §  3,  declares  that  the 
eagle  of  the  United  States  coined  after  the  1st  July,  1834,  and  of  a 
certain  weight,  shall  pass  and  be  a  legal  tender  for  ten  dollars,  and  the 
multiples  and  divisions  thereof  in  the  same  proportion.  This  is  a  leg- 
islative recognition  that  the  eagle  of  the  United  States  and  the  di- 
visions thereof  are  the  coins,  or,  in  other  words,  the  currency,  of  that 
country.  In  Wharton's  Law  Dictionary,  currency  is  defined  to  be 
bank-notes  or  other  passing  money  issued  by  authority,  and  which  are 
continually  passing:  as  and  for  coin.     *     *     * 

FisiiER  J.  I  have  some  doubts  whether  the  note,  the  subject  of 
this  action,   from   its   terms  is  a  promissory  note,  and  the  different 

60  The  statement  is  abridged,  and  the  arguments  of  counsel  and  part  of  the 
opinion  are  omitted. 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE.  117 

acts  of  assembly  relating  to  legal  tender  and  currency  have  rather  in- 
creased them,  as  they  speak  of  the  eagle  of  the  United  States,  of  a 
dollar,  and  of  currency,  but  refer  to  the  dollar  as  consisting  of  one 
hundred  cents,  and  the  eagle  is  made  a  legal  tender  for  ten  dollars  of 
one  hundred  cents.  Now,  the  note  in  question  for  $371  was  found  to 
be  equal  to  $279  ;  or  in  other  words,  the  $371  United  States  currency 
referred  to  in  the  note  would  only  produce  $279  if  paid  in  the  gold 
eagles  of  the  United  States  or  the  multiples  or  divisions  thereof. 
There  appears  to  me  to  be  a  want  of  certainty,  which  I  think  essen- 
tial to  a  promissory  note.  In  order  to  get  at  the  amount  of  the  note 
in  New  Brunswick  currency,  it  was  necessary  to  prove  the  value  of  the 
greenback  paper  notes  in  circulation,  which  was  said  to  be  constantly 
varying.     *     *     * 

Per  Curiam.     Rule  discharged. 


HOGUE  v.   WILLIAMSON. 

(Supreme  Court  of  Texas,   1893.     85  Tex.  553,   22   S.   W.   580,  20   L.   R.   A. 
481,  34  Am.  St.  Rep.  823.) 

Gaines^  J.  This  is  a  question  certified  to  us  for  determination  by 
the  Court  of  Civil  Appeals  -for  the  Third  Supreme  Judicial  district. 
The  certificate  is  as  follows : 

"The  plaintiff,  Hogue,  brought  suit  against  defendant,  Williamson, 
upon  a  written  obligation,  which  reads  as  follows:  'Saltillo,  January 
25,  1S88.  On  or  before  May  1,  1888,  I  promise  to  pay  C.  C.  Hogue, 
or  order,  one  thousand  Mexican  silver  dollars.  Geo.  S.  Williamson. 
$1,000  Mex.'  The  petition  alleges  that  on  May  1,  1888,  Mexican  dol- 
lars were  each  worth  85  cents  in  'American  coin,'  and  plaintiff  asks 
judgment  for  $850.  He  states  in  his  petition  that  the  note  is  pay- 
able in  Mexican  silver  dollars.  The  defendant  filed  a  general  denial, 
and  also  averred  in  his  answer  under  oath  that  the  note  sued  on  was 
given  for  money  which  the  plaintiff  had  won  from  defendant  in  a 
game  with  cards,  and  was  therefore  illegal  and  void. 

"Upon  the  trial  in  the  court  below  the  plaintiff  put  in  evidence  the 
written  obligation  sued  on,  and  proved  that  on  May  1,  1888,  Mexican 
silver  dollars  were  worth  80  cents  each.  The  plaintiff  then  rested,  and 
the  defendant  introduced  no  testimony.  The  court  instructed  the  jury 
to  return  a  verdict  for  defendant,  which  was  done,  and  judgment  en- 
tered accordingly.  If  the  instrument  sued  on  was  a  promissory  note, 
this  is  error.    Newton  v.  Newton,  77  Tex.  511,  14  S.  W.  157. 

"With  this  explanation,  the  Court  of  Civil  Appeals  for  the  Third 
Supreme  Judicial  District  certifies  and  submits  to  the  Supreme  Court 
for  decision  as  part  of  the  law  of  this  case,  as  a  new  or  novel  question, 
the  following  proposition:  'Was  the  burden  of  proof  on  the  plaintiff', 
after  the  introduction  of  the  instrument  sued  on,  to  show  nonperform- 


118  FORM   AND   INCEPTION.  (Part  1 

ance  of  its  obligations  by  defendant?  In  other  words,  is  the  written  ob- 
ligation sued  on  a  promissory  note,  obligating  its  maker  to  pay  a  cer- 
tain sum  of  money ;  or  is  it  an  ordinary  contract  for  the  delivery  of  a 
certain  commodity ;  and  must  the  plaintiff,  by  affirmative  testimony, 
show  a  breach  of  the  contract?'" 

We  are  of  the  opinion  that  the  instrument  in  question  is  a  promissory 
note.  It  is  such  in  form  and  in  substance,  unless  the  fact  that  the  sum 
payable  is  expressed  in  Mexican  silver  dollars  should  make  a  difference. 
Speaking  of  the  sum  for  which  a  bill  of  exchange  must  be  drawn,  Mr. 
Chitty  says :  "It  may  be  the  money  of  any  country."  Chit,  on  Bills, 
160.  Judge  Story  says:  "But,  provided  the  note  be  for  the  payment  of 
money  only,  it  is  wholly  immaterial  in  the  currency  or  money  of  what 
country  it  may  be  payable.  It  may  be  payable  in  the  money  or  currency 
of  England,  or  France,  or  Spain,  or  Holland,  or  Italy,  or  of  any  other 
country.  It  may  be  payable  in  coins,  such  as  in  pounds  sterling,  livres, 
tomnosis,  francs,  florins,  etc.,  for  in  all  these  and  the  like  cases  the 
sum  of  money  to  be  paid  is  fixed  by  the  par  of  exchange,  or  the 
known  denomination  of  the  currency  with  reference  to  the  par."  Story 
on  Prom.  Notes,  §  17.  The  same  rule  is  distinctly  laid  down  in  1 
Daniel  on  Negotiable  Instruments,  §  58,  and  in  Tiedeman  on  Commer- 
cial Paper,  §  29b.  In  view  of  the  opinion  of  these  eminent  text-writers, 
it  is  remarkable  that  we  have  found  but  two  cases  in  which  the  question 
is  discussed  or  decided. 

In  Black  v.  \\'ard.  27  Mich.  191,  15  Am.  Rep.  162,  it  is  held  that  a 
note  made  in  Michigan,  payable  in  Canada  in  "Canada  currency," 
is  payable  in  money,  and  is  therefore  negotiable.  But  in  Thompson  v. 
Sloan,  23  Wend.  (N.  Y.)  71,  35  Am.  Dec.  546,  a  note  made  in  New 
York,  and  payable  there  in  "Canada  currency,"  was  held  not  negotiable. 
The  court,  however,  say:  "This  view  of  the  case  is  not  incompatible 
with  a  bill  or  note  payable  in  money  of  a  foreign  denomination  or  any 
other  denomination  being  negotiable,  for  it  can  be  paid  in  our  own 
coin  of  equivalent  value,  to  which  it  is  always  reduced  by  a  recovery. 
A  note  payable  in  pounds,  shillings,  and  pence,  made  in  anv  country, 
is  but  another  mode  of  expressing  the  amount  in  dollars  and  cents, 
and  is  so  understood  judicially.  The  course,  therefore,  in  an  action  on 
such  instrument  is  to  aver  and  prove  the  value  of  the  sum  expressed  in 
our  own  tenderable  coin."  This  decision  was  made  in  1840,  and  it  is 
to  be  inferred  that  at  that  time  the  dollar  was  not  a  denomination  of 
the  lawful  money  of  Canada.  We  also  infer  that  when  the  Michigan 
case  arose  this  had  been  changed,  and  the  denomination  of  Canada 
money  corresponded  with  that  of  the  United  States.  Upon  this  theory 
it  would  seem  that  the  cases  may  be  reconciled.  The  language  quoted 
from  the  opinion  in  Thompson  v.  Sloan,  supra,  indicates  clearly  that, 
if  the  money  named  in  the  note  had  been  a  denomination  of  Canada 
money,  the  ruling  would  have  been  different,  unless,  perchance,  the 
word  "currency"  would  have  affected  the  question.  The  note  we  have 
under  consideration  is  for  Mexican  silver  dollars — coins   recognized 


Oh.  1)  FORM   OF   BILL   AND   OF   NOTE.  119 

by  the  laws  of  the  United  States  as  money  of  the  republic  of  Mexico. 
Rev.  St.  U.  S.  §  3567  (U.  S.  Comp.  St.  1901,  p.  2376). 

We  conclude  that  the  note  sued  upon  in  this  case  was  a  negotiable 
promissory  note,  and  that  when  the  plaintiff  oft'ered  it  in  evidence,  and 
proved  the  value  of  the  Mexican  dollar  at  the  time  of  its  maturity,  he 
had  made  a  prima  facie  case ;  and  our  opinion  will  be  certified  accord- 
ingly. 


HATCH  V.   FIRST   NAT.    BANK. 

{Supreme  Judicial  Court  of  Maine,   1900.     94  Me.  348,  47  Atl.  908,   80  Am. 

St.  Kep.  401.) 

On  exceptions  by  defendant.  Assumpsit  upon  a  certificate  of  de- 
posit, issued  to  one  Olive  Hodge  by  the  defendant  bank,  and  claimed 
by  the  plaintiff  as  a  gift  by  indorsement  and  delivery  before  the  death 
of  the  donor.     The  case  appears  in  the  opinion. 

Savage,  J.^^  This  action  is  brought  by  the  plaintiff  as  indorsee  on 
a  certificate  of  deposit  of  the  following  tenor: 

"The  First  National  Bank,  Dexter,  Maine,  Jan.  6th,  1897.  Olive 
Hodge  has  deposited  in  this  bank  five  hundred  and  sixty  dollars, 
payable  in  current  funds  to  the  order  of  herself  on  return  of  this  cer- 
tificate properly  indorsed.  Int.  at  3^  per  annum  if  on  deposit  6  mos. 
No.  2,236.  C.  M.  Sawyer,  Cashier." 

The  defendant  requested  the  presiding  justice  to  rule  that  the  action 
could  not  be  maintained  by  the  plaintiff,  as  indorsee,  for  the  reason 
that  the  certificate  of  deposit  in  question  was  not  a  negotiable  instru- 
ment. The  presiding  justice  declined  so  to  rule,  and  the  defendant 
excepted. 

The  defendant  contends  that  the  instrument  is  nonnegotiable  for 
three  reasons :  First,  because  it  was  written  payable  in  "current 
funds";  secondly,  because  of  the  clause,  "Int.  at  3%  per  annum  if  on 
deposit  6  mos. ;"  and,  lastly,  because  of  the  condition  of  payment 
expressed  in  the  words,  "on  return  of  this  certificate  properly  indorsed." 

That  a  certificate  of  deposit,  as  such,  is  a  negotiable  instrument  is 
held  by  almost  unanimous  authority  (2  Daniel  on  Negotiable  Instru- 
ments, §  1702;  Miller  v.  Austen,  13  How.  218,  14  L.  Ed.  119),  and  is 
not  here  denied  by  the  learned  counsel  for  the  defendant.  They  only 
contend  against  certain  features  in  the  certificate  before  us.  This 
court,  following  universal  authority,  has  recently  defined  a  negotiable 
instrument  to  be  one  which  runs  to  order  or  bearer,  is  payable  in 
money,  for  a  certain,  definite  sum,  on  demand,  at  sight,  or  in  a  certain 
time,  or  upon  the  happening  of  an  event  which  must  occur,  and  pay- 
able absolutely  and  not  upon  a  contingency.  Roads  v.  Webb,  91  Me. 
406,  40  Atl.  i28,  64  Am.  St.  Rep.  246.    If  the  certificate  in  question 

Bi  The  statement  is  abridged. 


120  FORM   AND    INCEPTION.  (Part   1 

does  not  conform  to  these  requirements,  it  must  be  held  to  be  non- 
negotiable. 

The  tirst  objection  is  that  it  is  not  made  payable  in  "money"; 
that  "current  funds,"  in  which  it  is  made  payable,  should  not  be  judi- 
cially interpreted  to  mean  "money."  We  do  not  think  this  contention 
should  prevail.  This  subject  has  been  discussed  exhaustively  by  many 
courts,  and  the  conclusions  they  have  reached  on  the  one  side  and  the 
other  are  not  in  harmony.  But  we  think  that  the  modern  and  better 
doctrine  is  that  the  term  "current  funds,"  when  used  in  commercial 
transactions  as  the  expression  of  the  medium  of  payment,  should  be 
construed  to  mean  current  money,  funds  which  are  current  by  law  as 
money,  and  that,  when  thus  construed,  a  certificate  of  deposit  payable 
in  current  funds  is,  in  this  respect,  negotiable.  It  is  well  known  that 
certificates  of  deposit  are  commonly  made  payable  in  "currency"  or  in 
"current  funds,"  and  we  believe  that  the  interpretation  we  have  given 
is  in  accord  with  *he  universal  understanding  of  parties  giving  and 
receiving  these  instruments ;  an  understanding  which  we  should  re- 
sort to  as  an  aid  to  interpretation,  unless  the  words  themselves  fairly 
import  some  other  meaning.  Some  courts  hold  that  evidence  may  be 
received  to  show  the  meaning  of  the  terms  "currency,"  "current  funds." 
But,  in  the  absence  of  evidence,  these  courts  come  to  opposite  conclu- 
sions. For  instance,  in  Iowa,  the  court  holds  that  notes  payable  in 
currency  are  prima  facie  nonnegotiable,  but  that  evidence  may  be  re- 
ceived to  prove  that  the  word  "currency"  describes  that  which  by 
custom  or  law  is  money,  and  thus  the  instruments  may  be  shown  to 
be  commercial  paper.  Huse  v.  Hamblin,  29  Iowa,  501,  4  Am.  Rep. 
244.  On  the  other  hand,  in  Michigan  it  was  held  that,  where  a  certifi- 
cate of  deposit  was  made  payable  in  currency,  "prima  facie,  at  least, 
that  must  be  held  to  mean  money  current  by  law,  or  paper  equivalent 
in  value  circulating  in  the  business  community  at  par."  "Such,  we 
think,"  said  the  court,  "is  the  general  signification,  the  fair  import, 
and  the  ordinary  legal  effect  of  the  term."  Phelps  v.  Town,  14  Mich. 
374;    Phcenix  Ins.  Co.  v.  Allen,  11  Mich.  501,  83  Am.  Dec.  756. 

Still  other  authorities  hold  that  the  terms  "currency"  or  "current 
funds,"  used  in  commercial  paper,  ex  vi  termini  mean  money.  Judge 
Campbell,  in  Black  v.  Ward.  27  Mich.  191,  15  Am.  Rep.  162,  after  a 
critical  examination  of  a  mass  of  authorities,  declared  that,  with  few 
exceptions,  "the  general  course  of  authority  is  in  favor  of  the  negotia- 
bility of  paper  payable  in  currency,  or  in  current  funds ;  and  these  de- 
cisions rest  upon  the  ground  that  those  terms  mean  money,  as  the  nec- 
essity of  having  negotiable  paper  payable  in  money  is  fully  recognized." 

"The  term  'funds,'"  say  the  court  in  Galena  Ins.  Co.  v.  Kupfer,  2S 
111.  332,  81  Am.  Dec.  284,  "as  employed  in  commercial  transactions, 
usually  signifies  money.  Then  the  term  'current  funds'  means  current 
money,  par  funds,  or  money  circulating  without  any  discount."  Re- 
specting an  instrument  payable  in  "current  funds,"  the  Maryland  court 
said :  "The  words  'current  funds,'  as  used  in  the  paper  before  us,  mean 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE.  121 

nothing  more  or  less  than  current  money,  and,  so  construed,  the  in- 
strument was  negotiable."  Laird  v.  State,  61  Md.  311.  See,  also. 
Miller  v.  Race,  1  Burr.  452,  1  Smith,  Lead.  Cas.  808.  The  Supreme 
Court  of  the  United  States  had  occasion,  in  Bull  v.  Bank,  123  U.  S. 
105,  8  Sup.  Ct.  62,  31  L.  Ed.  97,  to  pass  upon  the  negotiability  of  an 
instrument  which  had  been  made  payable  in  "current  funds."  That 
court  said :  "Undoubtedly  it  is  the  law  that,  to  be  negotiable,  a  bill, 
promissory  note,  or  check  must  be  payable  in  money,  or  whatever  is 
current  as  such  by  the  law  of  the  country  where  the  instrument  is 
drawn  or  payable.  There  are  numerous  cases  where  a  designation 
of  the  payment  of  such  instruments  in  notes  of  particular  banks  or 
associations,  or  in  paper  not  current  as  money,  has  been  held  to  destroy 
their  negotiability.  But  within  a  few  years,  commencing  with  the  first 
issue  in  this  country  of  notes  declared  to  have  the  quality  of  legal 
tender,  it  has  been  a  common  practice  of  drawers  of  bills  of  exchange 
or  checks,  or  makers  of  promissory  notes,  to  indicate  whether  the  same 
are  to  be  paid  in  gold  or  silver  or  in  such  notes ;  and  the  term  'current 
funds'  has  been  used  to  designate  any  of  these,  all  being  current,  and 
declared  by  positive  enactment  to  be  legal  tender.  It  was  intended  to 
cover  whatever  was  receivable  and  current  by  law  as  money,  whether 
in  the  form  of  notes  or  coin.  Thus  construed,  we  do  not  think  the  ne- 
gotiability of  the  paper  in  question  was  impaired  by  the  insertion 
of  those  words."  See  Chrysler  v.  Renois,  43  N.  Y.  209 ;  Howe  v. 
Hartness,  11  Ohio  St.  449,  78  Am.  Dec.  312;  Citizens'  Nat.  Bank  v. 
Brown,  45  Ohio  St.  39,  11  N.  E.  799,  4  Am.  St.  Rep.  526  ;  Telford  v. 
Patton,  144  111.  611,  33  N.  E.  1119.  The  case  of  Klauber  v.  Bigger- 
staff,  47  Wis.  551,  3  N.  W.  357,  32  Am.  Rep.  773,  holding  that  a  cer- 
tificate of  deposit  payable  in  currency  is  negotiable,  is  sometimes 
cited  as  distinguishing  between  "currency"  and  "current  funds,"  but 
we  think  the  distinction  is  more  in  language  than  in  meaning,  for  the 
Wisconsin  court,  after  carefully  defining  the  term  "currency,"  add: 
"This  construction  of  the  term  'currency'  might  perhaps  properly  be 
extended  to  the  term  'current  funds.'  It  must  extend  to  the  latter  term 
whenever  it  is  used  in  the  legal  sense  of  money." 

Another  contention  of  the  defendant  is  that  the  certificate  of  deposit 
is  not  negotiable  because  it  is  not  payable  absolutely,  but  only  con- 
tingently, "on  return  of  this  certificate  properly  indorsed."  We  think 
this  is  not  such  a  contingency  as  affects  the  negotiability  of  the  cer- 
tificate. The  language  expresses  no  more  than  the  law  implies  as  the 
duty  of  the  holder  in  the  absence  of  any  such  stipulation.  2  Daniel 
on  Negotiable  Instruments,  §  1707 ;   SmiHe  v.  Stevens,  39  Vt.  315. 

Further,  it  is  contended  that  this  certificate  is  uncertain  as  to 
amount  by  reason  of  the  interest  clause,  and  therefore  is  not  negotiable. 
No  time  of  payment  is  mentioned  in  the  certificate.  It  is  accordingly 
payable  on  demand.  If  payment  be  demanded  at  any  time  within  six 
months,  the  amount  payable  is  certain ;  it  is  the  face  of  the  certificate. 
If  payment  be  not  demanded  until  after  six  months,  the  amount  pay- 


122  FORM   AND   INCEPTION.  (Part   1 

able  is  equally  certain ;  it  is  the  face  of  the  certificate  and  interest  to 
the  time  of  payment.  In  this  respect,  the  certificate  is  like  a  note  pay- 
able at  a  time  certain  with  interest  at  a  specified  rate  from  the  date  of 
the  note,  or  from  maturity  if  it  is  not  paid  at  maturity.  Such  notes 
are  held  negotiable.  As  in  the  case  of  a  note  on  demand  or  on  time 
the  time  when  it  may  be  actually  paid  is  uncertain,  so  it  is  uncertain 
when  this  certificate  may  be  presented,  and  payment  demanded.  But 
whenever  that  may  be,  the  sum  to  become  absolutely  payable  upon  it 
at  any  given  time  is  ascertainable  upon  its  face,  and  that  is  sufficient. 
Smith  V.  Crane,  33  Minn.  144,  22  N.  W.  633,  53  Am.  Rep.  20 ;  Towne 
V.  Rice,  122  Mass.  67 ;  Hope  v.  Barker,  112  Mo.  338,  20  S.  W.  567,  34 
Am.  St.  Rep.  387 ;  Crump  v.  Berdan.  97  Mich.  293,  56  N.  W.  559,  37 
Am.  St.  Rep.  345 ;  1  Daniel  on  Negotiable  Instruments,  §  53.  This 
disposes  of  the  exceptions  relating  to  the  negotiability  of  the  certificate. 

At  the  trial  the  plaintiflf  claimed  that  Olive  Hodge,  when  she  in- 
dorsed the  certificate,  gave  it  to  her  as  her  property,  and  this  the  de- 
fendant denied.  The  defendant  requested  the  presiding  justice  to  in- 
struct the  jury  that,  "if  it  was  a  mere  gift  made  by  Olive  Hodge 
to  the  plaintiff  in  manner  aforesaid,  it  would  not  authorize  her  (the 
plaintiff)  to  demand  payment  of  the  balance  remaining  unpaid  repre- 
sented by  the  certificate,  but  still  unpaid  after  her  (Olive  Hodge's) 
death,"  which  request  was  refused,  and  exception  was  taken. 

We  do  not  think,  upon  the  facts  stated,  that  this  exception  raises  any 
question  of  law.  The  bill  of  exceptions  does  not  state  what  was  the 
"manner  aforesaid"  in  which  the  gift  was  made.  It  merely  states  that 
it  was  "a  question  in  dispute  between  the  parties"  whether  there  was 
a  gift  or  not. 

If  there  was  a  gift — which  was  a  question  of  fact,  of  course — the 
property  in  the  certificate  remained  in  the  plaintiff  both  before  and 
after  the  death  of  Olive  Hodge. 

Exceptions  overruled. 


SECTION  6.— PARTIES 
(I)  M.^KER  AND  Drawer 


TAYLOR  V.   DOBBINS. 

(CJourt  of  King's  Bench,  1720.     1  Str.  399.) 

In  case  upon  a  promissory  note,  the  declaration  ran,  that  the  de- 
fendant made  a  note,  et  manu  sua  propria  scripsit.  Exception  was 
taken,  that  since  the  statute  he  should  have  said  that  the  defendant 
signed  the  note,  but  the  court  held  it  well  enough,  because  laid  to  be 


Ch.  1)  FORM  OF  BILL  AND  OF  NOTE.  123 

vvrote  with  his  own  hand,  and  there  needs  no  subscription  in  that  case, 
for  it  is  sufficient  his  name  is  in  any  part  of  it.  I.  J.  S.  promise  to  pay 
is  as  good  as  I  promise  to  pay,  subscribed  J.  S. 


DRUMMOND  v.  DRUMMOND. 
(Court   of   Session,    Scotland,    1785.      ^Lor.   Die.    1445.) 

James  Drummond  subscribed  as  the  acceptor  of  a  bill  drawn  in  these 
terms :  "Against  Martinmas  next,  pay  to  Anne  Drummond,  or  order, 
the  sum  of  1035  merks,  for  value."  But  there  was  no  subscription  of 
the  drawer. 

It  was  objected  by  the  other  creditors  of  James  Drummond  that  a 
bill  not  subscribed  by  the  drawer,  though  accepted,  could  not  be  sus- 
tained as  a  ground  of  debt. 

But  as  the  creditor's  name  was  inserted  in  the  body  of  the  bill  in 
question,  and  thus  there  occurred  all  the  essential  requisites  of  a 
promissory  note, 

Th^  Court  repelled  the  objection.^* 


STOESSIGER  v.  SOUTH  EASTERN  RY.  CO. 

(Court  of  Queeu's  Bench,  1S54.     3  El.  &  Bl.  549.) 

Case  against  the  defendant  as  common  carrier  for  the  loss  of  £9.  10s. 
On  the  trial,  before  Crompton,  J.,  at  the  Westminster  sittings  in  last 
Michaelmas  term  the  following  facts  appeared : 

The  plaintiff  was  a  commercial  traveller  in  the  employment  of 
Gideon  Goold  named  in  the  declaration  who  resided  at  Birmingham. 
A  person  named  Cruttenden  residing  at  Chatham  being  indebted  to 
Goold  to  the  amount  of  ill.  10s.  gave  to  the  plaintiff  at  Chatham,  to 
be  by  him  transmitted  to  Goold,  an  instrument  of  which  the  following 
is  a  copy : 
^'£11 :  10  :  0.  Birmingham,  Sept.  1852. 

"Three  months  after  date  pay  to  my  order  the  sum  of  eleven  pounds 
10s.,  value  received. 

"Mr.  Cruttenden,  Jeweller,  &c.,  Chatham." 

Across  the  face  of  this  instrument  was  written :  "Accepted  payable 
at  Bank.     G.  Cruttenden." 

B2  Contra :  Tevis  v.  Young,  1  Mete.  (Ky.)  197,  71  Am.  Dec.  474  (185S). 
But  see  the  dissenting  opinion  of  Simpson,  J.,  in  which  he  says:  "The  only 
parties  to  a  bill  of  exchange  between  whom  a  direct  imdertaking  exists  are 
the  acceptor  and  the  payee.  The  former,  by  his  acceptance,  agrees  to  pay 
to  the  latter  the  amount  of  the  bill  according  to  its  tenor  and  effect.  Here 
such  an  undertali;ing  existed ;  the  acceptor  agreed  to  pay  the  sum  named  in 
the  instrument  to  the  payee,  and  the  latter,  by  his  indorsement,  transferred 
the  benefit  of  this  promise  to  the  holder.  What  more  was  necessary  to  create 
a  liability  upon  the  parties?  There  is  a  direct  promise  to  pay  the  money, 
and  a  transfer  of  that  promise." 


124  FORM    AND    INCEPTION.  (Part    1 

Goold  was  to  complete  this  instrument,  which  was  stamped  with 
a  two  shilling  bill  stamp,  by  signing  his  own  name  as  drawer.  The 
plaintiff  had  no  authority  to  draw  or  accept  bills  for  Goold.  He  ac- 
cordingly enclosed  the  document,  together  with  gold  and  silver  to  the 
amount  of  £0.  10s.,  on  account  of  a  private  debt  of  his  own  to  Goold, 
in  a  parcel,  which  he  directed  to  Goold  at  Birmingham,  and  delivered 
to  defendants,  at  their  station  at  Strood,  to  be  carried,  and  which  they 
received  for  that  purpose.  There  was  affixed,  in  a  conspicuous  part 
of  the  office  where  the  parcel  was  received,  a  notice,  requiring  an  in- 
creased rate  of  charge,  according  to  St.  11  Geo.  IV  &  1  Wm.  IV,  c. 
68,  §§  1  and  2,  for  the  articles  specified  in  section  1.  No  notice  of 
the  value  or  contents  of  the  parcel  was  given,  nor  any  increased  rate 
paid  or  agreed  for.  The  cash  was  abstracted  from  the  parcel,  by  some 
means  which  did  not  appear,  before  it  reached  Goold ;  the  remainder 
of  the  contents  came  safely  to  hand. 

On  this  evidence,  the  counsel  for  the  defendants  contended  that  the 
parcel  contained,  within  the  meaning  of  the  carriers'  act  (St.  11  Geo. 
IV  &  1  Wm.  IV,  c.  68,  §  1,  gold  or  silver  coin  of  the  realm,  and  a  bill, 
note,  or  security  for  payment  of  money,  or  writing,  the  value  of  the 
whole  exceeding  £10.,  and  that,  no  notice  of  the  value  or  contents 
having  been  given,  or  increased  rate  paid  or  contracted  for,  the  defend- 
ants were  not  liable  for  the  loss.  The  plaintiff's  counsel  contended 
that  the  document,  being  incomplete,  was  of  no  value  as  a  security  or 
writing,  and  that  therefore  the  parcel  contained  no  articles,  within  the 
iiieaning  of  the  statute,  of  the  value  of  more  than  £9.  10s.  The 
learned  Judge  directed  a  verdict  for  the  plaintiff"  for  £9.  10s.,  reserving 
leave  to  move  to  enter  the  verdict  for  the  defendant  if  the  skeleton 
bill  was  an  article  within  the  carriers'  act,  and  was  of  such  a  value 
as  to  make  together  with  £9.  10s.  more  than  £10.  It  was  agreed  that 
the  jury  were  to  be  taken  as  finding,  so  far  as  it  was  a  question  for 
them,  that  the  writing  was  of  no  value. 

In  last  Michaelmas  term,  Willes  obtained  a  rule  nisi  accordingly." 

Lord  CxMi'iJiCLL,  C.  J.  I  am  of  opinion  that  this  rule  ought  to  be 
discharged.  The  case  of  the  defendants  is  clearly  untenable  unless 
this  paper  can  be  brought  within  section  1  of  the  carriers'  act  (11  Geo. 
IV  &  1  Wm.  IV,  c.  68.  It  must  be  shown  to  be  a  bill,  order,  note,, 
or  security  for  payment  of  money,  or  writing,  of  such  value  as  to 
make  up,  with  the  £9.  10s.,  more  than  £10.  It  is  not  a  bill  of  exchange; 
there  is  neither  drawer  nor  payee.  Nor  is  it  a  promissory  note  to  pay 
any  one  who  might  happen  to  be  the  bearer;  that  Cruttenden  should 
become  liable  generally  to  the  bearer  was  quite  contrary  to  his  inten- 
tion. Nor  is  it  a  security  for  money ;  for  we  must  look  at  the  time  of 
the  delivery  to  the  carrier ;  and  at  that  time  nothing  could  be  claimed 
on  it.  I  think  it  is  a  writing;  it  would  be  very  difficult  to  define  a 
writing  so  as  not  to  include  this  paper.     Then  the  question  is  as  to 

88  The  statement  Is  abridged,  and  the  arguments  of  counsel  are  omitted. 


Gh.  1)  FORM   OF   BILL   AND   OF   NOTE.  125 

the  value.  If  this  writing  possess  any  vakie  beyond  that  of  the  paper 
material,  that  value  must  be  ill.  10s.  Now  can  it  be  said  that  the 
writing-  bore  that  value  at  the  time  of  its  delivery  to  the  carrier?  I 
do  not  see  that  it  was  of  intrinsic  value  to  any  person.  It  empowered 
a  particular  individual  to  claim  to  that  amount,  by  putting  his  name  to 
it ;  but  that  had  not  been  in  fact  done  by  the  individual,  Goold.  I  can- 
not agree  that  the  executors  of  Goold  could  have  made  it  valuable  by 
putting  to  it  his  name,  or  their  own,  or  any  name  whatever.  Nor  could 
any  one  have  bestowed  value  on  it,  who,  not  being  contemplated  by 
Cruttenden,  had  found  it.  It  is  therefore  in  entire  accordance  with 
all  the  authorities,  to  hold  that  this  writing  was  of  no  value  at  the 
time  of  its  delivery  to  the  carrier. 

WiGHTMAN  J.  The  question  is,  whether  that  which  beyond  all 
doubt  was  a  writing  was,  at  the  time  of  its  delivery  to  the  carrier,  of 
a  value  exceeding  £10.  The  fallacy  of  the  argument  lies  in  attempting 
to  make  the  power  of  conferring  the  value  at  the  end  of  the  destined 
carriage  the  criterion  of  the  value  at  the  time  of  the  delivery.  I  think 
the  rule  should  be  discharged. 

ErlE,  J.  I  am  of  the  same  opinion.  This  being  an  imperfect  in- 
strument, and  not  a  complete  bill,  order,  note,  or  security  for  money, 
but  clearly  a  writing,  we  are  not  bound  to  say  that,  in  point  of  law,  it 
was  of  value.  I  use  that  expression,  because  it  may  be  that,  this  being, 
except  for  the  absence  of  the  name  of  the  drawer,  an  accepted  bill  of 
exchange,  a  jury  may  in  a  similar  case  find  that  the  writing  is  of  value ; 
and  I  do  not  wish  to  preclude  myself  from  considering  whether  such  a 
finding  might  not  be  sustained. 

Crompton,  J.  I  am  of  the  same  opinion;  and  I  have  no  remarks 
to  add.     Rule  discharged. 


SIFFKIN  v.  WALKER  &  ROWLESTONE. 

(Nisi  Prius,  before  Lord  Elleuborougli,  C.  J.,  1809.    2  Camp.  308.) 

Action  on  a  promissory  note  in  the  following  f oim  : 

"Two  months  after  date  I  promise  to  pay  J.  Siffkin  or  order  £300. 
for  value  received.  Thos.  Walker." 

The  declaration  stated  that  the  defendants  made  their  certain  prom- 
issory note,  which  was  signed  by  Walker  for  himself  and  Rowlestone, 
whereby  they  promised  to  pay,  etc. 

Park,  in  opening  the  case,  undertook  to  show  that  the  defendants 
were  jointly  indebted  to  the  plaintiff  on  a  charter  party  of  affreight- 
ment, to  the  amount  of  £300.  and  that  the  note  declared  upon  was 
given  by  Walker  in  satisfaction  of  this  debt. 

Lord  Ellenborough.  I  think  your  remedy  was  either  jointly 
against  both  defendants  on  the  charter  party,  or  separately  against 
Walker  on  the  promissory  note.     How  can  I  say  that  a  note  made 


12G  FOHM    AND    INCEPTION.  (Part  1 

and  signed  by  one  in  his  own  name  is  the  note  of  him  and  another 
person  neither  mentioned  nor  referred  to? 

Park  contended  that  the  note  was  set  out  in  the  declaration  accord- 
ing to  its  import  and  legal  effect ;  that  Walker  had  authority  to  bind 
Rowlestone  for  this  debt,  and  that  the  presumption  of  law  was,  that 
he  had  done  so,  althougii  Rowlestone's  name  was  not  introduced.  It 
was  universally  acknowledged  that  any  number  of  partners  might  be 
bound  by  a  note  drawn  in  the  partnership  firm;  and  the  legal  conse- 
quence must  be  the  same  if  a  note  be  given  for  a  partnership  debt, 
whether  the  phrase  "Si  Co."  be  employed  or  not. 

Lord  ELLnNBOROUGH.  The  import  and  legal  effect  of  a  written  in- 
strument must  be  gathered  from  the  terms  in  which  it  is  expressed, 
and  I  must  treat  this  note  as  a  separate  security  for  a  joint  debt- 

Plaintiflf  nonsuited."* 


LEADBITTER  v.  FARROW. 
(Court  of  King's  Beuch,  1S16.     5  Maule  &  S.  345.) 

Assumpsit  upon  a  bill  of  exchange  and  the  money  counts.  Plea, 
non  assumpsit.  At  the  trial  before  Lord  Ellenborough,  C.  J.,  at  the 
London  sittings  after  last  Hilary  term,  there  was  a  verdict  for  the 
plaintiff,  damages  £50.,  subject  to  the  opinion  of  the  court  upon  the 
following  case : 

The  plaintiff  and  defendant,  at  the  time  of  drawing  the  bill  in  ques- 
tion, resided  at  Hexham.  The  defendant,  who  was  a  tanner,  was  also 
agent  of  the  Durham  Bank,  in  which  capacity  he  acted  from  July, 
1812,  to  July,  1815,  when  the  bank  failed.  On  the  8th  of  June,  1815, 
the  plaintiff  sent  £50.  to  the  house  of  the  defendant,  in  order  to  pro- 
cure a  bill  upon  London  for  the  amount,  and  the  defendant  filled  up 
and  signed  the  bill  in  question  upon  one  of  the  printed  forms  of  the 
Durham  Bank,  and  sent  it  to  the  plaintiff.  The  following  is  a  copy 
of  the  bill : 
"N.  G.  205.     £50.  Hexham,  June  8.  1815. 

"Forty  days  after  date,  pay  to  the  order  of  Mr.  Thomas  Leadbitter 
fifty  pounds,  value  received,  which  place  to  the  account  of  the  Durham 
Bank,  as  advised. 

"Messrs.  Wetherell,  Stokes,  Mowbray,  Hollingsworth,  &  Co.,  Bank- 
ers, London.  [Signed]     Christr.  Farrow." 

The  persons  w^ho  constitute  the  firm  upon  which  the  bill  was  drawn 
are  the  same  who  constitute  the  firm  of  the  Durham  Bank,  that  bank 
having  a  house  in  London,  upon  which  they  were  in  the  habit  of  draw- 
ing bills,  which  they  wished  to  make  payable  there. 

The  bill  in  question  was  drawn  in  the  same  form  as  had  been  used 

84  Accord:  Seattle  Shoe  Co.  v.  Pjickard,  43  Wash.  527,  S6  Pac.  S45,  117 
Am.  St.  Ilep.  lc»(;4  (IOCm;);  N.  Y.  Life  lus.  Co.  v.  Maitindale,  75  Kan.  142  88 
Pac  559,  21  L.  R.  A.  (N    S.)  1045,  121  Am.  St.  Itep.  362  (1907) 


Gh.  1)  FORM  OF  BILL   AND   OF   NOTE.  127 

by  the  defendant  since  June,  1813,  before  which  time  he  had  been  in 
the  course  of  issuing  bills  drawn  in  the  name  of  one  of  the  partners  of 
the  Durham  Bank.  He  did  not  draw  bills  on  his  own  account  in  this 
form,  nor  upon  the  same  parties.  The  plaintiff,  when  he  sent  the  £50, 
and  obtained  the  bill,  knew  that  the  defendant  was  agent  of  the  Dur- 
ham Bank  at  Hexham,  and  that  the  Durham  Bank  drew  upon  a  house 
in  London,  and  he  supposed  that  the  bill  was  given  by  the  defendant, 
as  agent,  and  on  account  of  the  Durham  Bank,  to  which  the  defendant 
paid  over  the  i50.  The  bill,  when  due,  was  presented  to  the  drawees, 
and  payment  refused,  and  due  notice  was  given  to  the  defendant. 

The  question  for  the  opinion  of  the  court  was,  whether  the  plaintiff 
was  entitled  to  recover. ^^ 

Lord  EllEnborough,  C.  J.  Is  it  not  a  universal  rule  that  a  man 
who  puts  his  name  to  a  bill  of  exchange  thereby  makes  himself  per- 
sonally liable,  unless  he  states  upon  the  face  of  the  bill  that  he  sub- 
scribes it  for  another,  or  by  procuration  of  another,  which  are  words 
of  exclusion?  Unless  he  says  plainly,  "I  am  the  mere  scribe,"  he  be- 
comes liable.  Now,  in  the  present  case,  although  the  plaintiff  knew 
the  defendant  to  be  agent  to  the  Durham  Bank,  he  might  not  know 
but  that  he  meant  to  offer  his  own  responsibility.  Every  person,  it  is 
to  be  presumed,  who  takes  a  bill  of  the  drawer,  expects  that  his  re- 
sponsibility is  to  be  pledged  to  its  being  accepted.  Giving  full  effect 
to  the  circumstance  that  the  plaintiff  knew  the  defendant  to  be  agent, 
still  the  defendant  is  liable,  like  any  other  drawer  who  puts  his  name 
to  a  bill  without  denoting  that  he  does  it  in  the  character  of  procurator. 
The  defendant  has  not  so  done,  and,  therefore,  has  made  himself  liable. 

1  do  not  say  whether  an  action  would  lie  against  the  Durham  Bank, 
because,  considering  it  in  either  way,  it  would  not,  as  it  seems  to  me, 
affect  the  liability  of  the  defendant. 

BaylEy,  J.  I  am  entirely  of  the  same  opinion.  The  drawer,  by 
the  act  of  drawing,  pledges  his  name  to  the  bill's  being  duly  honoured ; 
and  though  the  plaintiff  in  this  case  knew  that  the  defendant  was  an 
agent,  he  might  also  know  that  he  had  given  this  pledge. 

Abbott,  J.  I  am  also  of  the  same  opinion.  The  party  does  not 
show  that  the  bill  was  not  taken  according  to  the  effect  which  it  bears 
on  the  face  of  it. 

HoLROYD,  J.  I  apprehend  that  no  action  would  lie  on  the  bill,  ex- 
cept against  those  who  are  the  parties  to  it. 

Judgment  for  the  plaintiff.^® 

B5  Arguments  of  counsel  are  omitted. 

5  6  As  to  the  liability  of  the  ageut  where  he  signs  the  instrument  per  pro- 
curationem, or  "X.,  by  A.,  Agt.,"  or  the  name  of  the  principal  simply,  but  is 
unauthorized,  see  White  v.  Madison.  2G  N.  Y.  117  (18G2),  an  action  for  breach 
of  warranty  of  authority,  and  West  London  Banlj  v.  Kitson,  13  Q.  B.  D.  360 
(C.  A.  1SS4),  an  action  of  deceit. 

As  to  the  liability  of  the  principal  in  such  case,  see  Reid  v.  Rigsby,  []S94] 

2  Q.  B.  40,  an  action  for  money  had  and  received,  and  In  re  Cunningham.  36 
Ch.  Div.  532  (1887). 


128  FOllM   AND   INCEPTION.  (Part   1 


MANUFACTURERS'  &  TRADERS'  BANK  v.  LOVE. 

(Supreiiie    Court,    Apiiellate    Division,    Fourth    Departiueut      1S97.      13    App. 
Div.  5G1,  43  N.  Y.  Supp.  812.) 

Appeal  by  the  plaintiff,  the  Manufacturers'  &  Traders'  Bank,  from 
a  judgment  of  the  Supreme  Court  in  favor  of  the  defendant,  entered 
in  the  office  of  the  clerk  of  the  county  of  Erie  on  the  29th  day  of 
February,  1896,  upon  the  decision  of  the  court  rendered  after  a  trial 
at  the  Erie  Trial  Term  before  the  court  without  a  jury,  dismissing  the 
complaint  upon  the  merits. 

The  action  was  brought  to  recover  of  the  defendant  upon  a  prom- 
issory note  which  reads  as  follows : 
"$201.93.  Buffalo,  N.  Y.,  May  3,  1895. 

"Two  months  after  date,  I  promise  to  pay  to  the  order  of  Rice-Blake 
Lumber  Company  two  hundred  one  and  93-100  dollars.  Value  ra- 
■ceivcd.     At  Bank  of  Buffalo,  here. 

"[Signed]  J.  W.  Johnston,  Agent." 

This  note  was  executed  by  Johnston  to  the  payees  therein  named 
for  lumber  purchased  of  them.  Johnston  was  conducting  a  lumber 
business  in  Buffalo.  The  payee  indorsed  and  transferred  this  note 
to  the  plaintiff  for  value,  before  it  was  due.  The  defendant  resided  in 
Elmira,  and  was  a  stepdaughter  of  Johnston's.'^ 

Ward,  J.  Whatever  may  be  the  rule  as  to  other  contracts  not  un- 
der seal,  the  law  is  firmly  established  in  this  state  as  to  commercial 
paper  that  persons  dealing  with  negotiable  instruments  are  presumed 
to  take  them  on  the  credit  of  the  parties  whose  names  appear  upon 
them,  and  a  person  not  a  party  cannot  be  charged  upon  proof  that  the 
ostensible  party  signed  or  indorsed  as  his  agent.  Briggs  v.  Partridge, 
G4  N.  Y.  303,  21  Am.  Rep.  617,  and  cases  there  cited;  Cortland  Wagon 
Co.  V.  Lynch,  82  Flun,  173,  31  N.  Y.  Supp.  325 ;  Casco  National  Bank 
v.  Clark,  139  N.  Y.  307,  34  N.  E.  908,  36  Am.  St.  Rep.  705.  It  is  also 
held  that  the  negotiable  instrument  binds  only  the  ostensible  maker, 
though  the  word  "Agent"  is  attached  to  his  signature;  no  principal 
being  named  in  the  body  of  the  instrument,  or  indicated  by  the  sig- 
nature.    See  the  last  two  cases  cited. 

The  law  merchant  surrounds  the  negotiable  paper  in  the  hands  of  a 
bona  fide  holder  with  a  credit  not  given  to  other  contracts,  and  pro- 
tects him  against  hidden  equities  of  which  he  has  no  notice,  and  per- 
mits him  to  recover  against  the  party  whose  name  is  signed  to  the  in- 
strument, though  there  be  attached  to  his  name  the  word  "Agent"  ;  and 
he  is  not  bound  to  search  for  a  principal  unknown  to  the  instrument 
itself,  nor  can  he  do  so.  The  rights  of  the  holder  are  confined  to  the 
parties  to  the  instrument,  and  he  must  rely  upon  them  alone,  except 
that  he  can  establish  that  the  name  used  as  the  signature  to  the  instru- 

67  The  stateiuent  of  the  case  is  abridged- 


Ch.  1)  FORM  OF  BILL  AND  OF  NOTK.  120 

ment  has  been  adopted  by  the  assumed  principal,  or  by  the  person  not 
named  in  the  instrument,  as  his  own,  in  transacting  the  business.  This 
may  be  done.  A  person  may  become  a  party  to  a  bill  or  note  by  any 
mark  or  designation  he  chooses  to  adopt,  provided  it  be  used  as  a  sub- 
stitute for  his  name,  and  he  intends  to  be  bound  by  it.  De  Witt  v. 
Walton,  9  N.  Y.  574;  Daniel  on  Neg.  Inst.  §  304.  The  last-quoted 
authority  says :  "But  such  liability  exists  only  where  it  is  affirmatively 
and  satisfactorily  proved  that  the  name  or  signature  thus  used  is  one 
which  has  been  assumed  and  sanctioned  as  indicative  of  their  contract, 
and  has  been  with  their  knowledge  and  consent,  adopted  as  a  substitute 
for  their  own  names  and  signatures  in  signing  bills  and  notes." 

No  authority  is  given  in  the  written  instrument  filed  from  the  de- 
fendant to  use  the  signature  of  "J.  W.  Johnston,  Agent,"  as  and  for 
the  defendant;  nor  is  there  any  proof  that,  in  fact,  the  defendant  had 
authorized  the  use  of  that  name  as  representing  her  in  the  business ; 
and  the  case  seems  to  stand  upon  the  bare  proposition  that  although 
neither  the  plaintiff  nor  the  lumber  company  had  knowledge  of  the 
instrument  filed  in  the  clerk's  office,  and  in  no  manner  relied  upon  it, 
and  had  no  knowledge,  in  fact,  that  the  signature  to  the  note  in  any 
manner  represented  the  defendant,  still  the  plaintiff  had  a  right  to  go 
outside  of  the  instrument,  and  explore  for  some  undiscovered  principal 
that  the  simple  addition  of  "Agent"  to  Johnston's  name  might  indicate, 
and,  having  found  this  instrument  on  file,  could  stand  upon  that  and 
recover.     We  cannot  concur  in  this  view. 

The  appellant  claims,  also,  that  it  was  error  to  permit  Johnston  to 
testify  that  the  defendant  never  had  any  interest  in  the  business,  and 
received  no  profits  therefrom,  and  that  a  revocation  of  the  agency  was 
made  in  March,  1895,  but  not  filed,  over  the  objection  of  the  plaintiff- 
The  plaintiff  had  made  Johnston  its  witness,  and  had  gone  into  the  re- 
lations existing  between  him  and  the  defendant ;  and  the  court  per- 
mitted him  to  testify  on  cross-examination,  to  the  matter  objected  to. 
Upon  the  facts  we  have  narrated,  if  the  reception  of  this  evidence  were 
error,  it  could  not  affect  the  result,  as  the  defendant  was  not  liable  in 
any  event  so  far  as  the  case  discloses,  and  it  is  therefore  unnecessary 
to  consider  the  matter  further. 

We  have  reached  the  conclusion  that  the  decision  of  the  trial  court 
was  right,  and  that  the  judgment  should  be  affirmed. 


TARVER  V.  GARLINGTON  et  al. 

(Supreme  Court  of  South  Carolina,  1887.     27  S.  C.  107.  2  S.  E.  846.  1.3  Am. 

St  Rep.  628.) 

Simpson,  C.  J.     The  action  below  was  commenced  for  the  recov- 
ery of  a  certain  sum  of  money  alleged  to  be  due  the  plaintiff  from 
defendants.     The  complaint   was,   in   substance,   as    follows,   to   wit: 
Sm.&  M.B.&  N.— 9 


ir»0  FORM    AND    INCKPTION.  (Part    1 

That  the  defendants,  through  their  agent,  S.  D.  Garlington,  made  their 
note  in  writing,  whereby  they  promised  to  pay  the  plaintiff,  or  order, 
$1G0  on  the  l^t  day  of  Xovember,  1884,  with  interest  at  7  per  cent.,  a 
copy  of  which  note  was  attached  to  the  complaint,  and,  after  the  usual 
allegations  of  ownership  and  nonpayment,  judgment  was  demanded 
for  said  amount.  The  copy  of  note  attaclied  was  as  follows :  '•$460. 
On  the  1st  day  of  November  next  I  promise  to  pay  Samuel  J.  Tarver, 
or  order,  four  hundred  and  sixty  dollars,  for  value  received,  with  in- 
terest from  date  at  the  rate  of  seven  per  cent,  per  annum.  Witness 
my  hand  and  seal  this  March  22,  1884.  [Signed]  S.  D.  Garlington, 
Agent." 

The  defendant  George  F.  Young  put  in  an  answer  denying  that  Gar- 
lington was  his  agent,  and  denied  the  alleged  indebtedness.  The  tune 
for  Mary  Garlington  had  not  expired,  and  she  had  not  answered,  at 
the  ensuing  court.  When  the  case  was  called,  and  the  complaint  and 
answer  of  George  F.  Young  read,  he  interposed  an  oral  demurrer  that 
the  complaint  did  not  state  facts  sufficient  to  constitute  a  cause  of  ac- 
tion, which  his  honor,  Judge  Aldrich,  sustained,  dismissing  the  com- 
plaint, with  costs,  as  to  the  defendant  George  F.  Young,  with  leave, 
however,  to  the  plaintiff  to  amend  his  complaint.  From  this  order  this 
appeal  is  before  us. 

The  ground  upon  which  the  demurrer  was  interposed,  and  upon 
which,  as  we  suppose,  it  was  sustained,  was  that  a  party  could  not 
be  bound  as  principal  upon  a  note  where  it  was  signed  by  another 
simply  as  "Agent,"  as  this  note  was  signed;  that  under  the  law  ap- 
plicable to  such  cases,  involving  the  doctrine  of  agency,  before  one 
could  be  held  liable  as  principal  upon  a  note  or  other  contract,  his  name 
should  appear  in  some  form  upon  the  face  of  the  paper,  so  that  from 
the  paper  itself  the  principal  could  be  ascertained ;  and  that,  in  the  ab- 
sence of  such  fact,  parol  testimony  was  incompetent  to  discover  or  de- 
velop it.  And  the  defendant  contends  here  that  inasmuch  as  the  note 
sued  on,  as  shown  by  the  copy  attached,  was  signed  by  "S.  D.  Garling- 
ton, Agent,"  without  specifying  for  whom  he  was  agent,  either  in  the 
body  of  the  note  or  attached  to  the  signature,  and  inasmuch  as  parol 
testimony  would  not  be  allowed  to  explain  away  or  remove  this  diffi- 
culty, therefore  the  facts  stated  in  the  complaint  fail  to  show  a  cause 
of  action. 

The  principle  relied  on  by  respondent  is  no  doubt  correct.  In  fact, 
at  one  time  in  this  state,  this  doctrine  was  carried  much  further  than 
that  contended  for  here.  See  the  case  of  Fash  v.  Ross,  2  Hill,  Law, 
294,  where  it  was  held  that  the  agent  signing  his  name  for  another, 
although  the  name  of  the  other  was  mentioned  thus,  "A.  B.  for  C.  D.," 
was  not  sufficient.  This  case  was,  however,  overruled,  with  the  cases 
that  had  followed  it,  by  the  case  of  Robertson  v.  Pope,  1  Rich.  Law, 
503,  44  Am.  Dec.  267 ;  and  now  the  doctrine  as  to  unsealed  contracts, 
negotiable  notes,  etc.,  is  as  stated  by  the  respondent,  to  wit :  That  the 
name  of  the  principal  must  appear  on  the  paper,  so  that  from  the  paper 


Ch.  1)  FORM   OF   BILL  AND   OF   NOTE.  131 

itself  the  principal  can  be  known.  This  is  the  general  rule,  and  it  is 
said  by  some  that  to  this  rule  there  is  no  exception.  In  a  note  to  Par- 
sons on  Notes  and  Bills,  p.  92,  however,  it  is  stated  that  there  is  at  least 
one  exception,  apparent,  if  not  real,  to  wit,  where  the  principal  carries 
on  business  in  the  name  of  the  agent.  In  that  case  the  name  of  the 
agent  is  the  name  of  the  principal  pro  hac  vice.  Bank  of  Rochester  v. 
Monteath,  1  Denio  (N.  Y.)  402,  43  Am.  Dec.  681.  In  the  case  of  Hicks 
V.  Hinde,  9  Barb.  (N.  Y.)  528,  where  one  had  drawn  a  draft  in  his 
own  name,  styling  himself  simply  "Agent,"  without  more,  it  being 
known  at  the  time  by  all  of  the  parties  for  whom  he  was  acting  as 
agent,  it  was  held  sufficient  to  charge  his  principal.  It  is  true,  how- 
ever, that  in  that  case  a  distinction  was  drawn  between  a  draft  and  an 
ordinary  note  or  contract. 

The  principle  upon  which  it  has  been  held  that,  where  the  name  of 
the  principal  appears  anywhere  on  the  note,  the  agent  himself  is  re- 
lieved from  liability,  and  liability  attaches  to  said  principal,  is  that  the 
principal  is  known  at  the  time  of  the  contract,  and  the  contract  is  really 
made  with  him.  It  was  upon  this  principle  that  Fash  v.  Ross,  supra,  was 
overruled  by  Robertson  v.  Pope,  supra,  thus  differentiating  ordinary 
unsealed  contracts  from  the  technical  rule  governing  sealed  contracts 
in  this  respect.  And  in  the  case  of  Robertson  v.  Pope,  supra.  Judge 
O'Neall  said  the  proof  was  abundant  that  Byers  (the  party  who  signed 
the  note,  thus,  "for  Nath'l  Pope,  Sam'l  Byers")  "was  the  agent  of  Byers, 
and  that  Pope  received  half  of  the  cattle  bought  for  Neuffer  and  him." 
Neuffer  was  the  other  maker  of  the  note  sued  on.  And  it  seems  that 
parol  testimony  was  received  in  that  case  to  show  that  Pope  was  a 
principal  in  the  note. 

Now,  in  the  case  before  us,  the  question  how  far  parol  testimony 
may  be  allowed  to  come  in,  to  explain  and  to  fix  the  application  of  the 
term  "agent,"  as  used  here,  has  not  been  adjudicated  by  the  court  be- 
low ;  at  least,  there  does  not  appear  any  distinct  and  positive  ruling  on 
this  question  by  his  honor.  He  simply  and  in  short  form  sustains  the 
demurrer.  This  question,  then,  not  being  strictly  before  us,  we  pass  it 
by.  The  case  comes  up  on  demurrer  to  a  complaint,  in  which  plaintiff 
alleges  chat  the  defendants,  through  their  agent,  on  a  note  signed  by 
said  agent  in  his  own  name,  "Agent,"  promised  to  pay  him  $460. 
Under  the  rules  of  law  and  evidence,  it  may  be  that  the  plaintiff  would 
not  be  allowed  to  go  beyond  the  face  of  the  note,  and  prove  by  parol 
that  S.  D.  Garlington,  in  signing  this  note,  promised  for  and  as  agent 
of  the  defendants,  as  alleged  in  the  complaint;  and,  if  the  case  had 
gone  to  the  jury,  it  may  be  that,  such  parol  evidence  being  excluded, 
the  plaintiff"  would  have  failed  in  his  action.  But  here  the  defendant 
admits  the  truth  of  the  allegations,  to  wit,  that  S.  D.  Garlington  had 
promised  for  him,  and  as  his  agent,  to  pay  said  money.  He  admits 
the  agency,  admits  the  promise,  and  that  it  was  made  by  the  note,  a 
copy  of  which  is  attached.  In  other  words,  so  far  as  the  demurrer 
is  concerned,  he  waives  his  right,  if  he  has  any,  to  exclude  parol  tes- 


132  FORM    AND    INCKPTION.  (Part    1 

timony  on  the  question  of  the  agency,  and  admits  it.  Upon  these  facts 
admitted,  the  question  of  law  is  raised  for  the  judge;  whereas,  if  the 
case  was  before  the  jury,  the  first  question  would  be,  has  the  agency 
been  established?  Upon  the  face  of  the  paper,  unexplained  by  parol 
testimony,  the  jury  would  be  compelled,  under  the  cases  above,  to 
answer  in  the  negative.  But  before  the  judge,  with  the  agency  not 
even  disputed,  but  actually  admitted,  it  seems  to  us,  it  was  error  to 
hold  that  there  was  no  cause  of  action. 

It  appears  that  there  is  at  least  one  exception  to  the  general  rule 
above  stated.  Note  to  Parsons,  supra,  p.  95.  Non  constat  but  the 
plaintiff  may  be  able  to  bring  his  case  under  that  exception.  Besides, 
the  plaintiff  should  have  the  right  to  test  the  question  how  far  parol 
testimony  may  be  admitted  in  a  case  of  this  kind. 

It  is  the  judgment  of  this  court  that  the  judgment  of  the  circuit 
court  be  reversed. 


U.  S.  I.  R. 

Stamp. 
25  cents. 


STURDIVANT  et  al.  v.  HULL. 

(Supreme  Judicial  Court  of  Maine,  1871.     59  Me.  172,  8  Am.  Rep.  409.) 

On  exceptions  to  the  ruling  of  Goddard,  J.,  of  the  superior  court 
for  the  county  of  Cumberland,  at  the  November  term,  1870. 

B.\RRows,   J.     Assumpsit   by   the   payees  against   the   maker   of   a 
promissory  note  of  the  following  tenor: 
"$225.00.  Portland,  Dec.  20,  18G9. 

"Four  months  after  date  I  promise  to  pay  to  the  order 
of  Sturdivant  &  Co.  two  hundred  and  twenty-five  dollars. 
Payable  at  either  bank  in  Portland,  with  interest.  Value 
received. 

"John  T.  Hull,  Treas.  St.  Paul's  Parish." 

The  signature  to  the  note  was  not  denied,  but  the  defendant  offered 
to  prove,  and  if  evidence  dehors  the  note  is  admissible  for  that  pur- 
pose, we  must  consider  it  as  proved,  that  at  the  time  the  note  was  made 
defendant  was  treasurer  of  St.  Paul's  parish,  and  made  the  note  in 
suit,  in  behalf  of  said  parish  and  for  their  sole  benefit,  in  renewal  of 
a  former  note  given  by  his  predecessor,  Moody,  for  lumber  used  in 
building  their  parish  church,  and  that  defendant  never  received  any 
personal  consideration  or  any  consideration  for  the  note,  other  than 
the  foregoing,  and  that  these  facts  were  known  to  the  plaintiffs  when 
the  note  was  given,  and  that  the  understanding  and  intention  of  both 
parties,  then,  was  that  it  was  the  note  of  the  parish  and  not  of  the  de- 
fendant. 

As  the  suit  is  between  the  original  parties  to  the  note,  it  follows  that 
if  the  proffered  evidence  showed  that  there  was  no  valid  considera- 
tion for  the  defendant's  promise,  it  should  have  been  admitted.  But 
such  is  not  the  case.     It  is  not  necessary  that  the  consideration  should 


Ch.  1)  FORM   OF  BILL   AND   OF   NOTE.  133 

have  inured  to  the  personal  benefit  of  the  promisor,  and  the  surrender 
of  the  previous  note  or  the  extension  of  the  term  of  credit  originally 
given  to  the  parish  for  the  lumber  would,  either  of  them,  be  a  sufficient 
consideration  for  the  defendant's  note. 
The  case  presents  but  two  questions : 

(1)  Whether  the  defendant's  liability  must  be  determined  solely  by 
the  written  instrument  which  he  has  subscribed,  excluding  the  evi- 
dence above  offered  to  control  its  construction? 

(2)  If  so,  does  the  true  construction  of  it  make  it  his  note,  or  that 
of  the  parish  ? 

I.  Now,  when  parties  are  competent  witnesses,  and  stand  ready  to 
testify  (if  allowed)  not  only  to  their  own  intentions  but  to  those  of 
the  other  party  to  the  contract,  the  wisdom  of  the  long-established  rule, 
which  requires  all  parties  to  written  contracts,  at  their  peril,  to  state 
what  they  mean  to  abide  by  in  the  writing  itself,  and  prohibits  them 
from  resorting  to  oral  testimony  to  contradict  or  vary  its  terms,  grows 
more  apparent  every  day. 

One  of  the  illustrations  of  this  rule,  given  by  Mr.  Greenleaf  in  his 
treatise  on  Evidence  (Volume  1,  p.  320,  Ed.  1842),  citing  Stackpole  v. 
Arnold,  11  Mass.  27,  6  Am.  Dec.  150),  runs  thus:  "Where  one  signed 
a  promissory  note  in  his  own  name,  parol  evidence  was  held  inadmis- 
sible to  show  that  he  signed  it  as  the  agent  of  another,  on  whose  prop- 
erty he  had  caused  insurance  to  be  effected  by  the  plaintiff,  at  the 
owner's  request." 

When  a  man  has  deliberately  said,  in  writing,  "I  promise  to  pay," 
and  a  valid  consideration  for  the  promise  is  shown,  right  and  justice 
are  not  very  likely  to  be  the  gainers  by  allowing  him  to  retract  and  to 
undertake  to  prove  that  he  did  not  actually  mean,  'T  promise,"  but 
that  he  meant,  and  the  other  party  understood  that  he  meant,  that 
some  third  party,  whose  promise  the  writing  does  not  purport  to  be, 
undertook  the  payment. 

It  is  better  that  a  careless  or  ignorant  agent  shall  sometimes  pay  for 
his  principal,  than  to  subject  the  construction  of  valid  written  con- 
tracts to  the  manifold  perversions,  misapprehensions,  and  uncertain- 
ties of  oral  testimony. 

And  upon  this  point  the  decisions  (although,  in  cases  of  like  type 
with  this,  they  are  somewhat  conflicting,  or,  at  least,  distinguished 
with  scarcely  a  shade  of  difference,  upon  the  question  of  the  construc- 
tion of  the  instrument  itself)  will  be  found  concurring.  Andrews  v. 
Estes,  11  Me.  270,  26  Am.  Dec.  521 ;  Hancock  v.  Fairfield,  30  Me.  299  : 
Slawson  V.  Loring,  5  Allen  (Mass.)  342 ;  Draper  v.  Mass.  Steam  Heat- 
ing Co.,  5  Allen  (Mass.)  338;  Barlow  v.  Cong.  Soc.  in  Lee,  8  Allen 
(Mass.)  460;  Tucker  Manuf.  Co.  v.  Fairbanks,  98  Mass.  104,  and 
cases  there  cited. 

Nor  is  this  wholesome  rule  abrogated  by  any  of  our  statute  pro- 
visions touching  the  responsibility  of  principals  upon  contracts  made 
and  executed  by  their  authorized  agents.     *     *     * 


134  FOUM  AND  INCEPTION.  (Fart  1 

The  defendant's  liability  must  be  ascertained  by  an  examination  of 
the  note  itself. 

11.  As  has  already  been  suggested,  the  cases  involving  the  construc- 
tion of  similar  instruments  are  more  difficult  to  reconcile  than  those 
in  which  the  point  just  disposed  of  has  been  considered.  Apparent- 
ly slight  changes  in  the  phraseology  have  affected  the  construction 
adopted  by  different  courts,  and  by  the  same  court  in  different  cases. 
There  is  a  necessity  for  a  careful  examination  and  comparison  of  the 
numerous  decisions.  This  we  have  endeavored  to  make,  and  the  re- 
sult is,  we  are  satisfied  that  the  weight  of  reason  and  authority  dem- 
onstrates that  this  is  the  personal  contract  of  the  defendant  and  not 
that  of  the  parish  of  which  he  was  treasurer. 

There  are  no  appropriate  words  in  it  to  show  that  it  was  the  contract 
of  the  parish,  or  that  it  was  made  by  the  defendant  in  its  behalf.  He 
does  not  say  that  he  promises  as  treasurer,  or  use  any  language 
significative  of  an  intention  to  bind  his  successors  in  office  as  in  Bar- 
low V.  Cong.  Soc.  in  Lee,  in  which  case  Mann  v.  Chandler,  a  per 
curiam  opinion  reported  9  Mass.  335,  is  disavowed  as  an  authority,  and 
it  is  said  that  "all  the  decisions  of  this  court  upon  unsealed  instru- 
ments, since  the  case  of  Mann  v.  Chandler,  have  required  something 
more  than  a  mere  description  of  the  general  relation  between  the 
agent  and  the  principal,  in  order  to  make  them  the  contracts  of  the 
latter."    Vide  8  Allen   (Mass.)  461,  462,  463. 

In  Haverhill  M.  F.  Ins.  Co.  v.  Newhall,  1  Allen  (Mass.)  130.  up- 
on a  note  signed.  "Cheever  Newhall,  President  of  the  Dorchester  Av- 
enue Railroad  Company."  though  it  was  agreed  that  the  defendant. 
at  the  time  of  signing  the  note,  was  the  president  of  said  company, 
that  it  was  given  in  consideration  of  a  policy  of  insurance  issued  by 
the  plaintiffs  to  that  company,  upon  property  owned  by  them,  and 
that  the  defendant  was  duly  authorized  by  the  company  to  obtain 
the  insurance  and  sign  the  note,  it  was  held  that  the  form  of  the 
note  only  was  to  be  looked  at  upon  the  question  of  charging  the  de- 
fendant, that  he  had  fixed  a  personal  liability  upon  himself  by  the 
use  of  the  words.  "I  promise  to  pay,"  and  that  this  liability  was  not 
affected  by  the  descriptive  addition  to  his  signature. 

In  Fiske  v.  Eldridge.  12  Gray  (Mass.)  474,  the  note  was  signed, 
"John  S.  Eldridge,  Trustee  of  Sullivan  Railroad,"  and  the  defend- 
ant was  held  personally  liable,  though  he  proved  that  he  was  trustee 
of  the  railroad  company,  and  as  such  had  entire  charge  of  its  prop- 
erty and  business,  and  gave  the  note  in  suit  to  take  up  a  promissory 
note  of  the  corporation,  and  delivered  wnth  it  bonds  of  the  corpora- 
tion as  collateral  security  for  its  payment. 

The  defendant's  counsel  relies  upon  certain  dicta  intimatincr  that 
the  case  of  Mann  v.  Chandler  may  be  sustained,  because  the  defend- 
ant there,  as  here,  was  treasurer  of  the  corporation,  and  that  the  sig- 
nature of  that  officer  may  be  thought,  of  itself,  to  import  a  promise 
of  the  party  whose  treasurer  he  is. 


Ch.  1)  FORM   OF  BILi.   AND   OF   NOTE.  135 

But  we  should  be  unwilling  to  say  that  the  treasurer  of  a  religious 
corporation  has  any  authority  by  virtue  of  his  office  to  bind  such 
corporation  by  the  issue  of  negotiable  promissory  notes,  or  that  the 
official  signature  of  such  treasurer  could  be  considered  as  indicating 
the  assertion  of  such  authority,  any  more  than  the  signature  of  a  per- 
son describing  himself  as  president  or  trustee  of  a  business  corpo- 
ration asserts  the  requisite  authority  on  the  part  of  such  president 
or  trustee. 

In  Mann  v.  Chandler,  relied  on  by  the  defendant,  the  special  au- 
thority conferred  by  the  directors  upon  the  treasurer  to  give  the  note 
in  suit  was  shown,  and  in  the  more  recent  cases  above  cited,  from 
12  Gray  and  1  Allen,  such  authority  was  either  admitted  or  proved 
without  objection.  But  the  tendency  of  the  later  decisions,  manifest- 
ly, is  to  hold  the  man  who  says,  "I  promise  to  pay"  (without  stating 
in  the  writing  itself  that  he  promises  for  or  in  behalf  of  any  other 
party),  responsible  personally.  Why  should  it  not  be  so?  That  is 
the  plain  and  direct  import  of  the  language  he  uses.  "I"  is  not  the 
language  of  a  corporation  or  an  association.  It  is  that  of  an  individ- 
ual signer.  If  such  signer  appends  to  his  signature  a  description  of 
himsef  as  agent,  president,  trustee,  or  treasurer  of  a  corporation,  it 
may  import  a  declaration  on  his  part  that,  having  funds  of  such  cor- 
poration in  his  possession,  he  is  willing  to  be  responsible,  and  accord- 
ingly makes  himself  responsible,  for  a  debt  of  theirs. 

And  this  descriptio  personge  may  aid  him  in  the  keeping  and  adjust- 
ment of  his  accounts  with  his  different  principals. 

But  without  some  words  in  the  contract  importing  that  he  prom- 
ises for  or  in  behalf  of  his  principal,  he  cannot  avoid  the  personal 
liability  he  has  thus  assumed. 

In  Seaver  v.  Coburn,  10  Cush.  (Mass.)  324,  the  contract  signed  by 
defendant  as  "Treasurer  of  the  Eagle  Lodge,''  etc.,  was  held  bind- 
ing upon  him  personally.  And  the  distinction  which  the  defendant 
seeks  to  set  up,  between  treasurers  and  other  officers  and  agents  of 
corporations,  was   ignored. 

The  fact  that  it  has  been  suggested  as  a  possible  ground  upon  which 
the  case  of  Mann  v.  Chandler  (so  often  doubted,  and  so  recently  de- 
nied to  be  an  authority  in  the  court  which  pronounced  it)  might  be 
sustained  can  hardly  be  expected  to  avail  the  defendant  here. 

This  subject  has  been  elaborately  discussed  in  Tucker  Manuf.  Co. 
v.  Fairbanks,  98  Mass.  101,  and  in  Barlow  v.  Cong.  Soc.  in  Lee,  8 
Allen  (Mass.)  460,  and  what  we  have  already  said  may  seem  super- 
fluous.    *     *     * 

Judgment  for  plaintiffs."* 

6  8  Part  of  the  opiiiiou  is  omitted- 


136  FOUM  AND  INCEPTION.  (Part  1 


KEIDAN  V.  WINEGAR. 

(Supreme   Court   of   .MdchiKan,    1893.     95    Mich.    430,    54    N.    W.    001.    120    L. 

R.  A.  705.) 

McGr.\TH.  J.  Plaintiff  had  judgment  upon  the  following  promis- 
sory note:  "$336.96.  Grand  Rapids.  Mich.,  Dec.  22,  1887.  Ninety 
days  after  date,  I  promise  to  pay  to  the  order  of  Geo.  Keidan  three 
hundred  thirty-six  and  96-100  dollars  at  the  Old  National  Bank  of 
Grand  Rapids,  Mich.,  value  received,  with  interest  at  the  rate  of  eight 
per  cent,  per  annum  until  paid.     W.  S.  Winegar,  Agt." 

Defendant,  with  his  plea,  filed  an  affidavit  setting  forth  "that  the 
note,  a  copy  of  which  is  attached  to  the  declaration  in  said  cause,  and 
served  upon  said  deponent,  with  a  copy  of  said  declaration,  is  not  the 
note  of  this  deponent,  defendant  as  aforesaid;  and  he  denies  the  same 
and  the  execution  thereof,  and  says  that  he,  said  defendant,  is  not  in- 
debted to  said  plaintiff  upon  said  note,  nor  for  any  part  thereof,  nor 
is  he  indebted  to  said  plaintiff  in  any  sum  whatever,  nor  in  any  man- 
ner whatever." 

Upon  the  trial  defendant  offered  to  show  that  in  1SS4,  before  plain- 
tiff had  any  dealings  with  defendant,  plaintiff  was  informed  that  de- 
fendant was  carrying  on  business  as  the  agent  of  Maggie  G.  Wine- 
gar,  and  was  not  doing  business  for  himself;  that  business  relations 
were  then  established  between  plaintiff  and  said  Maggie  G.  Wine- 
gar;  that  said  business  relations  continued  from  the  early  part  of 
1884  to  and  including  the  year  1887,  and  embraced  many  transac- 
tions between  plaintiff  and  Maggie  G.  Winegar;  that  many  instru- 
ments were  made  between  the  parties,  which  were  signed  exactly  as 
the  note  sued  upon  is  signed,  and  that  this  form  of  execution  had 
come  to  be  recognized  and  adopted  between  the  parties  as  binding 
Maggie  G.  Winegar ;  that  during  that  time  no  business  was  trans- 
acted by  the  defendant  in  his  individual  capacity,  and  all  the  busi- 
ness done  was  that  of  his  principal,  and  known  and  understood  to  be 
such  by  plaintiff;  that  the  said  note  was  given  and  accepted  as  the 
obligation  of  Maggie  G.  Winegar;  that  the  note  was  given  for  due- 
bills  and  goods  furnished  by  plaintiff  to  Maggie  G.  Winegar,  and  such 
duebills  and  goods  were  by  plaintiff  charged  to  said  Maggie  G.  Wine- 
gar on  the  books  of  plaintiff';  that  the  taking  of  these  notes  did  not 
in  the  least  change  the  character  of  the  indebtedness;  and  that  de- 
fendant never  received  any  benefit  or  consideration  for  said  note.  The 
court  refused  to  admit  the  testimony,  and  directed  a  verdict  for  the 
plaintiff. 

The  clear  weight  of  authority  is  that  the  promise  in  the  present 
case  is  prinia  facie  the  promise  of  William  S.  Winegar,  and,  as  be- 
tween one  of  the  original  parties  and  a  third  party,  the  addition  of 
the  word  "agent"  is  not  sufficient  to  put  such  third  party  upon  in- 
quiry.   The  question  here,  however,  is  whether,  as  between  the  irrirne- 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE.  '  137 

diate  paities  to  the  instrument,  parol  evidence  is  admissible  to  show 
the  real  character  of  the  transaction.  In  his  excellent  work  on 
Agency,  Mr.  Mechem  lays  down  the  general  rules,  which  we  think 
are  sustained  by  reason  and  authority.  Mechem,  Agency,  par. 
443.     *     *     * 

In  Metcalf  v.  Williams,  104  U.  S.  93,  98,  26  L-  Ed.  665,  Mr.  Jus- 
tice Bradley  says :  "The  ordinary  rule,  undoubtedly,  is  that  if  a  per- 
son merely  adds  to  the  signature  of  his  name  the  word  'agent,'  'trus- 
tee,' or  'treasurer,'  etc.,  without  disclosing  his  principal  he  ir.  pfrscn- 
ally  bound.  The  appendix  is  regarded  as  a  mere  desciipricpei'ispria,! 
It  does  not  of  itself  make  third  persons  cha,rg"f;able  with  notice  of  any 
representative  relation  of  the  signer.  'Bn\^  if  lie  be  iji  fact  a  m2,r^ 
agent,  trustee,  or  ofificer  of  some  principal; 'and  is  in  the  habit  of.  ex- 
pressing in  that  way  his  representative  character  in  his  .dckh/igs'  with 
a  particular  party,  who  recognizes  hini  in  that  cbarapter',it' would  be 
contrary  to  justice  and  truth  to  construe  the,  documents  thus  made 
and  used  as  his  personal  obligat'on.,  ccntrAry  to  the  intent  of  the 
parties." 

In  Kean  v.  Davis,  21  N.  J.  Law,  683,  687,  47  Am.  Dec.  183,  Chief 
Justice  Green  says :  "The  question  is  not,  what  is  the  true  construc- 
tion of  the  language  of  the  contracting  party ;  but,  who  is  the  con- 
tracting party?  Whose  language  is  it?  And  the  evidence  is  not  ad- 
duced to  discharge  the  agent  from  a  personal  liability  which  he  has 
assumed,  but  to  prove  that  in  fact  he  never  incurred  that  liability ;  not 
to  aid  in  the  construction  of  the  instrument,  but  to  prove  whose  in- 
strument it  is.  Now,  it  is  true  that  the  construction  of  a  written  con- 
tract is  a  question  of  law,  to  be  settled  by  the  court  upon  the  terms 
of  the  instrument.  But  whether  the  contract  was  in  point  of  fact  ex- 
ecuted, when  it  was  made,  where  it  was  made,  upon  what  considera- 
tion it  was  made,  and  by  whom  it  was  made,  are  questions  of  fact, 
to  be  settled  by  a  jury,  and  are  provable  in  many  instances  by  parol, 
though  even  the  proof  conflicts  with  the  language  of  the  instrument 
itself." 

In  Hicks  v.  Hinde,  9  Barb.  (N.  Y.)  528,  where  an  agent  drew  a  bill 
on  his  principal  for  a  debt  due  from  the  principal  to  the  payee,  add- 
ing the  word  "agent"  to  his  signature,  and  the  payee  knew  that  the 
drawer  was  authorized  by  his  principal  to  draw  the  bill  as  his  agent, 
and  it  was  the  understanding  of  all  parties  that  the  drawer  signed 
only  as  agent,  and  not  with  a  view  of  binding  himself,  it  was  held 
that  the  drawer  was  not  personaly  liable  on  the  bill.     *     *     * 

As  is  so  often  said,  it  is  the  intent  of  the  parties  wdiich  is  to  be  car- 
ried out  by  the  courts.  The  rule  that  rejects  words  added  to  the  sig- 
nature is  an  arbitrary  one.  Its  reason  is  not  so  much  that  the  words 
are  not,  or  may  not  be,  suggestive,  but  that  they  are  but  suggestive, 
and  the  instrument,  as  a  whole,  is  not  sufificiently  complete  to  point 
to  other  parentage.  The  very  suggestiveness  of  these  added  words 
has  given  rise  to  an  irreconcilable  confusion  in  the  authorities  as  to  the 


138  KOUM  AND  INCEPTION.  (Part  1 

legal  effect  of  such  an  instrument.  Extrinsic  evidence,  therefore,  is 
admissible  in  such  case,  between  the  immediate  parties,  to  explain 
a  suggestion  contained  on  the  face  of  the  instrument,  and  to  carry  out 
the  contract  actually  entered  into  as  suggested,  but  not  fully  shown, 
by  the  note  itself.  The  presumption  that  persons  dealing  with  nego- 
tiable instruments  take  them  on  the  credit  of  the  parties  whose  names 
appear  should  not  be  absolute  in  favor  of  the  immediate  payee,  from 
whom  the  consideration  passed,  who  must  be  deemed  to  have  known 
all  the  facts  and  circumstances  surrounding  the  inception  of  the  note, 
and  willvsuch  knowledge  accepted  a  note  containing  such  a  suggestion. 
,  •■  In  the  case  -of  Tilden  v.  Barnard,  43  Mich.  376,  5  N.  W.  420,  38 
Am.  Rep.  376,  under  a  state  of  facts  similar  to  those  offered  to  be 
shewn  Jiere,  it  was  held  ^bal  defendants  there  were  not  liable. 

We  ihitik  .that  in  the  present  case  defendant  was  entitled  to  make 
the  showing,  offered.  Under  the  general  issue,  defendant  was  enti- 
tled to  give  in  .evidence  any  matter  of  defense  going  to  the  exist- 
ence of  any  promise:  having- legal  force,  as  against  him.  1  Shinn, 
PI.  &  Pr.  §  740.  .    • 

The  judgment  is  reversed,  and  a  new  trial  ordered."' 


FIRST  NAT.  BANK  OF  BROOKLYN  v.  WALLIS. 
(Court  of  Appeals  of  New  York,  1S96.     150  N.  Y.  4."..'.  44  N.  E.  1038.) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme  Court 
in  the  Second  Judicial  Department,  entered  September  10,  1894,  which 
affirmed  a  judgment  in  favor  of  plaintiff  entered  upon  a  verdict  di- 
rected by  the  court.  Since  the  taking  of  the  appeal  William  T.  Wal- 
lis  has  died,  and  the  action  has  been  continued  in  the  name  of  George 
T.  Smith. 

This  action  was  upon  a  promissory  note  in  the  following  form: 
"$1,100.  Jersey  City,  N.  J.,  Jan.  20,  1893. 

Three  months  after  date,  we  promise  to  pay  to  the  order 
of  H.  Stuetzer  &  Co.  eleven  hundred  dollars  at  the  First 
National   Bank  of  Jersey  City,  value   received. 

"William   T.    Wallis,    President. 
"George  T.    Smith,   Treasurer." 

On  the  day  of  its  date  the  note  was  presented  by  the  defendant 
Herman  Stuetzer,  one  of  the  members  of  the  firm  to  whom  it  was  pay- 
able, to  the  plaintiff  for  discount,  and  it  was  discounted  by  the  plain- 
tiff and  the  proceeds  paid  to  Stuetzer. 

When  the  note  was  discounted  no  knowledge  had  been  communi 
cated  to  the  plaintiff  respecting  the  purpose  for  which  the  note  was 

6»  Part  of  the  opiuiou  is  omitted. 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE,  139 

given.  The  discount  was  made  on  the  faith  of  Stuetzer,  without  in- 
quiry or  knowledge  whether  it  was  the  note  of  the  WalHs  Iron  Works 
or  the  individual  note  of  the  defendants  Wallis  and  Smith,  except 
what  appeared  upon  the  face  of  the  note. 

The  defense  was  that  the  note  was  the  obligation  of  the  Wallis 
Iron  Works,  not  that  of  defendants.^" 

Andrews,  C.  J.  The  character  of  the  plaintiff  as  a  bona  fide  hold- 
er of  the  note  is  not  affected  by  any  misconception  it  may  have  been 
under  when  it  discounted  it,  as  to  the  legal  import  of  the  promise ;  that 
is  to  say,  whether  the  note  was  the  obligation  of  the  Wallis  Iron 
Works,  or  of  the  persons  who  signed  it  in  their  individual  names, 
with  the  addition  of  the  names  of  their  respective  offices.  The  bank 
discounted  the  note  at  the  request  of  its  customers,  the  payees,  before 
maturity,  paying  full  value,  without  inquiring  as  to  the  nature  of  the 
principal  obligation,  and  it  is  entitled  to  enforce  it  against  the  defend- 
ants as  individuals,  if  on  its  face  it  was  their  promise,  and  not  the 
promise  of  the  corporation  of  which  they  were  officers.  It  may  be 
admitted  that  if  the  bank,  when  it  discounted  the  paper,  was  inform- 
ed or  knew  that  the  note  was  issued  by  the  corporation,  and  was  in- 
tended to  create  only  a  corporate  liability,  it  could  not  be  enforced 
against  the  defendants  as  individuals,  who,  by  mistake,  had  execut- 
ed it  in  such  form  as  to  make  it  on  its  face  their  own  note  and  not 
that  of  the  corporation. 

But,  according  to  the  rules  governing  commercial  paper,  nothing 
short  of  notice,  express  or  implied,  brought  home  to  the  bank  at  the 
time  of  the  discount,  that  the  note  was  issued  as  the  note  of  the  cor- 
poration, and  was  not  intended  to  bind  the  defendants,  could  defeat 
its  remedy  against  the  parties  actually  liable  thereon  as  promisors. 
It  appears  that  the  bank  discounted  the  note  on  the  credit  primarily 
of  its  customers,  the  payees,  making  no  inquiry  as  to  whether  it  was 
a  corporate  or  individual  obligation,  and  having  no  knowledge  on  the 
svibject.  In  law  it  was  the  individual  note  of  the  defendants  (Casco 
National  Bank  v.  Clark,  139  N.  Y.  308,  34  N.  E.  908,  36  Am.  St. 
Rep.  705 ;  Merchant's  National  Bank  v.  Clark,  139  N.  Y.  315,  34  N. 
E.  910,  36  Am.  St.  Rep.  710),  and  the  form  of  the  promise  is  quite 
consistent  with  an  intention  to  create  an  individual  liability.  The  fact 
that  the  bank  sued  the  Wallis  Iron  Works  on  one  of  the  notes  of  this 
kind  is  not  a  material  circumstance.  That  note  matured,  and  suit  was 
brought  thereon,  subsequent  to  the  discount  of  the  note  now  in  ques- 
tion. The  view  there  entertained  by  the  plaintiff  of  the  legal  nature 
of  the  obligation  did  not  conclude  the  bank  from  enforcing  the  note 
now  in  question  according  to  its  real  character.  If  the  fact  of  the  for- 
mer suit  and  the  pleadings  therein  were  admissible  on  the  question 
of  the  knowledge  of  the  bank,  when  it  discounted  the  present  note, 
that  it  was  issued  for  and  was  intended  as  a  corporate  obligation,  the 

•0  Arguments  of  counsel  are  omitted. 


140  FORM   AND    INCEPTION.  (Part  1 

existence  of  such  knowledge  has  been  negatived  by  the  course  of  the 
trial. 

We  think  the  judgment  is  right,  and  it  should,  therefore,  be  affirmed. 
All  concur. 

Judgment  affirmed.'^ 


MEGOWAN  et  al.  v.  PETERSON. 
(Court  of  Appeals  of  New  York.  1902.     173  N.  Y.  1.  »!')  N.  E.  T3S.) 

Appeal  from  a  judgment  of  the  Appellate  Division  of  the  Supreme 
Court  in  the  Second  Judicial  Department,  entered  June  7,  1901,  af- 
firming a  judgment  in  favor  of  defendant  entered  upon  a  dismissal 
of  the  complaint  by  the  court  at  a  Trial  Term  and  an  order  denying 
a  motion  for  a  new  trial.  The  nature  of  the  action  and  the  facts,  so 
far  as  material,  are  stated  in  the  opinion.*'^ 

Haight,  J.  This  action  was  brought  to  recover  of  the  defend- 
ant personally  the  amount  of  a  promissory  note,  of  which  the  follow- 
ing is  a  copy:  "$G93.19.  Brooklyn,  Dec.  28.  1899.  Three  months 
after  date  I  promise  to  pay  to  the  order  of  C.  Stevens  Co.  six  hundred 
and  ninety-three  ^'/loo  dollars  at  Kings  County  Bank  of  Bklyn.,  value 
received.  Due  March  28,  1900.  Charles  G.  Peterson,  Trustee."  The 
plaintiffs  were  copartners  doing  business  under  the  firm  name  of  C. 
Stevens  Company,  and  upon  the  trial,  to  establish  their  cause  of  ac- 
tion, introduced  the  note  in  question  in  evidence,  the  signature  being 
admitted,  and  then  rested. 

The  defendant,  in  order  to  establish  his  defense,  then  introduced 
in  evidence  testimony  tending  to  show  that  on  the  4th  day  of  Decem- 
ber, 1899.  the  surviving  member  of  the  firm  of  Johnson  &  Peterson 
called  a  meeting  of  the  creditors  of  the  firm,  and  at  such  meeting  the 
creditors  assembled  executed  a  paper  by  which  "we,  the  undersigned 
creditors  of  Johnson  &  Peterson,  hereby  agree  to  and  with  each  other 
and  for  the  purpose  of  liquidating  the  business  of  Johnson  &  Peter- 
son and  the  completion  of  the  contracts  of  said  firm,  do  hereby  ap- 
point Charles  G.  Peterson  as  sole  agent  and  trustee  for  the  benefit  of 
all  creditors  to  assume  control  and  management  of  said  business,  here- 

«i  Contra:  Daniel  v.  Glldden,  38  Wash.  556,  80  Pac.  811  (1905)  serable. 
See  Western  Grocery  Co.  v.  Lackman.  75  Kan.  34.  SS  Pac.  527  (1907).  an 
artion  on  a  promissory  note  payable  to  the  plaintiff  and  signed  "Kansas 
City  &  Olathe  Electric  Ky.  Co..  Wni.  I^ickuian,  I'resident,  D.  B.  Johnson, 
Secretary."  In  holding  that  the  plaintiff  could  not  recover,  the  court  said: 
"It  has  been  held  in  this  state  that,  when  it  is  uncertain  from  the  face  of 
the  note  whether  it  was  intended  to  be  the  note  of  the  corporation,  or  of  the 
individuals  signing  it,  or  both,  if  the  litigation  arises  between  the  original 
parties,  evidcme  may  be  intrnduced  to  explain  the  amlnguity."  See,  to  the 
same  effect,  where  the  note  read  "we  promise."  and  was  signed  by  "Varick 
Contracting  Co."  and  ".lohn  Martin,"  Dunbar  Co.  v.  Martin,  53  Misc  Rep 
312.   ^c^?,  X.   Y.  Supp.  91   (1007). 

62  The  arguments  of  counsel  are  omitted- 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE.  141 

by  ratifying  each  and  every  act  of  said  agent  in  the  premises  by  him 
done  or  to  be  done;  and  we  severally  agree  to  forbear  the  prosecu- 
tion and  collection  of  our  respective  claims  against  said  firm."  Then 
followed  the  signatures  of  the  creditors,  among  which  is  that  of  the 
plaintiff's  firm,  "C.  Stevens  Co."  This  was  followed  by  another  pa- 
per of  the  same  character,  upon  which  appear  the  signatures  of  other 
creditors  who  were  not  present  at  the  meeting.  Thereupon,  and  at 
the  same  meeting,  another  paper  was  drawn  and  executed  by  John- 
son, the  surviving  member  of  the  firm,  by  which,  in  consideration  of 
$1,  the  receipt  of  which  he  admitted,  he  bargained  and  sold,  granted 
and  conveyed,  unto  Charles  G.  Peterson,  as  trustee  for  the  creditors 
of  Johnson  &  Peterson,  his  successors  and  assigns,  all  the  stock  in 
trade,  goods,  merchandise,  effects,  and  property  of  every  description 
belonging  to  or  owned  by  the  said  partnership  of  Johnson  &  Peter- 
son, wherever  the  same  may  be,  together  with  all  debts,  choses  in  ac- 
tion, and  sums  of  money  due  and  owing  to  said  firm.  He  then  pro- 
duced oral  testimony  tending  to  show  that  he  entered  upon  the  dis- 
charge of  his  duties  as  such  trustee,  and  undertook  the  completion  of 
certain  buildings  which  Johnson  &  Peterson  had  contracted  to  con- 
struct, and  for  that  purpose  purchased  lumber  of  these  plaintiffs  un- 
der the  express  agreement  that  they  would  accept  in  payment  there- 
for his  promissory  note  as  such  trustee  and  that  the  note  in  suit  was 
given  in  payment  for  such  lumber.  This  latter  testimony  was  con- 
troverted by  the  plaintiffs,  who  testified  that  they  did  not  know  the 
purpose  for  which  the  lumber  was  purchased,  and  did  not  agree  with 
him  to  accept  his  note  as  trustee  for  the  benefit  of  the  creditors  in  pay- 
ment therefor. 

At  the  conclusion  of  the  evidence,  the  court,  upon  application  of  the 
defendant's  counsel,  dismissed  the  complaint  upon  the  ground  that  no 
cause  of  action  had  been  established  against  the  defendant,  the  plain- 
tiffs asking  for  leave  to  go  to  the  jury  upon  the  controverted  fact  as 
to  whether  the  plaintiffs  gave  credit  to  the  defendant  in  his  represen- 
tative capacity  or  as  an  individual.  An  exception  was  taken  by  the 
plaintiffs  to  the  direction  of  a  verdict  by  the  court. 

The  negotiable  instruments  law  (Laws  1897,  c.  612,  §  39;  provides 
as  follows :  "Where  the  instrument  contains,  or  a  person  adds  to  his 
signature  words  indicating  that  he  signs  for  or  on  behalf  of  a  princi- 
pal, or  in  a  representative  capacity,  he  is  not  liable  on  the  instrument 
if  he  was  duly  authorized ;  but  the  mere  addition  of  words  describ- 
ing him  as  an  agent,  or  as  filling  a  representative  character,  without 
disclosing  his  principal,  does  not  exempt  him  from  personal  liability.'' 
In  this  case,  as  we  have  seen,  the  defendant  signed  the  note,  and  then 
added  to  his  signature  the  word  "trustee."  He  did  not,  in  the  in- 
strument itself,  disclose  the  fact  that  he  was  trustee  for  the  cred- 
itors of  Johnson  &  Peterson,  so  that,  under  the  provisions  of  this 
statute,  he  would  become  personally  liable  upon  the  note,  unless  he 
could  show  that  at  the  time  of  the  delivery  of  the  note  to  the  plain- 


U2  FORM   AND    INCKPTION.  (Part    1 

tiffs  he  disclosed  the  fact  that  the  consideration  for  which  the  note 
was  given  was  for  the  benefit  of  the  creditors  of  Johnson  &  Peter- 
son, and  that  he  gave  the  note  as  the  trustee  for  such  creditors. 

It  is  contended  on  behalf  of  the  plaintiffs  that  his  representative 
character  must  be  disclosed  upon  the  face  of  the  note.  This  may  be 
so  in  so  far  as  innocent  purchasers  for  value  are  concerned,  but  as  to 
the  payees  named  in  the  note  we  think  a  different  rule  prevails.  In 
the  case  of  First  National  Bank  v.  Wallis,  150  N.  Y.  455,  44  N.  E. 
1038,  the  action  was  upon  a  promissory  note  sij^^ned  by  Wallis,  who 
added  to  his  signature  "President."  and  by  Smith,  who  added  to  his 
signature  "Treasurer."  They  were  in  fact  president  and  treasurer  of 
the  Wallis  Iron  Works,  a  corporation,  and  the  note  was  issued  as  an 
obligation  for  the  corporation,  and  was  discounted  by  the  plaintiff  bank. 
It  was  held  that  the  plaintiff  was  entitled  to  recover  upon  the  ground 
that  the  representative  characters  of  the  defendants  were  not  disclos- 
ed to  the  bank  at  the  time  that  it  discounted  the  paper.  Andrews,  C. 
J.,  in  delivering  the  opinion  of  the  court,  said,  with  reference  there- 
to: "It  may  be  admitted  that  if  the  bank,  when  it  discounted  the  pa- 
per, was  informed  or  knew  that  the  note  was  issued  by  the  corpora- 
tion, and  was  intended  to  create  only  a  corporate  liability,  it  could  not 
be  enforced  against  the  defendants  as  individuals,  who.  by  mistake, 
had  executed  it  in  such  form  as  to  make  it  on  its  face  their  own  note, 
and  not  that  of  the  corporation.  But,  according  to  the  rules  govern- 
ing commercial  paper,  nothing  short  of  n.tice,  express  or  implied, 
brought  home  to  the  bank  at  the  time  of  the  discount,  that  the  note 
was  issued  as  the  note  of  the  corporation,  and  was  not  intended  to 
bind  the  defendants,  could  defeat  its  remedy  against  the  parties  actu- 
ally liable  thereon  as  promisors."  We  do  not  understand  that  the 
statute  to  which  we  have  alluded  was  designed  to  change  the  com- 
mon-law rule  in  this  regard,  which  is  to  the  effect  that,  as  between 
the  original  parties  and  those  having  notice  of  the  facts  relied  upon 
as  constituting  a  defense,  the  consideration  and  the  conditions  under 
which  the  note  was  delivered  may  be  shown.  Benton  v.  Martin,  53 
N.  Y.  570,  574 ;  Bookstaver  v.  Jayne,  HO  N.  Y.  146 ;  Juilliard  v.  Chaf- 
fee. 92  N.  Y.  529,  534;  Reynolds  v.  Robinson,  110  N.  Y.  Goi,  18  N. 
E.  127;  Baird  v.  Baird.  145  N.  Y.  659,  664,  40  N.  E.  222,  28  L.  R. 
A.  375 ;  Blewitt  v.  Boorum,  142  N.  Y.  357,  37  N.  E.  119,  40  Am.  St. 
Rep.  600.  Schmittler  v.  Simon,  114  N.  Y.  176.  21  N.  E.  162,  11  Am. 
St.  Rep.  621 ;    Higgins  v.  Ridgway.  153  N.  Y.  130,  47  N.  E.  32. 

It  is  further  contended  on  behalf  of  the  plaintiffs  that  they  are  now 
entitled  to  judgment,  for  the  reason  that  the  answer  does  not  allege 
all  of  the  facts  necessary  to  constitute  a  defense.  The  case,  however, 
was  not  tried  upon  that  theory,  and  the  plaintiffs  did  not,  upon  the 
trial  ask  for  any  direction  of  a  verdict.  If  the  answer  of  the  defend- 
ant is  defective  the  question  should  have  been  raised  in  the  trial  court, 
where  an  opportunity  to  amend  might  have  been  given  if  it  was  found 
wanting  in  any  material  allegation.     The  trial  court  appears  to  have 


Ch.  1)  FORM   OF   BILL   AND   OP   NOTE.  143 

been  of  the  opinion  that  the  plaintiffs,  by  sig'ning  the  paper  selecting 
the  defendant  to  liquidate  the  business  of  Johnson  &  Peterson,  con- 
stituted him  their  agent,  and  that,  therefore,  he  could  not  be  held  per- 
sonally liable.  We  think  this  paper  must  be  read  in  connection  with 
that  executed  by  Johnson,  and,  reading  the  two  together,  the  intent  of 
the  parties  is  made  reasonably  clear.  Johnson,  the  surviving  member 
of  the  firm  of  Johnson  &  Peterson,  called  a  meeting  of  the  creditors 
and  gave  them  the  privilege  of  selecting  the  person  who  should  take 
charge  of  the  assets  of  the  firm,  carry  on  the  business  so  far  as  it  was 
necessary  to  close  up  existing  contracts,  and  then  distribute  the  prop- 
erty. The  creditors  selected  the  defendant,  and  then  Johnson  con- 
veyed all  the  property  of  the  firm  to  him  as  trustee  for  the  creditors, 
thereby  vesting  the  title  to  the  property  in  him  as  such  trustee.  We 
think,  therefore,  that,  notwithstanding  the  fact  that  the  word  "agent" 
is  used  in  the  paper  signed  by  the  creditors,  under  the  latter  instru- 
ment the  defendant  became  a  trustee  for  the  creditors,  and  that  it  was 
in  such  character  that  he  took  possession  of  the  property  and  under- 
took the  liquidation  of  the  assigned  estate. 

The  evidence  submitted  on  behalf  of  the  defendant,  tending  to  show 
that  the  lumber  for  which  the  note  was  given  was  purchased  for  the 
benefit  of  the  assigned  estate,  and  that  the  plaintiffs  agreed  to  accept 
his  note  in  his  representative  capacity  therefor,  having  been  contro- 
verted by  the  testimony  of  the  plaintiffs,  a  question  of  fact  arose 
which  it  became  necessary  for  the  trial  court  to  submit  to  the  jury.- 
It  was,  therefore,  error  to  refuse  the  plaintiffs'  request  to  go  to  the 
jury  upon  this  question  of  fact,  and  to  direct  a  verdict  in  favor  of 
the  defendant. 

The  judgment  should  be  reversed,  and  a  new  trial  granted,  with 
costs  to  abide  the  event. *^ 


(II)     Payee 
GORDON  V.  LANSING  STATE  SAVINGS   BANK. 

(Supreme  Court  of  Michigan,  1903.    133  JUich.  143,  94  N.  W.  741.) 

Assumpsit  by  Gordon  against  the  bank  to  recover  the  balance  of  a 
deposit.     From  a  judgment  for  plaintiff,  defendant  brings  error. 

MooRE  J.  This  case  was  tried  by  the  circuit  judge  without  a  jury. 
At  the  request  of  the  defendant,  he  made  a  finding  of  facts,  which  is 
as  follows : 

"Monday  morning,  December  9,  1901,  at  about  9  o'clock,  there  was 
presented  at  the  bank  of  defendant  at  the  city  of  Lansing  for  payment 

63  Accord:  Kerby  v.  Ruegamer,  107  App.  Div.  491,  95  N.  Y.  Siipp.  408 
(1905).  Compare  Tuttle  v.  First  National  Bank,  187  Mass.  533,  535,  73  N. 
E.  5G0,  105  Am.  St.  Rep.  420  (1905). 


144  FORM  AND  INCEPTION.  (Part  1 

the  following  check,  made  upon  the  printed  form  of  check  supplied  by 
defendant  to  its  patrons,  and  signed  by  plaintiff,  viz. : 

'"Lansing,  Mich.  190  No. 

"'Lansing  State  Savings  Bank  of  Lansing. 

"  'Pay  to  the   order  of Nine   Hundred  and 

Seventy  Dollars— $970.00.  Jno.  R.  Gordon.' 

"The  check  was  indorsed  by  Charles  P.  Downey,  and  was  presented 
by  an  employe  of  Mr.  Downey,  and  cash  was  paid  at  the  time  of  its 
presentation.  The  plaintiff  had  been  a  depositor  at  defendant's  bank 
at  periods  for  three  or  four  years,  and  at  the  opening  of  the  bank  on 
the  morning  of  December  9,  1901,  his  balance  or  credit  upon  the  books 
of  the  bank  was  $3.40,  but  during  the  day  $2,997.50  was  added  to 
plaintiff's  credit.  The  day  defendant  cashed  the  check  plaintiff'  was  at 
the  bank,  and  was  informed  that  the  check  for  $970  had  been  cashed 
by  payment  to  Mr.  Downey,  and  he  then  notified  defendant  he  would 
not  accept  that  check  as  a  voucher  for  the  money  paid.  December  14, 
1901,  plaintiff'  prepared  and  presented  to  defendant  his  check,  payable 
to  himself,  for  $970,  being  the  amount  he  claimed  to  then  have  on 
deposit  in  the  bank.  Payment  on  this  check  was  refused  by  defendant 
upon  the  ground  that  plaintiff  had  no  funds  in  the  bank." 

The  circuit  judge  rendered  a  judgment  in  favor  of  the  plaintiff  for 
$970  and  interest.     The  case  is  brought  here  by  writ  of  error. 

Two  questions  are  discussed  by  counsel:  First,  the  effect  of  not 
dating  the  check;  second,  has  the  check  a  payee?  We  do  not  deem 
it  necessary  to  discuss  the  first  question. 

As  to  the  second  question,  it  w^ill  be  noticed  the  drawer  of  the  check 
did  not  name  a  payee  therein,  nor  did  he  leave  a  blank  space  where 
the  name  of  a  payee  might  be  inserted,  nor  did  he  name  an  impersonal 
payee.  In  the  case  of  Mcintosh  v.  Lytle,  26  Minn.  336,  3  N.  W.  983, 
the  court  used  the  following  language:  "A  check  must  name  or  in- 
dicate a  payee.  Checks  drawn  payable  to  an  impersonal  payee,  as  to 
'Bills  Payable'  or  order,  or  to  a  number  or  order,  are  held  to  be  pay- 
able to  bearer,  on  the  ground  that  the  use  of  the  words  'or  order'  in- 
dicates an  intention  that  the  paper  shall  be  negotiable ;  and  the  mention 
of  an  impersonal  payee,  rendering  an  indorsement  by  the  pavee  im- 
possible, indicates  an  intention  that  it  shall  be  negotiable  without  in- 
dorsement— that  is,  that  it  shall  be  payable  to  bearer.®*  So,  when  a 
bill,  or  note  or  check  is  made  payable  to  a  blank  or  order,  and  actually 
delivered  to  take  effect  as  commercial  paper,  the  person  to  whom  de- 
livered may  insert  his  name  in  the  blank  space  as  payee,  and  a  bona 
fide  holder  may  then  recover  on  it.  These  cases  differ  essentially  from 
the  one  at  bar.  In  the  latter  case  the  person  to  whom  delivered  is  pre- 
sumed, in  favor  of  a  bona  fide  holder,  to  have  had  authority  to  insert 
a  name  as  payee.     In  the  former  cases  the   instrument  is.   when   it 

8*  Accord:  Cleary  v.  De  Beck  Co.,  54  Misc.  Rep.  537,  104  N.  Y.  Supp. 
S.*?!  (10(17),  a  clie.k  payable  to  "Cash." 


Gh.  1)  FORM   OF   BILL   AND   OF   NOTE.  145 

passes  from  the  hands  of  the  maker,  complete,  in  just  the  form  the  par- 
ties intend.  But  in  this  case  there  is  neither  a -blank  space  for  the 
name  of  the  payee,  indicating  authority  to  insert  the  payee's  name, 
nor  is  the  instrument  made  payable  to  an  impersonal  payee,  indicating 
a  fully  completed  instrument.  It  is  claimed  that  the  words  'on  sight' 
are  such  impersonal  payee.  They  were  inserted,  however,  for  another 
purpose — to  fix  the  time  of  payment,  and  not  to  indicate  the  payee.  It 
is  clearly  the  case  of  an  inadvertent  failure  to  complete  the  instrument 
intended  by  the  parties.  The  drawer  undoubtedly  meant  to  draw  a 
check,  but,  having  left  out  the  payee's  name,  without  inserting  in  lieu 
thereof  words  indicating  the  bearer  as  a  payee,  it  is  as  fatally  defective 
as  it  would  be  if  the  drawee's  name  were  omitted."  See,  also,  Rush 
et  al.  V.  Haggard,  68  Tex.  674,  5  S.  W.  683 ;  Prewitt  v.  Chapman,  & 
Ala.  86 ;  Brown  v.  Oilman  et  al.,  13  Mass.  160  ;  Rich  et  al.  v.  Starbuck, 
51  Ind.  87 ;  Norton,  Bills  &  Notes  (3d  Ed.)  p.  59,  and  notes ;  1  Daniel, 
Neg.  Inst.  (4th  Ed.)  §  102. 

The  case  differs  from  the  one  at  bar  in  some  respects,  but  the  im- 
portant part  of  the  decision  is  that  a  payee  is  necessary  to  make  a  com- 
plete instrument,  and,  even  though  the  maker  of  the  check  may  have 
intended  to  name  a  payee,  if  he  has  not  in  fact  done  so  the  check  is 
incomplete.  In  the  case  at  bar  the  failure  to  name  a  payee  was  not  an 
oversight,  if  we  may  judge  from  what  Mr,  Gordon  did,  as  will  appear 
more  in  detail  later. 

Our  attention  has  been  called  to  Crutchly  v.  Mann,  5  Taunt.  529. 
In  this  case  the  bill  of  exchange  was  made  payable  to  the  order  of 
The  court  found  that,  under  the  facts  shown,  the  con- 
clusion was  irresistible  that  the  name  was  filled  in  with  the  consent 
of  the  drawer.  The  same  case  was  previously  reported  in  2  Maule  & 
S.  90  (Cruchley  v.  Clarance),  where,  as  the  case  then  stood,  it  appeared 
the  bill  of  exchange  had  been  sent  out,  the  defendant  leaving  a  blank 
for  the  name  of  the  payee.  One  of  the  judges  was  of  the  opinion 
that  the  defendant,  by  leaving  the  blank,  undertook  to  be  answerable 
for  it,  when  filled  up  in  the  shape  of  a  bill  of  exchange;  another  judge 
was  of  the  opinion  that  it  was  as  though  the  defendant  had  made  the 
bill  payable  to  bearer;  while  the  third  judge  was  of  the  opinion  that 
the  issuing  of  the  bill  in  blank  without  the  name  of  the  payee  was  an 
authority  to  a  bona  fide  holder  to  insert  the  name. 

In  the  case  of  Harding  v.  State,  54  Ind.  359,  a  promissory  note  was 
drawn,  leaving  a  blank  space  for  the  name  of  the  payee ;  and  it  was 
held:  "So  the  name  of  the  payee  may  be  left  blank,  and  this  will 
authorize  any  bona  fide  holder  to  insert  his  own  name.  1  Pars.  Notes 
&  B.  33."  In  the  case  of  Brummel  v.  Enders,  18  Grat.  873,  promis- 
sory notes  blank  as  to  the  names  of  the  payees  had  been  put  in  the 
hands  of  an  agent  to  be  sold  for  the  benefit  of  the  makers.  The  agent 
sold  them,  at  a  greater  discount  than  the  legal  rate  of  interest,  to  pur- 
chasers who  did  not  know  they  were  sold  for  the  benefit  of  the  makers. 
.Sm.&  M.B.&  N.— 10 


14G  FOKM   AND    INCBPTION.  (Part    1 

At  the  time  of  the  sale  the  names  of  the  purchasers  were  inserted, 
either  by  the  purchasers  or  by  the  agent,  in  the  blank  left  for  the 
payee.  When  the  notes  were  sued  the  makers  pleaded  usury.  The 
court,  following  the  cases  already  cited,  held  that  any  bona  fide  holder 
of  a  bill  or  note  which  is  blank  as  to  the  name  of  the  payee  may  insert 
his  own  name  and  thus  acquire  all  the  rights  of  the  payee. 

It  will  be  observed  that  the  case  at  bar  differs  from  all  of  these 
cases.  As  before  stated  not  only  did  Mr.  Gordon  fail  to  insert  the 
name  of  a  pa^ee,  or  to  leave  a  blank  where  the  name  of  the  payee 
might  be  inserted,  but  he  did  more.  He  drew  a  line  through  the  blank 
space  making  it  impossible  for  any  one  else  to  insert  therein  a  name, 
indicating  very  clearly  that  he  not  only  declined  to  name  a  payee  but 
intended  to  make  it  impossible  for  any  one  else  to  do  so.  Had  Mr. 
Gordon  issued  a  check  otherwise  perfect,  but  with  the  blank  space  for 
the  amount  of  the  check  unfilled,  and  delivered  it  to  a  third  person  it 
would  be  presumed  the  third  person  was  given  authority  to  fill  the 
blank  space.  But  had  he,  instead  of  leaving  the  space  a  blank  filled  it 
by  drawing  a  line  through  it,  would  any  one  say  the  third  person  might 
then  insert  a  sum  of  money  in  that  space?  If  not,  upon  what  principle 
may  the  name  of  a  payee  be  inserted  when  the  space  was  filled  in  the 
same  way,  or  upon  what  theory  may  it  be  presumed  there  was  an  im- 
personal payee  when  the  maker  has  not  made  the  check  payable  to 
cash  or  some  other  impersonal  payee?  In  order  to  construe  the 
check  as  a  complete  instrument,  we  must  read  into  it  an  intention  not 
only  not  expressed  by  its  language,  but  contrary  to  the  act  of  the  maker. 
The  check,  as  it  appears  to-day,  is  without  any  payee.  The  record  is 
silent  in  relation  to  whom  it  was  delivered,  or  whether  the  person  who 
presented  it  at  the  bank  or  the  person  whose  indorsement  it  bears  was 
a  bona  fide  holder. 

Judgment  is  affirmed. 

Hooker,  C.  J.,  concurred  with  Moore,  J. 

Carpentkr,  J.  I  regret  that  I  cannot  concur  in  the  opinion  of  my 
Brother  Moore.  I  agree  with  him  that  the  check  in  question  is  not 
governed  by  the  authorities  which  hold  that,  where  a  blank  is  left  for 
the  insertion  of  the  name  of  a  payee,  the  instrument  is  to  be  treated 
as  payable  to  bearer.  I  cannot  agree,  however,  that  the  case  of  Mcin- 
tosh v.  Lytle,  26  Minn.  336,  3  N.  W.  983,  is  controlling.  That  case 
lesembles  this  in  many  particulars.  There  is,  however,  a  difference 
which,  in  my  judgment,  renders  the  reasoning  of  that  case  inapplica- 
ble. The  fact  that  the  plaintiff  in  the  case  at  bar  used  the  ordinary 
blank,  and  drew  a  line  through  the  space  intended  for  the  name  of  the 
\^ayee  prevents  our  assuming,  as  did  the  court  there — and  its  decision 
was  based  on  this  assumption — that  it  is  "the  case  of  an  inadvertent 
failure  to  complete  the  instrument  intended  by  the  parties."  The  in- 
strument under  consideration  is  obviously  complete,  in  just  the  form 
the  maker  intended. 


oil.  1)  FORM   OP  BILL   AND   OF   NOTE.  147 

In  my  judgment,  the  authorities  which  hold  a  check  payable  to  the 
order  of  an  impersonal  payee  to  be  valid  and  negotiable  control  this 
case.  I  quote  from  the  case  of  Willets  v.  Bank,  3  Duer  (N.  Y.)  at 
page  129 :  "One  of  the  checks  was  payable  to  the  order  of  1658,  the 
other  three  to  the  order  of  bills  payable ;  and,  as  the  required  order 
could  not  in  either  case  possibly  be  given,  the  checks,  unless  transfer- 
able by  delivery,  were  payable  to  no  one,  and  were  void  upon  their 
face.  The  law  is  well  settled  that  a  draft  payable  to  the  order  of 
a  fictitious  person,  inasmuch  as  a  title  cannot  be  given  by  an  indorse- 
ment, is,  in  judgment  of  law,  payable  to  bearer.  Vere  v.  Lewis,  3 
Term  R.  183;  Minet  v.  Gibson,  Id.  481;  Gibson  v.  Minet,  1  H. 
Black,  569,  affirmed  in  the  House  of  Lords.  And  it  seems  to  us  quite 
manifest  that  in  principle  these  decisions  embrace  the  present  case. 
At  any  rate,  the  bank,  by  certifying  the  checks  as  good,  is  estopped 
from  denying  that  they  were  valid  as  drafts  upon  the  funds  of  the 
maker,  and,  consequently,  were  payable  to  bearer.  The  giving  of 
such  a  certificate,  if  otherwise  construed,  would  be  a  positive  fraud." 

In  Mechanics'  Bank  v.  Straiton,  3  Abb.  Dec.  (N.  Y.)  269,  a  check 
payable  to  bills  payable  or  order  was  held  payable  to  bearer,  the  court 
saying:  "By  naming  the  persons  to  whose  order  the  instrument  is 
payable,  the  maker  manifests  his  intention  to  limit  its  negotiability 
by  imposing  the  condition  of  indorsement  upon  its  first  transfer.  But 
no  such  intention  is  indicated  by  the  designation  of  a  fictitious  or  im- 
personal payee,  for  indorsement  under  such  circumstances  is  mani- 
festly impossible ;  and  words  of  negotiability,  when  used  in  connec- 
tion with  such  designations,  are  capable  of  no  reasonable  interpreta- 
tion except  as  expressive  of  an  intention  that  the  bill  shall  be  nego- 
tiable without  indorsement — i.  e.,  in  the  same  manner  as  if  it  had 
been  made  payable  to  bearer." 

We  must  decide  that  the  check  in  the  case  at  bar,  like  those  in  the 
cases  cited,  is  either  altogether  void,  or  is  transferable  by  delivery.  I 
submit  that  we  should  follow  those  cases,  and  decide  that  it  is  trans- 
ferable by  delivery.  To  quote  the  language  of  Lord  EHenborough, 
in  Cruchley  v.  Clarance,  2  Maule  &  S.  90 :  "As  the  defendant  has 
chosen  to  send  the  bill  [check]  into  the  world  in  this  form,  the  world 
ought  not  to  be  deceived  by  his  acts."  This  view  of  the  case  compels 
me  to  notice  the  fact  that  the  check  under  consideration  is  not  dated. 
According  to  the  weight  of  authority,  this  omission  does  not  invali- 
date it.  See  Zane,  Banks,  §152;  2  Daniel,  Neg.  Inst.,  §  1577;  Nor- 
ton, Bills  &  N.  (3d  Ed.)  p.  405,  note. 

I  think  the  judgment  of  the  court  below  should  be  reversed,  and  a 
judgment  entered  in  this  court  for  the  defendant. 

Grant,  J.,  concurred  with  Carpenter,  J.  Montgomery,  J.,  did 
not  sit.«^ 

65  "$2..500.0O.  I»a  CJrosse,  "Wisconsin,  Sept.  2,  '97. 

Four  montlas  after  date,  for  value  received,  I  promise  to  pay  to  the  order 
of  tvveuty-tive  hundred  dollars,  at  the  office  of  People's  Bank,  Bloomiugtou, 


148  FORM    AND   INCEPTION.  (Part  1 

REGINA  V.  BARTLETT. 

(Nisi  rrius.  before  Erskine,  J.,  1841.    2  Mood.  &  R.  362.) 

The  prisoner  was  indicted  for  forging  and  uttering  a  bill  of  ex- 
change, and  the  acceptance  of  a  bill  of  exchange.  In  several  of  the 
counts  the  bill  was  set  out  verbatim,  and  in  all  it  was  called  a  bill  of 
exchange.  The  document,  when  produced,  agreed  with  that  set  out, 
and  was  in  the  following  form : 

V,    y  "Nov.  10,  1840. 

"Please  to  pay  to  your  order  tlj^sAffi  of  forty-seven  pounds  for 
value  received.  ^Ss#v^ 

J' Q'^  "J.  Bishop." 

"To  Mr.  G.  Peckford,  Yeovil."  V^  % 

The  paper  was  indorsed  "J.  Bishop." 

It  was  objected  for  the  prisoner  that  this  could  not  be  called  a  bill 
of  exchange ;  it  was  nothing  more  than  a  request  to  a  man  to  pay 
himself,  and  the  acceptance  of  such  a  document  laid  the  acceptor  un- 
der no  obligation  to  a  third  party. 

Illinois,  with  interest  at  seven  per  cent,  per  annum  until  paid.  And  to  se- 
cure the  payment  of  said  amount  I  hereby  authorize,  irrevocably,  any  at- 
torney of  any  court  of  record  to  appear  for  me  in  such  court,  In  term  time 
or  vacation,  at  any  time  hereafter,  and  confess  a  judgment  without  process 
in  favor  of  the  holder  of  this  note,  for  such  an  amount  as  may  be  due 
and  also  for  such  an  amount  as  may  become  due  thereon,  together  with 
costs  and  fifty  dollars  attorney's  fees,  and  to  waive  and  release  all  errors 
which  may  intervene  in  any  such  proceedings,  or  in  execution  thereon,  and 
consent  to  immediate  execution  upon  such  judgment,  hereby  ratifying  and 
confirming  all  that  my  said  attorney  may  do  by  virtue  thereof. 

"John   Willing." 

The  notp  w;i«  fon  ^  printed  form  which,  after  the  words  "pay  to  the 
order  of,"  contained  a  single  blank  line  terminating  in  the  word  "dollars"; 
the  words  "twenty-five  hundred"  being  written  at  the  extreme  left  of  that 
line,  so  as  to  leave  no  space  whatever  in  front  of  them  for  the  name  of  a 
payee.  The  plaintiff's  attorney,  before  taking  judgment  in  Illinois,  had  in- 
terlined between  the  words  "i>ay  to  the  order  of"  and  the  words  "twenty- 
five  hundred"  the  name  of  Edward  E.  Smith.  Referring  to  the  above  instru- 
ment, Dodge,  J.,  said: 

"Plaintiff's  principal  contention  is  that  this  is  a  negotiable  promissory 
note  on  either  of  two  theories:  First,  that,  by  reason  of  the  provision  in 
the  power  of  attorney  emliodied  in  the  note  that  judgment  may  be  confessed 
in  favor  of  the  holder,  the  silence  of  the  promissory  part  of  the  note  itself 
as  to  a  payee  is  sui)i)lied,  and  the  note  becomes,  by  its  terms,  a  note  payable 
to  Jiearer:  secondly,  that  omission  of  the  name  of  the  payee  is,  in  practical 
effect,  the  leaving  of  a  blank  which  any  person  having  possession  of  the 
note  is  therein'  impliedly  authorized  to  fill  up;  the  further  contention  be- 
ing that,  if  this  is  a  negotiable  promissory  note,  the  defendant  has  no  mer- 
itorious defense  based  uiwn  the  agreement,  at  the  time  it  was  given,  that 
it  should  be  used  only  for  a  special  purpose,  since  the  very  purpose  of  the 
law  merchant  is  to  give  such  currency  and  certainty  to  negotiable  paper  that 
equities  existing  only  between  the  original  parties  cannot  affect  subsequent 
bona  fide  holders  for  value.     Young  v.  Ward,  21  111.  226. 

"The  fii-st  ground  on  which  plaintiff  asserts  negotiability  we  deem  unten- 
able. The  part  of  the  entire  writing  which  seeks  to  express  the  promise 
made   clearly  shows  an  intent  that  it  be  payable  only  to  some  person   or 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE.  149 

Erskine,  J.,  said  he  should  reserve  the  point  for  the  consideration 
of  the  judges,  and  left  the  case  to  the  jury,  who  convicted  the  pris- 
oner;  and  he  was  sentenced  to  transportation. 

His  Lordship,  however,  afterwards  thought  the  objection  so  clearly 
valid  that  he  did  not  submit  the  case  to  the  judges,  but  recommended 
a  pardon  for  the  offense. 


WITTE  v.  WILLIAMS. 

(Supreme  Court  of  South  Carolina.  1870.     8  S.  C.  290,  28  Am.  Rep.  294.) 

This  was  an  action  by  Chas.  O.  Witte  against  Mrs.  Sally  C.  Wil- 
liams. The  complaint  alleged:  That  on  the  loth  day  of  December, 
1868,  the  defendant,  at  Charleston  aforesaid,  made  her  other  bill  of 
exchange  in  writing  and  directed  the  same  to  J.  &  J.  D.  Kirkpatrick, 
at  Charleston  aforesaid,  and  thereby  required  the  said  J.  &  J.  D. 
Kirkpatrick  to  pay  to  the  order  of  the  said  J.  &  J.  D.  Kirkpatrick  the 
sum  of  $2,500  three  hundred  and  sixty-five  days  after  the  date  there- 
of, which  period  elapsed  before  this  suit  was  brought,  and  then  and 
there  delivered  the  said  bill  to  the  said  J.  &  J.  D.  Kirkpatrick,  who 

that  person's  order,  and  thus  negatives  intent  to  make  It  payable  to  who- 
ever may  happen  to  acquire  possession,  without  indorsement  from  the  origi- 
nal payee.  The  two  conceptions  are  antagonistic.  We  cannot  think  the  mere 
authority  to  confess  judgment  in  favor  of  the  holder  sufficient  to  overcome 
that  clear  declaration  in  the  promissory  portion.  That  would  be  an  entire- 
ly proper  and  enforceable  provision,  if  some  person  had  been  in  fact  named 
as  payee.  It  surely  would  not  then  suffice  to  transform  the  note  into  one 
payable  by  its  terms  to  bearer.  Nat.  Exch.  Bank  v.  Wiley,  2.5  Sup.  Ct.  70. 
We  cannot  avoid  the  conclusion  that  the  paper  on  its  face  shows  that  a 
payee  was  intended  to  be  named,  but  by  mistake  was  not  named.  That  this 
was  the  intent  is  confirmed  by  the  evidence,  which  shows  clearly  that  both 
parties  to  the  making  of  the  instrument  intended  to  make  it  payable  to  the 
order  of  the  People's  Bank  of  Bloomington,  and  supposed  they  had  done 
so.  A  promise  to  pay,  other  than  to  bearer,  which  is  not  certain  as  to  the 
payee,  is  not  negotiable,  with  certain  well-defined  conventional  exceptions 
not  at  all  applicable  here.     *     *     * 

"The  next  contention  rests  upon  a  perfectly  well-established  rule,  that  the 
delivery  of  a  negotiable  instrument  containing  a  blank  space  for  any  of  the 
material  elements  thereof  implies  authority  to  fill  up  such  blank  in  the 
hands  of  any  one  to  whom  it  may  come.  This  rule  is  based  on  implied 
agreement  with  any  one  who  may  become  the  owner,  and  is  not  to  be  con- 
fused in  principle  or  application  with  those  case?,  some  of  which  are  cited 
above,  where  an  incomplete  instrument  is  delivered  to  one,  not  as  payee, 
but  as  agent,  with  authority  to  make  it  complete,  and  where  the  agent  ex- 
ceeds his  authority ;  for  the  insertion  of  plaintiff's  name  in  this  paper  was 
not  made  by  defendant's  agent,  but  by  plaintiff  himself,  under  his  claimed 
rights  as  owner.  This  implied  authority  depends,  however,  on  the  very  ex- 
istence of  a  blank.  There  is  no  right  in  the  holder  of  a  contract,  negotiable 
or  otherwise,  to  rewrite  it  or  insert  omitted  provisions,  except  where  the 
signer,  by  leaving  a  blank,  obviously  delivers  it  with  such  intention.  In  the 
instrument  before  us  there  was  no  blank  ;  the  writing  joined  to  the  printed 
portion  without  physical  break  or  separation.  True,  there  was  an  hiatus 
in  sense,  but  that  does  not  carry  with  it  any  authority  to  supply  the  missing 
term. 

"We  must  therefoi'e  reach  the  conclusion  that  this  instrument  is  not  nego- 
tiable."   Smith  V.  Willing,  123  Wis.  377,  101  N.  W.  692,  68  L.  R.  A.  940  (1904). 


150  FOUM  AND  INCEPTION.  (Part  1 

indorsed  the  same  and  delivered  it  to  the  plaintiff;  and  the  said  plain- 
tiff further  says  that  the  said  bill  was  duly  presented  to  the  said  J.  & 
J.  D.  Kirkpatrick  for  acceptance  and  that  the  said  firm  duly  accepted 
the  same,  and  at  maturity  that  said  bill  was  duly  presented  for  pay- 
ment but  was  not  paid,  of  all  which  the  defendant  had  notice.  And 
the  plaintiff  further  says  that  he  is  now  the  lawful  owner  and  holder 
of  the  said  bill,  and  the  defendant  is  justly  indebted  to  him  therefor 
in  the  sum  of  $2,500,  principal,  together  with  interest  thereon  from 
the  eighteenth  day  of  December,   1SG9,   and  $2.35  costs  of   protest. 

Tlie  defense  was  on  the  ground,  inter  alia,  that  the  instrument  set 
forth  in  the  complaint  was  not  a  bill  of  exchange  because  the  name 
of  the  drawer  and  payee  designated  the  same  person,  and  that  the 
defendant  therefore  was  not  liable  as  drawer  of  a  bill.  Judgment  for 
defendant.     Plaintiff  appealed."^ 

Moses,  C.  J.  *  *  *  The  instrument  was  held  not  a  bill  of  ex- 
change because  drawn  on  J.  &  J.  D.  Kirkpatrick,  requesting  the 
drawees  to  pay  to  their  own  order  a  certain  sum  of  money,  while  a 
bill  of  exchange  presupposes  a  duty  on  them  to  pay  to  some  other 
than  themselves.  The  only  authority  relied  on  in  support  of  the 
position  is  found  in  Story  on  Bills,  §  35.  With  the  accustomed  defer- 
ence that  is  due  to  so  distinguished  a  jurist  as  the  late  Mr.  Justice 
Story,  we  are  obliged  to  say  that  the  proposition  is  not  sustainable  on 
either  principle  or  authority.  We  are  the  more  emboldened  to  say 
so  because,  in  the  same  section,  the  learned  writer  thus  expres^^es 
himself:  "Nay,  the  drawer  may  at  once  become  drawer,  payee  and 
drawee ;  as,  for  example,  if  he  should  draw  a  bill  on  himself,  pay- 
able to  his  own  order  at  a  particular  place,  naming  no  drawee,  and  then 
should  indorse  it  over,  the  indorsee  might  sue  him  as  acceptor  of  the 
bill  or  as  maker  of  a  promissory  note,  at  his  election."  And  in  section 
36  he  says:  "The  drawee  and  the  payee  may  be  also  one  and  the  same 
person."  But  in  Wildes  v.  Savage,  1  Stor)-.  29,  Fed.  Cas.  No.  17.653, 
he  lays  down  the  rule  in  direct  contradiction  to  his  aflfirmation  cited 
by  the  presiding  judge  to  sustain  his  own  conclusion.  We  quote  the 
very  words  of  Justice  Story :  "The  argument  is  that  the  bill  is  not 
a  regular  bill  of  exchange  because  it  is  drawn  by  Russel  &  Co.,  paya- 
ble to  Wildes  &  Co.,  who  are  the  drawees  of  the  bill.  *  *  *  An 
instrument  is  not  the  less  of  a  bill  of  exchange  because  all  the  parties 
to  it  in  the  character  of  drawers,  payees  and  drawees  are  not  different 
persons.  A  bill  drawn  by  a  person  payable  to  his  own  order  has 
always  been  deemed  to  be  a  bill  of  exchange  in  the  commercial 
sense  of  the  phrase,  and  it  would  not  cease  to  be  such  a  bill  if  it  should 
be  indorsed  by  the  drawer  payable  to  the  drawee.  Now,  such  a  bill 
so  indorsed  dift'ers  in  nothing  substantially  from  the  present  bill.  In 
truth,  where  the  bill  is  negotiable,  and  contains  a  drawer,  a  payee  and 

••  The  statement  is  abridged,  argumeuts  are  omitted,  and  a  part  only  of 
the  opinion  is  printed. 


Ch.  1)  FOKM    OF   BILL   AND   OF   NOTE.  151 

a  cli-awee,  it  is,  in  a  commercial  sense,  a  bill  of  exchang-e,  although  one 
or  more  of  the  parties  shall  fill  a  double  character." 

Mr.  Chitty,  in  his  work  on  Bills  (page  25),  says:  "It  is  not,  how- 
ever, necessary  that  there  should  be  three  parties  to  a  bill.  There  are 
sometimes  only  two,  as  where  a  person  draws  on  another  payable  to 
his  own  order ;  and,  indeed,  a  bill  will  be  valid  where  there  is  only 
one  party  to  it,  for  a  man  may  draw  on  himself  payable  to  his  own 
order.  In  such  cases,  however,  the  instrument  may  be  treated  as,  in 
legal  operation,  a  promissory  note,  and  declared  on  accordingly,  but 
in  practice  it  is  usual  to  declare  upon  the  instrument  as  if  it  were  a  bill 
not  admitting-  the  identity  of  drawer  and  drawee."     *     *     * 

Judgment  reversed. 


HOOPER  V.  WILLIAMS. 

(Court  of  Exchequer,  1848.     2  Exch.  13.) 

The  declaration  stated  that  the  defendant,  on  the  12th  of  November, 
A.  D.  1846,  made  his  promissory  note  in  writing,  and  thereby  promised 
to  pay  to  the  bearer  thereof  £150,  for  value  received,  two  months  after 
the  date  thereof,  which  period  had  elapsed  before  the  commencement 
of  this  suit;  and  the  defendant  then  delivered  the  said  note  to  one  J. 
Kent,  who  thereby  became  the  bearer  thereof,  and  who  indorsed  and 
delivered  it  to  the  plaintifif,  who  thereby  became  the  bearer  thereof ; 
whereof  the  defendant  then  had  notice,  and  then,  in  consideration  of 
the  premises,  promised  to  pay  the  amount  of  the  note  to  the  plaintifif 
according  to  the  tenor  and  effect  thereof.    Breach,  nonpayment. 

The  defendant  pleaded  that  he  did  not  make  the  note. 

At  the  trial,  before  Lord  Denman,  C.  J.,  at  the  Surrey  spring  as- 
sizes, 1847,  the  plaintiff  gave  in  evidence  the  following  note : 

"Camberwell,  Nov.  12,  1846. 

"Two  months  after  date,  I  promise  to  pay  to  my  own  order  floO, 
value  received.  James  Williams." 

The  note,  which  bore  a  4s.  6d.  stamp,  was  indorsed  in  blank  by  the 
defendant,  and  afterwards  by  J.  Kent.  It  was  objected,  on  the  part 
of  the  defendant,  that  the  instrument  given  in  evidence  was  not  a 
promissory  note  within  St.  3  &  4  Anne,  c.  9,  and  that  it  did  not  sup- 
port the  declaration;  also,  that  it  should  have  been  stamped  as  an 
agreement ;  or  if  the  indorsement  by  the  defendant  were  treated  as  a 
new  contract,  then  a  new  stamp  would  be  requisite.  The  learned  judge 
directed  a  nonsuit,  reserving  leave  for  the  plaintiff  to  move  to  enter  a 
verdict  for  him  for  the  amount  of  the  note. 

Channell,  Serjt.,  in  last  Easter  Term,  obtained  a  rule  nisi  accord- 
ingly.*'' 

•  T  The  arguments  of  counsel  are  omitted. 


152  FORM  AND  INCEPTION.  (Part  1 

Parke,  B.  In  this  case,  we  think  the  rule  to  enter  a  verdict  for  the 
plaintiff  should  be  made  absolute.  The  plaintiff  declared  on  a  note  for 
£150  at  two  months,  made  by  the  defendant,  and  payable  to  bearer, 
which  the  defendant  delivered  to  one  J.  K.  Kent,  and  Kent  indorsed  to 
ihe  plaintiff.  The  defendant  pleaded  that  he  did  not  make  the  note. 
On  the  trial,  the  plaintiff  produced  a  note  corresponding-  in  date,  made 
by  the  defendant,  whereby  he  promised  to  pay  to  his  own  order  £150, 
two  months  after  date.  The  note  was  indorsed  in  blank  by  the  de- 
fendant, and  afterwards  by  J.  K.  Kent.  My  Brother  Channell  ob- 
jected to  the  receipt  of  the  note  in  evidence,  on  the  ground  of  variance, 
and  that  it  was  not  a  note  within  St.  3  &  4  Anne,  c.  9,  and  not  obliga- 
tory as  a  note;  and  if  so,  that  it  required  a  stamp  as  an  agreement, 
or  that  the  indorsement  by  Kent  made  it  a  new  note,  so  that  it  re- 
quired a  new  note  stamp.  Lord  Denman  allowed  the  objections,  re- 
serving the  points.  On  showing  cause  the  principal  question  was, 
what  the  effect  of  this  instrument  was  as  it  stood  originally  before  it 
was  indorsed,  and  whether  it  was.  within  St.  3  &  4  Anne,  c.  9,  a  good 
and  valid  note,  payable  to  the  order  of  the  maker.  The  opinion  of 
this  court  and  that  of  the  Queen's  Bench,  as  to  this  point,  are  at  vari- 
ance with  one  another.  In  Flight  v.  Maclean,  this  court  held,  on 
special  demurrer  to  the  first  count  of  a  declaration  stating  a  note  pay- 
able to  the  order  of  the  maker,  and  indorsed  to  the  plaintiff,  that  the 
count  was  bad,  such  a  note  not  being  within  the  statute  of  Anne.  The 
case  of  Wood  v.  Mytton  afterwards  came  on  in  the  Queen's  Bench. 
It  was  an  action  on  a  similar  note  indorsed  to  the  plaintiff.  After 
verdict  for  the  plaintiff,  a  motion  was  made  in  arrest  of  judgment; 
and  the  court  discharged  the  rule,  holding,  after  a  minute  examina- 
tion of  all  the  provisions  of  the  statute  of  Anne,  that  such  a  note  was 
within  that  statute,  and  assignable  by  indorsement.  Though  these 
decisions  are  not  at  variance,  as  will  be  afterwards  explained,  the  con- 
struction of  the  statute  by  the  two  courts  differs. 

After  a  careful  perusal  of  the  statute,  we  must  say  that  we  do  not 
think  that  it  ever  contemplated  the  case  of  notes  payable  to  the  mak- 
er's order,  which  are  incomplete  instruments,  and  have  no  binding 
effect  on  any  one  till  indorsed.  The  Court  of  Queen's  Bench  thought 
that,  though  the  first  part  of  the  first  section  of  the  statute  of  Anne 
applied  only  to  notes  payable  to  another  person,  or  his  order,  or  to 
bearer,  which  notes  it  makes  obligatory  between  the  parties,  yet  that 
the  second  part  applies  to  every  note  payable  to  any  person,  and  there- 
fore includes  a  note  payable  to  the  maker  or  his  order.  It  appears 
to  us  that  this  is  not  the  meaning  of  this  part  of  the  section,  which  is, 
as  we  think,  intended  to  make  those  instruments,  to  which  it  had  pre- 
viously given  an  obligatory  effect  between  tlie  original  parties,  trans- 
ferable to  third  persons,  so  as  to  enable  them  to  sue  upon  them  as  upon 
the  transfer  of  bills  of  exchange.  The  previous  part  of  the  section 
had  given  to  the  payee,  when  the  note  was  made  payable  to  another 
person,  or  to  another  person  or  order,  and  to  the  bearer,  whoever  at 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE.  153 

any  time  he  might  be,  a  right  to  sue,  thus  providing  entirely  for  notes 
payable  to  bearer,  whether  in  the  hands  of  the  original  or  a  subsequent 
bearer.  And  then  the  section  proceeds  to  make  the  class  of  notes 
payable  to  a  person  or  order  transferable.  We  think  that  the  Legis- 
lature, by  the  second  part  of  the  section,  could  only  mean  to  make 
that  instrument,  which  gave  a  right  to  sue,  assignable ;  and  no  right  to 
sue  could  exist  in  any  one,  in  the  case  of  a  note  payable  to  the  maker's 
order,  until  the  order  was  made  in  the  shape  of  an  indorsement;  un- 
til that  indorsement  was  made,  it  was  an  imperfect  instrument,  and, 
in  truth,  not  a  promissory  note  at  all,  and  consequently  not  trans- 
ferable under  the  statute.  What,  then,  is  the  effect  of  the  indorse- 
ment to  another  person?  We  think  it  was  to  perfect  the  incomplete 
instrument,  so  that  the  original  writing  and  indorsement  taken  to- 
gether became  a  binding  contract,  though  an  informal  one,  between 
the  maker  and  the  indorsee,  and  then,  and  not  till  then,  it  became  an 
assignable  note. 

It  is  well  settled,  that  no  particular  form  of  words  is  necessary  to 
constitute  a  promissory  note.  If  a  man  draws  an  instrument  in  the 
form  of  a  bill  of  exchange  on  himself,  and  accepts  it,  it  is  a  promis- 
sory note.  If  he  says,  "I  pay  to  A.  B.  £100,"  and  adds  an  address  to 
the  instrument,  it  may  be  declared  on  as  a  note.  What,  then,  is  the 
meaning  of  the  instrument  in  question?  Before  the  indorsement,  it 
may  be  considered  to  be  a  promise  to  pay  £150,  two  months  after 
date,  to  the  person  to  whom  the  maker  should  afterv/ards,  by  indorse- 
ment, order  the  amount  to  be  paid,  such  indorsement  being  intended 
to  have  the  same  operation  as  if  put  on  a  complete  note.  If,  then,  the 
indorsement  should  be  to  a  particular  person,  or  to  A.  B.  or  his  order, 
it  would  be  a  note  payable  to  that  person,  or  to  A.  B.  or  his  order; 
and  if  in  blank,  it  would  be  payable  to  bearer,  in  like  manner  as  a 
sum  secured  by  a  complete  note  would  have  been  by  similar  indorse- 
ments. It  may  follow  as  a  consequence,  that  the  holder  might  fill  up 
the  blank  indorsement  by  writing  over  it  his  own  name,  and  so  make 
it  payable  to  himself,  although  it  is  not  necessary  to  determine  that 
point;  and,  reading  the  note  as  payable  to  bearer,  any  one  may  after- 
wards indorse  his  own  name,  and  so  make  himself  liable  to  subsequent 
holders,  as  the  indorser  of  a  complete  note  payable  to  bearer  would  do. 
Story  on  Notes,  §  lS3. 

It  appears  to  us,  then,  that  the  instrument  in  this  case  was,  when  it 
first  became  a  binding  promissory  note,  a  note  payable  to  bearer,  and 
consequently  was  properly  described  in  the  declaration. 

This  view  of  the  case  reconciles  the  decision  of  this  court  in  Flight 
V.  Maclean  with  that  of  the  Queen's  Bench  in  Wood  v.  Mytton ;  but 
not  the  reasons  given  for  those  decisions.  In  the  case  in  this  court, 
the  declaration  was  bad  on  special  demurrer,  as  it  did  not  set  out  the 
legal  efifect  of  the  instrument.  In  that  in  the  Queen's  Bench,  the  mo- 
don  being  for  arrest  of  judgment,  the  declaration  was,  in  substance, 


154  FORM   AND   INCEPTION.  (Part  1 

good ;  for  it  set  out  an  inartificial  contract,  which  had  the  legal  efifect 
of  a  valid  note  payable,  as  stated  on  the  record,  to  the  plaintiff. 

The  difference  between  the  two  courts  in  the  construction  of  the 
statute  is  of  no  practical  consequence,  as,  in  our  view  of  the  case,  se- 
curities in  this  informal,  not  to  say  absurd,  form,  are  still  not  invalid : 
and  it  might  be  of  much  inconvenience  if  they  were,  for  there  is  no 
doubt  that  this  form  of  note,  probably  introduced  long-  after  the  stat- 
ute of  Anne,  and  for  what  good  reason  no  one  can  tell,  has  become  of 
late  years  exceedingly  common ;  and  it  is  obvious  that,  until  they  are 
indorsed,  they  must  always  remain  in  the  hands  of  the  maker  himself, 
and  so  he  can  never  be  liable  upon  them. 

Tlie  objection  to  the  stamp,  in  our  view  of  the  case,  cannot  prevail, 
as  the  note  was  a  valid  note  at  two  months,  payable  to  bearer  as  soon 
as  the  indorsement  was  put  upon  it;  and  our  judgment  is,  that  the 
rule  be  made  absolute. 

Rule  absolute."* 


BLANCKENHAGEN  v.  BLUNDELL. 

(Ck)urt  of  King's  Bench.  1819.     2  Barn.  &  Aid.  417.) 

Declaration  alleged  that  the  defendant,  on  the  24th  May,  1817,  made 
a  promissory  note,  and  delivered  the  note  to  the  plaintiffs ;  by  which 
note  defendant  promised  to  pay  to  J.  P.  Damer,  then  of  Rio  de 
Janiero,  or  to  the  plaintiffs,  or  to  his  or  their  order,  250  sterling,  in 
Portuguese  currency,  at  the  rate  of  57d.  sterling  per  mil-re,  together 
with  interest  from  the  27th  July,  one-half  at  14,  and  one-half  at  26 
months,  from  the  date,  value  received ;  whereby,  and  by  force  of  the 
statute,  the  defendant  became  liable  to  pay,  etc.,  and  being  liable, 
promised,  etc.  The  declaration  then  stated  that  the  money  mentioned 
in  the  note  became  due  according  to  the  tenor  and  effect  thereof,  yet 
that  the  defendant,  athough  often  requested,  had  not  paid  the  same 
to  the  plaintiffs,  nor  had  he  paid  the  same  to  Damer.  The  second 
count  was  upon  the  same  promissory  note ;  but  only  alleged  a  general 
liability  to  pay,  without  treating  it  as  a  promissory  note  within  the  stat- 
ute of  Anne.     Demurrer. ®° 

Abbott,  C.  J.  I  have  no  doubt  that  this  instrument,  in  the  form  in 
which  it  is  declared  on,  is  not  a  promissory  note  within  the  statute 
of  Anne;  for  if  a  note  is  made  payable  to  one  or  other  of  two  per- 
sons, it  is  payable  to  either  of  them,  only  on  the  contingency  of  its 
not  having  been  paid  to  the  other,  and  is  not  a  good  promissory  note 
within  the  statute.  I  am  also  of  opinion,  that  the  second  count  cannot 
be  supported.     *     ♦     * 

«8  See  Chamberlain  v.  Young.  [1893]  2  Q.  B.  206. 

6  9  Parts  of  the  oi)inions  relating  to  second  count  are  omitted. 


Ch,  1)  FORM  OF  BILL  AND   OF   NOTE,  155 

Bayley,  J.  I  am  of  the  same  opinion.  If  there  had  been  any  com- 
munity of  interest  stated  between  the  payees  so  as  in  any  respect  to 
identify  Darner  and  Blanckenhagen,  it  is  possible  that  an  action  might 
have  been  maintained  on  this  note ;  but  in  the  way  in  which  the  dec- 
laration has  been  framed,  stating  this  as  a  note  payable  to  one  or  the 
other,  I  am  very  clearly  of  opinion  that  it  is  not  that  description  of 
note  which  the  statute  of  Anne  contemplated. 

HoLROYD,  J.  I  am  of  the  same  opinion,  that  this  note  does  not  come 
within  the  description  of  notes  contemplated  by  the  statute  of  Anne. 
It  is,  in  fact,  a  promise  to  pay  to  A.,  if  the  maker  does  not  pay  to  B. 
and  C.  It  is  therefore  a  conditional  promise,  and  consequently  not 
within  the  statute.  And  I  am  also  of  opinion  that  the  second  count 
cannot  be  supported.     *     *     * 

Judgment  for  defendant.^** 


STORM  V.  STIRLING. 

(Court  of  Queen's  Bench,   1854.     3  Ellis  &  B.  832.) 

Declaration  upon  a  promissory  note. 

On  the  trial,  before  Crompton,  J.,  at  the  Middlesex  sittings  in  Mi- 
chaelmas term,  1853,  a  special  verdict  was  found,  of  which  the  parts 
now  material  were  as  follows : 

As  to  the  first  issue :    That  the  defendant,  at  a  certain  place,  etc. 
(as  in  the  declaration),  made  and  signed,  and  delivered  to  the  plaintiff, 
a  document  in  the  words  and  figures  following,  that  is  to  say: 
^'C.  20,000.  Calcutta,  10th  March,  1845. 

"Nine  months  after  date,  I  promise  to  pay  to  the  secretary  for  the 
time  being  of  the  Indian  Laudable  &  Mutual  Assurance  Society,  or 
order,  company's  rupees,  twenty  thousand,  with  interest  at  the  rate  of 
six  per  cent,  per  annum.  And  I  hereby  deposit  in  his  hands  twenty- 
two  Union  Bank  shares,  as  particularized  at  foot,  by  way  of  pledge 
or  security  for  the  due  payment  of  the  said  sum  of  company's  rupees, 
twenty  thousand,  as  aforesaid ;  and,  in  default  thereof,  hereby  au- 
thorize the  said  secretary  for  the  time  being,  forthwith,  either  by  pri- 
vate or  public  sale,  absolutely  to  sell  or  dispose  of  the  said  twenty-two 
Union  Bank  shares,  so  deposited  with  him;  and  out  of  the  proceeds 
of  sale  to  reimburse  himself  the  said  loan  of  company's  rupees,  twenty 
thousand,  and  interest  thereon,  as  aforesaid,  he  rendering  to  me  any 
surplus  which  may  be  forthcoming  from  such  sale.  And  I  hereby 
promise  and  undertake  to  make  good  whatever,  if  anything,  may  be 
wanting  over  and  above  the  proceeds  of  such  sale,  to  make  up  the  full 

TO  See  Watson  v.  Evans.  1  Hnrlstone  &  C.  662  (1SG3).  a  note  payable  to 
"A.,  B.,  and  C,  or  to  their  order,  or  the  major  part  of  them" ;  Absolon  v. 
Marks,  11  Q.  B.  19  (1S47),  a  note  signed  by  five  payable  "to  our  and  each  of 
•our  order." 


156  FORM   AND   INCEPTION.  (Part  1 

amount  of  the  said  loan  of  company's  rupees,  twenty  thousand,  and 
interest  as  aforesaid.  Edvvd.  Stirling," 

(Then  followed  the  numbers  of  the  shares.) 

"No.  33,  Due  10/13  Dec./45." 

That  the  Indian  Laudable  &  Mutual  Assurance  Society,  in  the  said 
document  mentioned,  is  the  Indian  Laudable  &  Mutual  Assurance 
Society  within  in  the  declaration  mentioned;  and  that  the  plaintiff, 
at  the  time  of  the  making  of  the  said  document,  and  from  thence  un- 
til the  time  of  the  commencement  of  the  within  mentioned  action,  was 
the  secretary  of  the  said  society.  That  the  name  Edward  Stirling,  set 
and  subscribed  to  the  said  document,  is  of  the  proper  handwriting  of 
the  defendant.  That  the  said  sum  of  twenty  thousand  company's  ru- 
pees, at  the  time  of  the  making  of  the  said  document,  and  when  the 
same  became  due,  was  of  the  value  of  £2000.  of  lawful  money  of  Great 
Britain.  The  special  verdict  then  left  the  first  issue  to  the  court  in 
the  usual  form.  The  findings  on  the  other  issues  were  immaterial  to 
the  question  now  decided.^ ^ 

Lord  Campbixl,  C.  J.  The  nature  and  every  definition  which  we 
find  in  the  books  of  a  promissory  note  show  that  it  must  contain  an 
express  promise  to  pay  to  a  person  therein,  named  or  designated,  or 
to  his  order  or  to  bearer.  See  Byles  on  Bills  (6th  Ed.)  p.  4;  Colehan 
V.  Cooke,  Willes,  396 ;  2  Bl.  Com.  467.  If  the  person  to  whom,  or  to 
whose  order,  it  is  to  be  paid  is  uncertain,  and  it  depends  on  a  contin- 
gency to  whom,  or  to  whose  order,  payment  is  to  be  made,  it  is  not 
a  promissory  note  unless  it  can  be  treated  as  payable  to  bearer. 

It  was  urged,  on  behalf  of  the  plaintiff,  that  we  might  treat  this  as  a 
note  made  payable  to  the  plaintiff',  who  at  tlie  date  of  the  document 
was  the  secretary  of  the  society,  by  his  description  as  such  secretary. 
And  it  was  said  that  the  subsequent  part  of  the  instrument,  in  which  it 
is  said  that  the  plaintiff  deposits  in  his  hands,  and  that  he  authorizes 
the  said  secretary  for  the  time  being  forthwith  to  sell,  points  to  the 
then  secretary  as  the  person  to  whom  alone  the  promise  is  made,  and 
to  whom  alone  the  note  is  payable. 

There  is  no  doubt,  upon  the  authorities,  that  it  is  quite  sufficient  to 
make  a  note  by  a  description  or  designatio  personge  of  this  kind ;  but 
we  do  not  think  that  we  can  put  the  above  construction  on  the  docu- 
ment now  before  us.  The  use  of  the  words  "for  the  time  being"  in  the 
first  instance,  the  repetition  of  them  afterwards,  and  the  whole  form 
and  scope  of  the  instrument,  satisfy  us  that  the  payment  was  to  be 
made  to  the  individual  who,  at  the  time  of  the  instrument  falling  due, 
should  fill  the  situation  of  secretary  of  the  company,  and  not  to  the 
plaintiff,  unless  he  happened  to  be  the  secretary  at  that  time.  It  was, 
we  think,  clearly  intended  as  a  floating  promise,  the  performance  of 
which  was  to  be  made  to  the  person  being  secretary  when  the  docu- 

TiThe  statement  is  abridged,  and  the  arguments  of  counsel  and  part  of 
the  opinion  are  omitted. 


Ch.  1)  FORM  OF  BILL  AND  OF  NOTE.  157 

ment  became  due.  The  other  construction  would  in  effect  be  to  hold 
that  the  words  "the  secretary  for  the  time  being"  meant  the  now  sec- 
retary ;  but  we  think  that  the  words  were  used  for  the  very  purpose 
of  excluding  that  construction. 

The  case  of  Rex  v.  Box,  6  Taunt.  325,  which  was  relied  on  by  the 
plaintiff,  is  clearly  distinguishable  from  the  present.  There  the  note 
was  payable  on  demand  to  A.  B.  and  C.  D.,  by  name,  "stewardesses" 
of  a  provident  society,  "or  their  successors  in  office."  There  the  par- 
ties to  whom  the  note  was  given  were  designated  by  name,  and  the 
description  of  them  as  stewardesses,  which  it  was  said  they  were  not 
legally,  being  mere  matter  of  description,  did  not  alter  the  promise 
to  pay  them  on  demand;  and  the  judges  said  that,  although  they  could 
have  no  legal  successors  as  stewardesses,  still  their  executors  or  ad- 
ministrators might  sue.  In  the  present  case,  as  we  read  the  document, 
the  money  was  never  to  become  payable  to  the  plaintiff,  and  he  was 
never  to  have  any  right  upon  the  instrument,  unless  he  happened  to 
fill  the  situation  of  secretary  to  the  society  at  the  end  of  the  nine 
months.  In  Rex  v.  Box,  the  note,  as  construed  by  the  court,  gave  an 
immediate  right  of  action  to  the  payees  named,  on  which  they  might 
have  immediately  sued ;  and  the  court  seems  to  have  thought  that  the 
mention  of  the  successors,  who  could  have  no  legal  existence,  might  be 
rejected  so  that  it  did  not  destroy  the  immediate  legal  right  expressly 
given  to  the  plaintiffs  on  demand.  Here  there  is  no  right  given  to 
the  plaintiff,  except  by  the  words  promising  to  pay  "the  secretary  for 
the  time  being."  It  was  not  suggested,  in  that  case,  that  the  note 
would  be  good  if  it  amounted  to  such  a  floating  contingent  promise  as 
we  think  that  the  words  are  intended  to  import  in  the  case  before  us. 

It  was  suggested  also,  in  the  argument,  that,  if  there  were  no  payee 
who  could  sue,  the  note  might  be  treated  as  payable  to  bearer.  But  we 
think  that  in  so  holding  we  should  give  a  meaning  to  the  note  contrary 
to  the  clearly  expressed  intention  of  the  maker.  This  is  not  a  case  of 
fraud,  or  of  a  fictitious  payee ;  but  the  defect  is,  that  it  is  a  promise  to 
pay  some  person  to  be  ascertained  ex  post  facto  and  we  know  no  au- 
thority to  show  that  under  such  circumstances  we  can  hold  this  instru- 
ment to  be  a  note  payable  to  bearer,  because,  though  valid  perhaps  as 
an  agreement,  it  cannot  be  enforced  as  a  promissory  note.  The  prom- 
ise is  to  pay  to,  or  to  the  order  of,  an  uncertain  person.  But,  if  found- 
ed on  good  consideration,  it  may  probably  give  rights  legal  or  equita- 
ble to  the  society.  But  we  think  that  we  should  be  making  a  new  in- 
strument if  we  were  to  hold  it  a  promissory  note  payable  to  bearer  ; 
and  the  case  does  not  fall  within  any  of  the  decisions  cited  on  this 
branch  of  the  argument. 

As  we  think,  therefore,  that  this  is  not  a  promissory  note,  our  judg- 
ment is  for  the  defendant. 

Judgment  for  defendant.''* 

T2  Affirmed  in  the  Exchequer  Chamber  sub  nom.  Cowie  v.  Sterling,  6 
Ellis  &  B.  333  (185t3).     Accord:  Yates  v.  Nash,  8  C.  B.  (N    S.)  581  (ISGO). 


158  FOUM  AND  iNCKPTiON.  (Part  1 

HOLMES  V.  JAQUES. 

(Court  of  Queeus  Beuch,  1866.     L.  K.  1  Q.  B.  Cas.  376.) 

Declaration  by  the  plaintiffs  as  payees  of  a  promissory  note  against 
the  defendant  as  maker.    Plea,  traverse  of  the  making. 

At  the  trial,  before  Shee,  J.,  at  the  last  spring  assizes  at  Leeds,  it 
appeared  that  the  defendant,  in  1861,  signed  the  following  instrument: 

"Harrogate,  March  18,  1861. 

"On  demand  I  promise  to  pay  to  the  trustees  of  the  Wesleyan  Chap- 
el, Harrogate,  or  their  treasurer  for  the  time  being,  the  sum  of  ilUU., 
in  four  equal  installments  of  £25.  each,  each  of  such  installments  to  be 
due  and  payable  on  the  1st  Oct.  annually,  for  value  received." 

The  plaintiffs  and  four  other  persons  were  the  original  trustees  of 
the  chapel,  the  plaintiff's  being  the  survivors.  A  verdict  was  returned 
for  the  plaintiffs  for  the  amount  claimed,  with  leave  to  move  to  en- 
ter a  verdict  for  the  defendant,  if  the  court  should  be  of  opinion  that 
the  instrument  was  invalid  as  a  promissory  note. 

Manisty,  Q.  C,  moved  accordingly.  The  instrument  sued  upon  is 
not  a  valid  promissory  note,  owing  to  the  uncertainty  of  the  payees. 
It  is  payable  to  the  trustees  or  their  treasurer  for  the  time  being ;  if 
this  be  taken  to  mean  the  trustees  for  the  time  being,  or  their  treas- 
urer for  the  time  being,  then  it  is  uncertain  as  to  both,  and  is  bad  as  a 
promissory  note.  Cowie  v.  Stirling,  6  E.  &  B.  333,  25  L.  J.  (Q.  B.) 
335;  Yates  v.  Nash,  8  C.  B.  (N.  S.)  581,  29  L.  J.  (C.  P.)  306.  But 
the  principal  objection  to  the  instrument  is  that  it  is  payable  to  the 
trustees  or  the  treasurer  in  the  alternative,  and  Blanckenhagen  v.  Blun- 
dell,  2  B.  &  A.  417,  is  a  direct  authority  that  this  uncertainty  renders 
the  instrument  no  promissory  note. 

[Blackburn,  J.  For  all  that  appeared  in  that  case  the  persons 
named  in  the  alternative  as  payees  were  strangers  in  interest.  And 
Bayley,  J.,  suggests  that,  had  there  appeared  a  community  of  inter- 
est, then  (as  appears  here)  an  action  might  possibly  have  been  main- 
tained. 

[Lush,  J.  You  admit  that  a  note  payable  to  "trustees"  is  sufficient 
without  naming  them?] 

Yes.  That  cannot  be  maintained  as  an  objection.  See  Megginson  v. 
Harper,  2  C.  &  M.  322,  4  Tyr.  94,  and  the  judgment  in  Storm  v.  Stirl- 
ing, 3  E.  &  B.,  at  page  842,  23  L.  J.  (Q.  B.),  at  page  301. 

CoCKBURN,  C.  J.  I  am  of  opinion  that  there  should  be  no  rule.  I 
fully  concur  in  what  Mr.  Manisty  has  said,  that  the  payee  must  be  a 
person  certain,  and  a  promise  to  pay  A.  or  B.,  apparent  strangers,  in 
the  alternative,  would  not  be  a  good  promissory  note ;  but  all  this  in- 
strument shows  is  that  it  is  payable  in  the  first  instance  to  the  trustees 
as  payees,  but  with  the  option  of  the  maker  to  pay  to  the  treasurer  for 
the  time  being,  as  their  agent. 

The  treasurer  would  have  no  authority  to  sue  in  his  own  name,  but 
only  to  receive  the  money  on  behalf  of  the  trustees.     I  think  it  would 


Cll.  1)  FORM   OF   BILL   AND   OF   NOTE.  ISd" 

be  to  introduce  unnecessary  strictness  if  we  were  to  say  that  this  was 
not  a  valid  promissory  note;  and  by  holding  that  the  treasurer  for 
the  time  being  is  simply  inserted  as  an  indication  that  he,  as  the  agent 
of  the  trustees,  is  authorized  to  receive  payment  on  their  behalf,  no 
uncertainty  is  introduced  into  the  instrument. 

Blackburn,  J.  I  am  quite  of  the  same  opinion.  I  think  the  true 
construction  of  this  instrument  is  that  it  merely  means,  I  promise  to 
pay  to  the  trustees,  or  their  agents  for  the  time  being  (the  latter  being 
what  is  implied  by  law),  and  I  give  notice  that  the  treasurer  is  such 
agent.  This  is  carrying  out  the  intimation  of  Bayley,  J.,  in  Blancken- 
hagen  v.  Blundell,  2  B.  &  A.,  at  pages  419,  420,  that  if  there  had  been 
any  community  of  interest  stated  between  the  payees  so  as  in  any  re- 
spect to  identify  the  one  with  the  other,  it  is  possible  that  an  action 
might  have  been  maintained  on  the  note.  I  quite  agree  with  Mr.  Man- 
isty's  argument  thus  far,  if  I  thought  the  treasurer  was  named  as  pay- 
ee, so  as  to  be  able  to  indorse  the  note  had  it  been  payable  to  order,, 
or  to  sue  upon  it,  there  would  have  been  an  uncertainty  which  would 
have  vitiated  it  as  a  promissory  note ;  but  this  is  not  the  construction 
which  ought  to  be  put  on  the  instrument. 

Shee,  J.  I  agree  that  the  treasurer  must  be  taken  to  be  named  as 
agent. 

Lush,  J.  In  two  of  the  cases  cited  no  person  was  named  except 
the  officer  for  the  time  being,  consequently,  of  necessity,  the  officer 
for  the  time  must  have  been  taken  to  be  meant  as  the  payee ;  and, 
therefore,  as  there  was  no  certain  person  named  as  payee,  the  instru- 
ment was  invalid  as  a  proinissory  note  or  bill  of  exchange.  Here  the 
trustees  are  designated  as  payees,  and  the  promise  is  to  pay  them  by 
their  agent  for  the  time  being. 

Rule  refused. '^^ 


PATTON  V.  MELVILLE. 

(Court  of  Queen's  Bench  of  Upper  Canada,  1861.     21  U.  C.  Q.  B.  263.) 

This  was  an  action  brought  by  Isabella  Patton,  administratrix  with 
the  will  annexed  of  the  last  will  and  testament  of  John  Patton,  deceas- 
ed, against  Thomas  Melville,  the  defendant,  to  recover  from  him  the 
amount  of  three  promissory  notes,  specially  declared  upon,  made  by 
the  defendant,  payable  to  the  said  John  Patton  in  his  lifetime,  which 
were  respectively  in  the  following  form,  excepting  that  one  of  them 
was  payable  at  12,  a  second  at  18,  and  the  third  at  24  months. 

"Prescott,  August  4,  1858. 

"$15.  Twelve  months  after  date,  for  value  received,  I  promise  to 
pay  to  John  Patton,  Esquire,  treasurer  of  the  building  committee  of 
the  congregation  of  St.  John's  Church,  in  the  town  of  Prescott,  or  hi.s 

7  3  Compare  Noxon  v.  Smith,  127  Mass.  485  (1879). 


100  FOKM   AND   INCEl'TION.  (Part    1 

successor  duly  appointed,  the  sum  of  fifteen  dollars,  towards  the  build- 
ing of  a  new  church  in  the  said  town.  Thonias  Melville." 

The  defendant  denied  the  making  of  the  said  notes,  upon  which 
issue  was  joined.  The  cause  was  entered  for  trial  at  Brockville,  be- 
fore McLean,  J.,  when  a  verdict  was  rendered  for  the  plaintiff,  for 
the  sum  of  il2.  Ts.  (Jd.,  subject  to  the  opinion  of  the  court  on  the  fol- 
lowing case: 

The  payee  of  the  note  was  the  treasurer  of  the  building  committee 
of  the  congregation  of  St.  John's  Church,  in  the  town  of  Prescott; 
and  the  defendant  was  a  subscriber  and  contributor  towards  the  build- 
ing, and  for  such  subscription  and  contribution  made  and  delivered  the 
promissory  notes  which  are  the  subject  of  this  action.  This  action  is 
in  fact  brought  by  and  for  the  benefit  of  the  said  building  committee, 
and  the  now  treasurer  of  the  same.  The  name  of  the  present  plaintiff 
is  used  for  the  mere  purpose  of  enforcing  payment  for  the  said  com- 
mittee or  treasurer,  and  not  for  her  own  benefit;  and  it  is  agreed 
that  the  nisi  prius  record  may  be  referred  to  and  taken  as  part  of  this 
case. 

The  defendant  contends :  (1)  That  the  action  cannot  be  maintained, 
because  the  notes  show  they  were  given  to  the  payee  in  a  particular 
character,  as  treasurer  of  the  said  building  committee,  and  he  had  no 
interest  therein  except  as  such  treasurer.  (2)  That  the  present  plain- 
tiff as  the  administratrix  of  the  payee  can  have  no  interest  in  the  notes, 
which  are  payable  to  the  successor  of  the  payee  as  such  treasurer,  aft- 
er the  payee's  death.  (3)  That  the  instruments  declared  on  are  not 
promissory  notes,  as  they  are  not  payable  to  any  one  person  in  partic- 
ular, or  to  a  person  who  can  be  recognized  as  having  any  legal  exist- 
ence, and  because  they  are  otherwise  too  uncertainly  expressed. 

The  plaintiff  insists  they  are  promissory  notes,  payable  to  John  Pat- 
ton  in  his  lifetime,  and  to  his  personal  representative,  the  plaintiff, 
after  his  death,  and  that  she  is  entitled  to  maintain  this  action  for  the 
benefit  of  the  said  committee  or  of  the  treasurer  thereof. 

The  questions  for  the  opinion  of  the  court  are:  (1)  Whether  the 
plaintiff  can  maintain  an  action  as  administratrix  as  aforesaid  of  the 
said  John  Patten?  and  (2)  Whether  the  said  instruments  are  promis- 
sory notes?  and  if  the  court  is  of  opinion  that  the  plaintiff'  can  main- 
tain this  action  as  aforesaid,  and  that  the  said  instruments  declared 
on  are  promissory  notes,  then  the  verdict  is  to  be  entered  for  the  plain- 
tiff, for  the  sum  aforesaid ;  but  if  the  court  is  of  opinion,  either  that 
the  plaintiff  cannot  maintain  this  action  as  aforesaid,  or  that  the  said 
instruments  are  not  promissory  notes,  then  a  nonsuit  is  to  be  entered. 

Robinson,  C.  J.,  delivered  the  judgment  of  the  court. 

The  plaintiff  is  entitled  in  our  opinion  to  sue  upon  these  notes  as 
administratrix  of  the  deceased  payee,  on  the  authority  of  Rex  v.  Box, 
6  Taunt.  329.  We  can  see  no  distinction  between  that  case  and  the 
present.  We  mean  no  distinction  as  respects  the  legal  character  of 
the  instrument  declared  upon. 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE.  161 

The  payee  is  named  in  the  note,  which  distinguishes  the  present  case 
from  Cowie  v.  Stirling,  3  E.  &  B.  832.  He  could  have  no  successor, 
legally  speaking,  as  treasurer  of  a  church  building  committee,  which 
had  no  corporate  capacity,  and  was  a  mere  voluntary  association ;  and 
the  consequence  is  that  on  his  death,  even  if  none  of  the  notes  ma- 
tured in  his  lifetime,  his  personal  representative  must  have  a  right  to 
sue ;  and  the  money  when  recovered  will  be  held  by  the  plaintiff  upon 
the  trust  which  the  note  indicates,  just  as  the  payee  himself  would 
have  held  it. 

Postea  to  the  plaintiff/* 


FISHER  V.  ELLIS. 

(Supreme  Judicial  Court  of  Massachusetts,  1825.     3  Pick.  322.) 

Assumpsit,  brought  by  the  treasurer  of  the  Third  parish  in  Dedham, 
upon  the  following  promissory  note  signed  by  Oliver  Ellis,  the  defend- 
ant's testator,  viz.:  "Dedham,  June  1,  1811.  Borrowed  and  received 
of  Willard  Gay,  Esquire,  treasurer  of  the  Third  parish  in  Dedham, 
seventy-five  dollars,  which  sum  I  promise  to  repay  him  or  his  success- 
or in  said  office,  according  to  the  conditions  of  a  donation  made  to  said 
parish,  and  accepted  by  them  by  a  vote  passed  May  30,  1811,  and  re- 
corded in  the  parish  book  of  records,  reference  thereto  being  had,  with 
interest  on  the  1st  day  of  March  annually." 

The  defendant  objected  to  the  admission  of  the  note  in  evidence 
because  the  plaintiff  had  no  legal  interest  in  it,  and  was  not  a  party  to 
it.  But  Williams,  J.,  overruled  the  objection  and  ruled  that  the  parish 
might  sustain  the  action  in  the  name  of  their  present  treasurer,  and 
directed  a  verdict  for  the  plaintiff.  Whereupon  the  defendant  filed 
his  exceptions.'^ ^ 

Parker,  C.  J.  We  are  not  able  to  perceive  any  sufficient  reason 
against  the  plaintiff's  recovering  in  the  present  action.  The  promise 
is  made  to  the  Third  parish  in  Dedham,  through  their  treasurer,  and 
it  is  expressly  made  to  the  successors  in  that  office.  The  parish  is  a 
legally  existing  body,  having  a  right  to  hold  funds,  and  to  be  a  debtor 
or  creditor.  The  present  plaintiff  is  the  lawful  successor  of  him  to 
whom  the  promise  was  immediately  made.  There  is  then  no  objection 
to  the  character  or  capacity  of  the  plaintiff.  A  promise  made  to  A., 
for  the  benefit  of  B.,  may  be  sued  by  A.  or  B.  Com.  Dig.  Action,  etc., 
upon  Assumpsit,  J^.     *     *     * 

Judgment  affirmed.^' 

74  Accord:  Davis  v.  Garr,  6  N.  Y.  124,  55  Am.  Dec.  387  (1851);  Wliit- 
comb  V.  Smart,  38  Me.  264  (1854). 

7  5  The  statement  is  abridged,  and  the  arguments  of  counsel  and  part  of 
the  opinion  omitted. 

7  8  Accord:  Tainter  v.  Winter,  53  Me.  348  (1865);  McDonald  v.  Laugh- 
Un,  74  Me.  480  (1883) ;    Rogers  v.  Gibson,  15  Ind.  218  (1860),  semble ;    Buck 

Sm.&  M.B.&  N.— 11 


162  FORM   AND    INCEPTION.  (Part  1 

MOODY  V.  THRELKELD. 
(Supreme  Court  of  Georgia,   1853.     13  Ga.  55.) 

This  was  an  action  of  debt,  brought  by  John  L.  Moody,  as  adminis- 
trator on  the  estate  of  John  H.  Newland,  deceased,  against  the  defend- 
ant in  error,  on  the  following  note : 

"On  or  before  the  first  day  of  January,  eighteen  hundred  and  forty- 
two,  we  or  either  of  us  promise  to  pay  to  administrators  of  estate  of 
John  H.  Newland,  eleven  hundred  and  twenty  dollars  and  eighty-five 
cents,  for  value  received.     August  23,  1840.       T.  J.  Threlkeld. 

"George  W.  Sims." 

The  action  was  commenced  on  the  22d  day  of  January,  1851.  The 
defendant,  among  other  pleas,  filed  that  of  the  statute  of  limitations. 

The  defendant  moved  for  a  nonsuit  on  the  following  grounds :  ( 1) 
Because  the  paper  sued  on  is  not  a  note  on  which  an  action  will  lie, 
being  too  uncertain  as  to  the  payee.  (2)  Because  the  case  is  barred 
by  the  statute  of  limitations,  and  the  facts  proven  do  not  take  it  out 
of  the  bar  of  the  statute.  The  court  sustained  the  motion,  and  award- 
ed a  nonsuit,  and  counsel  for  plaintiff  excepted,  and  also  moved  the 
court  to  reinstate  the  case,  and  allow  him  to  amend  his  declaration, 
which  motion  the  court  refused,  and  counsel  for  plaintiff  excepted, 
and  upon  these  exceptions  has  assigned  error.''^ 

Lumpkin,  J.  (delivering  the  opinion).  Was  the  paper  sued  on  a 
promissory  note?  We  think  so,  most  clearly.  We  recognize  the  gen- 
eral principle  that  it  is  essential  to  the  validity  of  a  promissory  note 
that  it  should  be  certain  as  to  the  person  to  whom  it  is  payable  (  Story 
on  Pro.  Not.  33,  note  3),  and  that  parol  proof  is  inadmissible  to  sup- 
ply a  defect  in  this  respect  (Id.  §  3.5).  But  this  does  not  mean  that 
the  person  to  whom  the  note  is  payable  should  be  made  known  by 
name,  on  the  face  of  the  note  itself. 

It  is  admitted  that  a  note  payable  to  bearer  merely,  without  men- 
tioning any  name,  is  a  valid  note,  and  that  a  note  issued  with  a  blank, 
for  the  payee's  name,  may  be  filled  up  by  any  bona  fide  holder,  with 
his  own  name  as  payee,  and  that  then  it  will  be  treated  as  a  good  prom- 
issory note,  to  him,  from  its  date.  And  it  is  upon  the  familiar  maxim, 
"Id  cestum  est  quod  cestum  reddi  potest."  And  it  is  upon  the  same 
principle  that  a  note  payable  to  the  administrator  of  an  estate  has  al- 
ways been  held  by  the  courts  of  Georgia  a  good  promissory  note.  A 
reference  to  the  records  of  the  court  of  ordinary  will  show  with  un- 
erring certainty  to  whom  its  obligations  apply. 

Suppose  this  note  had  been  made  payable  to  John  H.  Newland  in 
his  lifetime.  The  face  of  the  paper  would  not  disclose  who  was  the 
legal  representative  of  the  payee,  to  whom  alone  payment  was  to  be 

r.  Merrick.  8  Allen  (Mass.)  123  (1864),  semble.    Compare  Scares  v.  Glyn,  8  Q. 
B.  24  (1845). 

T7  The  statement  is  abridged,  and  part  of  the  opinion  omitted. 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE.  163 

made,  and  who  alone  had  the  right  to  transfer  it.  In  that  case,  as  in 
this,  recourse  would  have  to  be  had  to  the  records  of  the  ordinary. 
Indeed,  there  would  be  greater  uncertainty  in  that  case  than  this,  for 
it  would  be  doubtful  whether  the  representative  were  executor  or  ad- 
ministrator; whereas  this  paper  shows  upon  its  face  the  character  of 
the  trustee,  namely,  that  he  is  administrator.  Or,  take  another  illus- 
tration :  Suppose,  as  is  frequently  the  case,  that  the  notes  of  an  es- 
tate are  distributed  among  the  heirs,  would  not  the  division  constitute 
such  a  link  in  the  title  of  the  holder  as  to  enable  him  to  sue  for  and 
recover  the  note?  And  yet  greater  uncertainty  would  exist  in  that 
case,  also,  as  to  the  ownership  of  the  paper,  or  the  person  to  whom  it 
was  payable,  than  in  the  present. 

Is  the  statute  of  limitations  a  bar  to  this  recovery?  It  is  contended 
in  behalf  of  the  defendant  in  error  that  Hill,  the  administrator  of  New- 
land,  might  have  sued  on  this  note,  in  his  individual  character,  at  its 
maturity.  Indeed,  the  assumption  in  the  argument  is  that  he  must 
have  sued  in  his  own  right,  and  that  he  could  not  have  maintained  the 
action  in  his  trust  character,  and  that  no  obstacle  has  occurred  to  the 
prosecution  of  his  suit,  and  that,  failing  to  do  so,  the  remedy  is  tolled 
or  taken  away. 

But  we  apprehend  the  very  reverse  of  this  proposition  to  be  true. 
Had  the  note  been  payable  to  Hill,  with  the  usual  addition  of  adminis- 
trator, etc.,  he  might  have  treated  the  note  as  his  private  property,  and 
declared  on  it,  as  such.  But  even  then,  on  the  other  hand,  he  would 
not  be  bound  to  have  done  this,  but  might  also  have  sued  in  his  repre- 
sentative capacity,  and  the  defendant  would  have  been  estopped  from 
denying  the  fact  that  he  was  administrator.'^^  And  conceding  that  a 
proper  mode  of  declaring  on  this  note  would  have  been  to  have  aver- 
red that  it  was  made  payable  to  Jacob  R.  Hill,  by  the  name  and  style 
of  administrator  on  the  estate  of  John  H.  Newland,''*  still  it  cannot 
be  questioned  for  a  moment  that  the  note  may  be  treated  as  the  prop- 
erty of  Newland's  estate,  and  sued  on,  as  it  has  been,  as  such.^°  And 
if  this  be  true,  it  is  an  effectual  reply  to  the  plea  of  the  statute.  But 
this  note  is  payable  to  the  administrator  of  the  estate  of  Newland.  The 
legal  title  vests  in  him,  as  trustee,  and  it  is  doubtful  whether  the  suit 

T 8  Accord:     Williams  on  Executors,  marg.  p.  763. 

7  9  On  a  note  similar  to  that  in  the  principal  case,  a  declaratiou  in  the  form 
suggested,  without  an  allegation  that  the  plaintiffs  were  administrators  when 
the  action  was  begun,  was  held  good  on  demurrer.  Adams  v.  King,  16  111. 
169.  61  Am.  Dec.  64  (18.54).  But,  of  course,  on  the  trial  the  plaintiffs  must 
prove  that  they  answered  the  description  in  the  note ;  1.  e.  that  they  were 
administrators  when  the  note  was  delivered.  Hamilton  v.  Aston,  1  Car.  & 
K.  679  (1845). 

80  Accord:  Barron  v.  Vandvert,  13  Ala.  232  (1848),  where  the  action  was 
by  the  administrator  de  bonis  on  a  note  payable  to  his  predecessor,  "F.  B., 
administrator  of  W.  B." ;  Dunham  v.  Grant,  12  Ala.  105  (1847),  where  after 
his  removal  from  office  G.  was  not  allowed  to  recover  on  a  note  payable  to 
"G.,  administrator  of  M.  M.,"  although  no  successor  had  been  appointed; 
Williams  on  Elsecutors,  marg.  p.  764.  Compare  Atherwood  v.  Chabaud,  1  B. 
&  C.  150  (1823). 


164  FORM   AND   INCEPTION.  (Part    1 

could  be  brought  by  him  in  any  other  right.^^  In  this  character,  at 
any  rate,  he  did  sue  within  six  years  from  the  time  the  cause  of  ac- 
tion accrued.  The  case  remained  on  the  docket  till  August,  1850, 
when  it  was  nonsuited.  It  was  recommenced  by  his  successor,  in  Jan- 
uary, 1851,  within  less  than  six  months  from  the  time  when  the  first 
suit  was  dismissed.  No  plea  to  the  disability  of  the  plaintiff  to  main- 
tain either  the  first  or  second  suit,  in  his  representative  character,  has 
ever  been  filed.  Consequently  the  statute  has  not  interfered  to  save 
the  defendant.  *  *  * 
Judgment  reversed.®^ 


GRIST  et  al.  v.  BACKHOUSE. 
(Supreme  Court  of  North   Carolina,    1839.     20   N.   C.   496.) 

This  was  an  action  of  debt,  on  a  negotiable  single  bill,  in  which  the 
plaintiffs  declared  as  assignees  of  Richard  Grist.  Plea — the  general 
issue. 

On  the  trial  at  Craven,  on  the  last  circuit,  before  his  honor  Judge 
Settle,  the  plaintiffs  proved  and  read  in  evidence  the  bill  upon  which 
they  declared,  in  the  following  words  and  figures,  to  wit: 

"$233.  Ninety  days  after  date  we  jointly  and  severally  promise  to 
pay  Richard  Grist,  agent  of  his  assignees,  or  order,  two  hundred  and 
thirty-three  dollars,  value  received.  Negotiable  and  payable  at  the 
Bank  of  New  Berne.    Witness  our  hands  and  seals  July  23d,  1833. 

"Allen   Backhouse.     [Seal.] 
"Wm.   V.   Barrow.      [Seal.]" 

The  plaintiffs  then  produced  and  read  a  deed  of  assignment  to  them- 
selves of  all  the  effects  of  Richard  Grist,  for  the  benefit  of  his  credit- 
ors, which  was  executed  before  the  date  of  the  bill.  There  was  no 
indorsement  of  the  bill  by  the  payee.  Upon  this  evidence  the  jury,  un- 
der the  instruction  of  his  honor,  returned  a  verdict  for  the  plaintiffs, 
whereupon  they  had  judgment,  and  the  defendant  appealed. 

Daniel,  J.,  after  stating  the  facts  as  above,  proceeded  as  follows: 
We  are  of  the  opinion  that  the  evidence  offered  by  the  plaintiffs  did 
not  support  their  declaration,  and  that  the  judge  misdirected  the  jury 
as  to  the  law,  when  he  told  them  that  the  plaintiffs  were  entitled  to  re- 
cover. Where  a  bill  was  made  payable  to  A.,  to  the  use  of  B.,  it 
was  held  that  B.  had  but  an  equitable  right,  not  a  legal  interest,  and 
that  he  could  not  maintain  an  action  on  the  bill  against  the  acceptor. 
Evans  V.  Cramlington,  Carth.  5,  1  Leigh's  N.  P.  402 ;    Byles  on  Bills, 

81  That  Hill  might  have  treated  the  phrase  "administrator  of  estate  of 
J.  H.  U."  as  descriptlo  personae  Is  held  in  Adams  v.  King,  supra.  See,  also, 
Hamilton  v.  Aston,  supra. 

8»  Compare  Peltier  v.  Babillion,  45  Mich.  384.  8  N.  W.  99  (1881);  Shaw 
V.  Smith.  150  Mass.  160,  22  N.  E.  887,  6  L.  R.  A.  348  (1889),  where  the  payee 
was  designated  as  "X.'s  estate." 


Ch.  1)  FORM   OP   BILL   AND   OF   NOTE.  165 

84,  So,  in  this  case,  Richard  Grist  describing  himself  in  the  bill  as 
the  agent  of  his  assignees  did  not  give  them  the  legal  title  to  the  bill. 

The  counsel  for  the  plaintiffs  insist  that  the  defendant  cannot  now 
object  to  this  error,  because  there  was  no  specific  exception  taken  at 
the  trial.  The  defendant  had  placed  on  the  record  his  plea ;  it  was 
for  the  plaintiffs  to  support  the  affirmative  of  the  issue  arising  on  that 
plea.  The  court  misdirected  the  jury  as  to  the  law  on  the  trial  of  the 
issue,  and  told  them  that  the  evidence  offered  was  sufficient  for  the 
plaintiffs.  This  error  appears  on  the  record,  and  for  that  the  judg- 
ment must  be  reversed  and  a  new  trial  awarded. 

Per  Curiam.    Judgment  reversed. 


PRESIDENT,   ETC.,   OF  COMMERCIAL  BANK  v.   FRENCH. 

(Supreme   Judicial    Court    of    Massachusetts,    Suffolk    and   Nantucket,    1839. 
21  Pick.  486,  32  Am.  Dec.  280.) 

Assumpsit  on  a  promissory  note  as  follows : 

"Boston,  Sept.  28,  1835.  For  value  received  I,  John  Thompson,  as 
principal,  and  I,  John  French,  as  surety,  jointly  and  severally  promise 
to  pay  the  cashier  of  the  Commercial  Bank,  Boston,  or  his  order,  nine 
thousand  dollars,  on  demand  with  interest.  John  Thompson. 

"John    French." 

The  note  was  not  indorsed. 

The  defendant  insisted  that  the  note  was  made  payable  to  the  cash- 
ier, and  not  to  the  bank,  and,  not  being  indorsed,  an  action  upon  it  in 
the  name  of  the  bank  could  not  be  sustained.  The  judge  overruled 
the  objection,  and  a  verdict  was  taken  for  the  plaintiff  by  consent,  sub- 
ject to  the  opinion  of  the  whole  court. *^ 

Morton,  j,  *  *  *  But  the  only  objection  much  relied  upon,  or 
worthy  of  much  consideration,  relates  to  the  form  of  the  action.  The 
note  is  in  terms  payable  to  "the  cashier  of  the  Commercial  Bank,"  and 
the  defendant  contends  that  the  action  should  have  been  brought  in 
the  name  of  the  person  who  was  then  cashier,  and  will  not  lie  in  the 
name  of  the  corporation.  It  is  not  denied  that  the  property  of  the 
note  is  and  ever  has  been  in  the  plaintiffs ;  but  the  argument  is  that, 
the  promise  being  in  the  name  of  the  cashier,  although  made  to  him  in 
trust  and  for  the  benefit  of  the  corporation,  it  can  only  be  enforced  in 
his  name. 

It  is  a  familiar  rule  of  pleading  that  contracts  must  be  declared  on 
according  to  their  legal  import  and  effect,  rather  than  their  literal 
form.  1  Chit.  PI.  (1st  Ed.)  299,  302.  We  should  therefore  first  seek 
the  true  import  of  the  contract  under  consideration.     If  it  be  in  truth 

8  8  The  statement  is  abridged,  and  the  arguments  of  counsel  and  part  of 
the  opinion  omitted. 


166  FORM   AND   INCEPTION.  (Part  1 

a  promise  to  the  individual  who  was  cashier  when  it  was  made,  and 
not  to  the  corporation,  it  is  very  clear  that  the  plaintiffs  cannot  main- 
tain this  action.  For  he  alone  to  whom  a  promise  is  made,  or  in  whom 
its  legal  interest  is  vested,  can  enforce  its  performance  or  complain 
of  its  breach.  Hammond  on  Parties,  4 ;  1  Chit.  PI.  (1st  Ed.)  3  to  5, 
and  cases  there  cited ;  Allen  v,  Ayres  et  al.,  3  Pick.  298. 

A  contract  may  be  made  to  or  with  a  person,  as  well  by  description 
as  by  name.  And  where  the  parties  can  be  ascertained,  it  will  be  val- 
id, although  their  names  be  mistaken  or  their  description  be  incorrect. 
It  cannot  be  doubted  that  a  note  to  the  Commercial  Bank  would  be 
valid  and  might  be  declared  on  as  a  promise  to  the  plaintiffs,  although 
their  legal  name  is  "the  President,  Directors  and  Company  of  the 
Commercial  Bank."  So  a  contract  with  the  stockholders,  or  with  the 
president  and  directors,  or  with  the  directors  of  the  Commercial  Bank, 
would  doubtless  be,  in  its  legal  effects,  a  contract  with  the  corporation. 
It  is  not  easy  to  perceive  why  a  contract  with  the  cashier  of  a  bank  is 
not  a  contract  with  the  bank  itself.  The  accounts  of  banks  with  each 
other  are  usually  kept  in  form  with  the  cashiers,  but  undoubtedly  the 
banks  themselves  are  the  real  parties  to  them.  Master,  etc.,  of  Sussex 
Sidney  College  v.  Davenport,  1  Wils.  184. 

A  corporation,  being  an  incorporeal  being  and  having  no  existence 
but  in  law,  can  neither  make  nor  accept  contracts,  receive  nor  pay  out 
money,  but  by  the  agency  of  its  officers.  They  are  the  hands  of  the 
corporation  by  which  they  execute  their  contracts  and  receive  and 
inake  payments.  Of  these  officers  the  cashier  is  the  principal.  If  the 
note  had  been  made  to  the  corporation,  by  its  appropriate  name,  the 
same  officer  would  have  demanded  and  received  payment,  or  would 
have  given  notice  of  nonpayment  and  protested  it,  and,  had  it  been 
negotiated,  would  have  made  the  indorsement,  and  in  precisely  the 
same  form  as  he  would  upon  this  note. 

There  are  several  decisions  in  our  own  reports,  which  support  this 
view  of  the  subject,  in  cases  less  strong  than  the  present.  In  the  Med- 
way  Cotton  Manufactory  v.  Adams  et  al.,  10  Mass.  360,  it  was  decid- 
ed that  a  note  payable  to  Richardson,  Metcalf  &  Co.  might  well  be 
declared  on  as  a  promise  to  the  Medway  Cotton  Manufactory.  In 
Taunton  &  South  Boston  Turnpike  v.  Whiting,  10  Mass.  327,  6  Am. 
Dec.  124,  it  was  holden  that  the  promise,  in  a  subscription  paper,  to 
pay  the  assessments  which  should  be  made  on  certain  shares  to  John 
Gilmore,  or  order,  would  support  an  action  in  the  name  of  the  corpo- 
ration. And  in  Gilmore  v.  Pope,  5  Mass.  491,  it  was  directly  decided 
that  an  action  would  not  lie  upon  the  same  subscription  in  the  name 
of  Gilmore,  but  must  be  brought  by  the  corporation.  Piggott  v. 
Thompson,  3  Bos.  &  Pul.  147. 

The  principle  is  that  the  promise  must  be  understood  according  to 
the  intention  of  the  parties.  If  in  truth  it  be  an  undertaking  to  the 
corporation,  whether  a  right  or  a  wrong  name,  whether  the  name  of 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE.  167 

the  corporation  or  of  some  of  its  officers  be  used,  it  should  be  declared 
on  and  treated  as  a  promise  to  the  corporation.  And  there  is  no  so 
safe  criterion  as  the  consideration.  If  this  proceed  from  the  corpora- 
tion, it  raises  a  very  strong  presumption  that  the  promise  is  made  to 
them.  If  no  express  promise  be  made,  but  it  be  left  to  legal  implica- 
tion, it  must  be  to  them. 

Some  later  cases  have  the  appearance  of  clashing  a  little  with  the 
two  last  above  cited.  But  probably  they  may  be  reconciled  by  a  refer- 
ence to  the  different  nature  of  the  promises  declared  on  and  the  dif- 
ferent state  of  the  facts.  In  Fisher  v.  Ellis,  3  Pick.  322,  it  was  decid- 
ed that  a  note  payable  to  the  treasurer  of  a  parish,  though  given  for 
the  funds  of  the  parish,  might  well  be  sued  in  the  name  of  the  treas- 
urer. And  in  Fairfield  v.  Adams,  16  Pick.  381,  it  was  holden  that  a 
note  indorsed  to  S.  S.  Fairfield,  cashier,  would  sustain  an  action  in  the 
name  of  Fairfield.  See,  also,  Little  v.  O'Brien,  9  Mass.  423  ;  Brigham 
V.  Marean,  7  Pick.  40. 

Great  favor  and  indulgence  is  always  shown  to  negotiable  securi- 
ties. The  above  cases  seem  to  show  that  upon  such  paper,  when  made 
in  the  name  of  an  agent  or  officer,  though  the  beneficial  interest  be 
m  the  corporation,  they  may  be  sued  by  him.  But  they  do  not  show 
that  an  action  might  not  also  be  maintained  in  the  name  of  the  corpo- 
ration. The  contrary  is  plainly  intimated  in  Fisher  v.  Elhs.  It  has 
been  the  practice  to  sue  towns  on  notes  given  by  their  treasurers. 
Many  such  actions  have  been  brought  and  maintained.  See  Prece- 
dents of  Declarations,  111.  If  a  note  given  by  the  treasurer  of  a 
corporation  is  the  contract  of  the  corporation,  we  can  see  no  sound 
reason  why  a  note  given  to  the  treasurer  should  not  be  an  available 
promise  to  the  corporation. 

There  is  an  obvious  and  broad  distinction  between  the  case  at  bar 
and  those  of  Fisher  v.  Ellis  and  Fairfield  v.  Adams.  Had  the  note 
been  made  to  the  cashier,  by  name,  the  addition  of  "cashier  of  the 
Commercial  Bank"  might  have  been  considered  as  descriptio  personse, 
used  to  designate  as  between  him  and  the  bank  the  relation  he  bore 
to  it  in  the  transaction,  and  the  individual  might  have  been  deemed 
the  promisee  as  in  those  cases. ^*  But  such  was  not  the  fact,  and  we 
discover  no  valid  objection  to  the  plaintiff's  recovery.^^ 

8  4  In  such  a  oase  as  the  court  supposes  the  instrument  would  be  payable 
to  the  bank  prima  facie.  First  Bank  v.  Hall,  44  N.  Y.  395,  4  Am.  Rep. 
698  (1871);  Johnson  v.  Bank,  134  Iowa,  731,  112  N.  W.  165  (1907);  Griffin 
V.  Erskine,  131  Iowa,  444,  109  N.  W.  13  (1906),  a  note  payable  to  "X.,  Pres." 
Compare  First  Bank  v.  McCullough.  50  Or.  508.  93  Pac.  366,  17  L.  R.  A, 
(N.  S.)   1105,  126  Am.   St.  Rep.  758  (1908). 

88  Accord:  McBroom  v.  Corporation  of  Lebanon,  31  Ind.  268  (1869),  a  note 
payable  to  "treasurer  of  Lebanon  Corporation."  Compare  Charitable  Ass'n  v. 
Baldwin,  1  Mete.  (Mass.)  359,  365  (1840) ;  Vermont  R.  R.  Co.  v.  Clayes.  21  Vt. 
30  (1848) ;  Noxon  v.  Smith,  127  Mass.  485  (1879) ;  Sayers  v.  Bank,  89  Ind- 
230  (1883). 


IG8  FORM   AND   INCEPTION.  (Part    1 


TOLMAN  V.  AMERICAN  NAT.  BANK. 

(Supreme  Court  of  Rhode  Island,  1901,  22  R.  I.  462,  48  Atl.  4S0,  52  L.  R. 
A.  877,  84  Am.  St.   Rep.   850.) 

Assumpsit.  The  facts  are  fully  stated  in  the  opinion.  Heard  on 
petition  of  plaintiff  for  new  trial,  and  new  trial  granted. 

Stiness,  C.  J.  The  plaintiff  sues  to  recover  money  paid  out  by  the 
defendant,  on  his  account,  upon  his  check,  under  a  forged  indorse- 
ment. Louis  Potter,  representing  himself  to  be  Ernest  A.  Haskell, 
went  to  the  plaintiff  to  get  a  loan  of  money,  giving  the  residence  and 
occupation  of  Haskell  as  his  own.  The  plaintiff  made  inquiry,  and 
finding  that  Haskell  was  employed,  and  was  living  as  represented,  he 
agreed  to  make  the  loan.  Potter,  under  the  name  of  Haskell,  gave  his 
note  to  the  plaintiff",  and  the  plaintiff  gave  him  a  check  on  the  defend- 
ant payable  to  the  order  of  Haskell,  delivering  it  to  Potter,  supposing 
him  to  be  Haskell.  Potter  indorsed  Haskell's  name  on  the  back  of  the 
check,  and  gave  it  to  A.  R.  Hines,  who  collected  it  from  the  bank. 
When  the  note  given  to  the  plaintiff  became  due,  the  fraud  was  dis- 
covered. He  thereupon  notified  the  bank  and  demanded  a  return  of 
the  amount  paid  on  the  check  to  the  credit  of  his  account. 

At  the  trial  a  verdict  for  the  defendant  was  directed,  and  the  plain- 
tiff petitions  for  a  new  trial.  The  question  is  whether  the  bank  is 
liable  for  the  payment  which  it  made  on  this  check.  It  is  a  funda- 
mental rule  of  banking  that,  when  a  bank  receives  money  to  be  checked 
out  by  a  depositor,  it  is  to  be  paid  only  as  the  depositor  shall  order. 
The  bank  assumes  this  duty  in  receiving  the  deposit.  If,  therefore, 
it  pays  out  money  otherwise  than  according  to  such  order,  it  is  liable 
to  the  depositor  for  the  amount  so  paid.  The  bank  thus  assumes  the 
responsibility  of  seeing  that  the  money  gets  to  the  party  authorized 
to  receive  it.  Hence,  if  it  pays  money  out  on  a  forged  signature,  the 
depositor  being  free  from  blame  or  negligence,  it  must  bear  the  loss. 
In  this  case  the  plaintiff  directed  the  money  to  be  paid  to  the  order 
of  Ernest  A.  Haskell.  It  was  not  so  paid.  He  did  not  indorse  the 
check.  Potter  forged  his  signature.  Under  these  circumstances,  the 
plaintiff's  right  to  recover  seems  to  be  plain. 

But  the  defendant  contends  that  the  man  who  made  the  contract 
received  the  check ;  that  it  was  intended  for  him ;  that  the  money 
went  to  him,  and  so  there  was  no  forgery,  and  the  bank  is  not  liable. 
It  would  seem  that  upon  so  plain  a  proposition  the  decisions  should 
be  unanimous ;  but  it  is  not  so.  To  say  that  the  money  was  intended 
for  the  one  who  had  committed  the  fraud  is  simply  to  say  that  the 
fraud  was  complete.  It  is  a  surprising  doctrine  that,  if  A.  can  suc- 
cessfully personate  B.,  he  thereby  escapes  being  guilty  of  forgery  in 
signing  B.'s  name  on  a  check  of  C.'s.  Of  course,  C.  intended  the 
money  to  go  to  him  as  an  actual  person,  but  only  because  he  supposed 
that  he  was  the  person  whom  he  represented  himself  to  be.     Can  the 


Ch.  1)  FORM   OF   BILL   AND   OF   NOTE.  169 

imposition  upon  C.  justify  A.'s  personation  and  signature  of  B?  If 
C.  had  sent  his  check  to  B.  by  A.,  and  the  latter  had  written  B.'s  in- 
dorsement thereon,  no  one  would  say  that  it  was  not  forgery.  How 
does  it  change  the  case  when  A.  gets  the  check  by  making  C.  believe 
that  he  is  B.?  In  one  case  C.  sent  it  to  B.,  and  in  the  other  he  sup- 
posed that  he  handed  it  to  B.  directly.  In  both  cases  it  was  intended 
for  B. 

The  plaintiff's  counsel  has  well  said,  in  this  case,  that  any  decision 
to  the  effect  that  a  bank  is  protected  in  paying  a  check  to  an  imposter 
who  has  forged  the  payee's  name  on  the  check,  upon  the  ground  that 
it  carries  out  the  actual  intent  of  the  drawer,  is  based  upon  a  manifest 
fallacy.  Moreover,  of  what  consequence  is  the  intent  of  the  drawer 
of  the  check,  when  the  direction  is  to  pay  to  the  party  named?  He 
has  the  right  to  assume  that  the  bank  will  pay  to  the  party  as  directed. 
In  this  case  the  money  was  intended  for  Haskell,  because  his  was  the 
only  name  suggested.  He  had  been  looked  up,  and  found  to  be  re- 
sponsible. It  is  a  perversion  of  words  to  say  that  it  was  intended  for 
Potter  simply  because  he  had  fraudulently  impersonated  Haskell,  and 
led  the  plaintiff  to  believe  that  he  was  Haskell.  The  plaintiff  did  not 
intend  to  let  Potter  have  money.  His  check  showed  he  was  not  to 
have  it,  because  it  was  made  payable  to  Haskell.  When,  therefore, 
Potter  fraudulently  indorsed  Haskell's  name  on  the  check,  it  was  a 
typical  case  of  forgery.  It  was  a  false  signature,  with  intent  to  de- 
ceive. 

The  defendant  relies  on  Robertson  v.  Coleman,  141  Mass.  231,  4 
N.  E.  619,  55  Am.  Rep.  471,  where  the  suit  was  by  a  holder  against 
the  maker  of  a  check.  The  payee  had  assumed  the  name  of  another 
and  obtained  the  check  as  the  price  for  stolen  property  sold  by  the 
defendants  as  auctioneers.  The  decision  was  for  the  plaintiff,  and 
good  ground  is  given  for  it  in  the  opinion,  in  this :  that  the  plaintiff 
was  a  bona  fide  holder  without  notice,  and  that  the  defendants  simply 
supposed  the  payee  to  be  Charles  Barney,  of  Swanzey,  but  not  from 
any  false  representation  made  to  them.  Had  the  opinion  stopped 
there,  no  case  of  fraud  would  have  appeared.  But  the  court  put 
these  facts  aside  as  immaterial,  and  then  said :  "This  was  the  person 
intended  by  the  defendants  as  the  payee  of  the  check,  designated  by 
the  name  he  was  called  in  the  transaction,  and  his  indorsement  of  it 
was  the  indorsement  of  the  payee  of  the  check  by  that  name.  The 
contract  of  the  defendants  was  to  pay  the  amount  of  the  check  to  this 
person  or  his  order,  and  he  has  ordered  it  paid  to  the  plaintiff."  No 
authorities  are  cited  in  the  opinion,  but  the  case  has  been  cited  as  an 
authority  since.  See  Emporia  Bank  v.  Shotwell,  35  Kan.  360,  11  Pac. 
141,  57  Am.  Rep.  171;  United  States  v.  National  Bank  (C.  C.)  45 
Fed.  163;  Land  Title  Co.  v.  Northwestern  Nat.  Bank,  196  Pa.  230, 
46  Atl.  420,  50  E-  R.  A.  75,  79  Am.  St.  Rep.  717;  First  National 
Bank  v.  Am.  Exchange  Bank,  49  App.  Div.  349,  63  N.  Y.  Supp.  58. 

These  cases  lose  sight  of  the  distinction  between  real  and  fictitious 


170  FOUM  AND  iNCKPTiON.  (Part  1 

persons.  In  the  latter  case  there  is  nobody  to  inquire  about ;  no  one 
in  fact  misrepresented ;  no  one  in  the  mind  of  one  party  other  than 
the  person  witli  whom  he  is  deaHng.  In  the  case  of  a  real  person,  how- 
ever, one  party,  having  him  in  mind,  satisfies  himself  about  the  re- 
sponsibility of  such  party,  and  supposes  that  he  is  dealing,  not  with 
the  person  who  is  in  fact  before  him,  but  with  the  one  whom  he  has 
in  mind  and  whom  the  one  before  him  falsely  personates.  Thus 
in  Mead  v.  Young,  4  D.  &  E.  28,  it  was  held  that,  where  a  bill  of 
exchange  got  into  the  hands  of  one  of  the  same  name  as  the  payee, 
yet  such  person,  knowing  that  he  was  not  the  person  in  whose  favor 
it  was  drawn,  was  guilty  of  forgery  in  indorsing  it.  In  Robarts  v. 
Tucker,  16  Q.  B.  559,  it  was  held  that  a  banker  could  not  debit  his 
customer  with  the  payment  made  to  one  who  claimed  through  a  forged 
indorsement  made  by  the  solicitor  of  the  payee.  That  was  not  a  case 
of  misrepresentation  of  persons,  but  it  is  referred  to  in  Vagliano  v. 
Bank  of  England,  23  Q.  B.  Div.  243,  as  having  settled  the  relations 
between  bankers  and  customers  for  many  years.  This  latter  case 
came  under  the  bills  of  exchange  act,  and  it  was  held  that  as  the  bill 
was  not  made  to  a  fictitious  or  non-existing  person,  it  could  not  be 
treated  as  a  bill  payable  to  bearer,  and  so  defendants  could  not  be 
protected  in  a  payment  under  a  false  indorsement.  Although  this  last 
decision  was  overruled  in  L.  R.  App.  Cas.  1801.  p.  167,  on  a  close  di- 
vision, Robarts  v.  Tucker,  which  was  a  case  of  forgery,  as  this  one  is, 
was  not  overruled. 

In  Armstrong  v.  National  Bank.  46  Ohio  St.  512,  22  N.  E.  866,  6 
L.  R.  A.  625,  15  Am.  St.  Rep.  655,  it  is  held  that,  even  where  the 
payee  is  non-existing,  the  rule  making  such  paper  payable  to  bearer 
does  not  apply  where  the  maker,  supposing  the  payee  to  be  a  real 
person  and  intending  payment  to  be  made  to  such  person,  is  induced 
by  fraud  so  to  draw  it.  In  Graves  v.  Am.  Exchange  Bank.  17  N.  Y. 
205,  it  was  held  to  be  forgery  for  one,  not  the  payee  of  a  bill,  but 
bearing  the  same  name,  to  indorse  and  transfer  it,  knowing  that  he 
was  not  intended  as  the  payee.  The  true  rule  is  well  stated  in  the 
headnotes  of  Rogers  v.  Ware,  2  Neb.  29,  as  follows : 

"If  the  bill  run  to  a  fictitious  payee  it  is  as  if  drawn  payable  to 
bearer,  and  indorsement  is  not  necessary. 

"But  if  it  be  payable  to  some  person  known  at  the  time  to  exist, 
and  present  to  the  mind  of  the  drawer  when  he  made  it,  as  the  party 
to  whose  order  it  was  to  be  paid,  the  genuine  indorsement  of  such 
payee  is  necessary. 

"Nor  is  the  case  changed  by  the  circumstance  that  the  party  who 
induced  the  drawer  to  make  such  bill  defrauded  him  in  so  doing." 

Rowe  V.  Putnam,  131  Mass.  *281,  is  to  the  same  effect,  but  is  not  re- 
ferred to  in  Robertson  v.  Coleman,  141  Mass.  231,  4  N.  E.  619,  55  Am. 
Rep.  471. 

The  attention  of  counsel  was  called  to  the  negotiable  instruments 
act  (Pub.  Laws  1899,  c.  674,  §  31),  which  is:   "Where  a  signature  is 


oil.  1)  FORM  OF  BILL   AND   OF   NOTE.  171 

forged  or  made  without  the  authority  of  the  person  whose  signature 
it  purports  to  be,  it  is  wholly  inoperative;  and  no  right  to  retain  the 
instrument,  or  to  give  a  discharge  therefor,  or  to  enforce  payment 
thereof  against  any  party  thereto,  can  be  acquired  through  or  under 
such  signature,  unless  the  party  against  whom  it  is  sought  to  enforce 
such  right  is  precluded  from  setting  up  forgery  or  want  of  authority." 

This  statute  covers  this  case.  We  have  referred  to  authorities  be- 
cause the  defendant's  counsel  so  earnestly  and  ably  argued  that  the 
act  did  not  alter  the  law  merchant  that  it  seemed  proper  to  show  that 
the  law  in  this  respect,  outside  of  the  act,  is  in  a  very  unsatisfactory 
state  and  that  the  act  is  right.  We  do  not  think  that  the  act  does  alter 
the  law  as  it  was  when,  a  few  years  ago,  it  seems  to  have  been  switched 
ofif  on  a  fallacy  in  some  places.  One  of  the  advantages  of  the  act  is 
in  settling  the  question.  Waiving  the  question  of  forgery,  about  which 
the  cases  we  have  cited  dififer,  the  signature  in  this  case  is  clearly  one 
"made  without  the  authority  of  the  person  whose  signature  it  purports 
to  be,"  and,  therefore,  it  is  "wholly  inoperative."  This  being  so,  the 
defendant  cannot  justify  its  action  under  it,  there  being  no  evidence 
of  any  conduct  by  the  plaintiff  to  mislead  the  defendant  and  so  to  es- 
top his  present  claim.  As  the  case  stood,  the  plaintiff  had  ordered 
money  paid  to  Haskell.  The  bank  had  not  so  paid  it.  The  fact  that 
the  plaintiff  had  been  imposed  upon  did  not  relieve  the  bank  from  its 
duty  to  see  that  the  money  was  paid  according  to  order.  The  case- 
should  have  gone  to  the  jury. 

New  trial  granted.^® 


(Ill)  Drawee 

REGINA  v.  HAWKES. 
(Court  for  Crown  Cases  Reserved,  1838.     2  Moody,  C.  C.  60.) 

The  prisoner  was  convicted  before  Mr.  Justice  Bosanquet,  at  the 
summer  assizes,  1838,  at  Warwick,  of  uttering  a  forged  acceptance 
upon  a  bill  of  exchange,  knowing  it  to  be  forged. 

The  indictment  charged  that  the  prisoner  having  in  his  possession  a 
bill  of  exchange  as  follows: 

"Birmingham,  9th  August,  1837. 

"£20.  Two  months  after  date,  pay  to  my  order  the  sum  of  twenty 
pounds  for  value  received.  Edward  Hawkes, 

"General  Provision  Warehouse,  Baker,  etc.,  Unett  Street,  Well  Street,. 
Hockley." 

8  6  Contra:      Hofifman    v.    Bank,    2    Neb.    (Unof.)    217,    222,    96    N.    W.    112 
(1901) ;    Heavy  v.   Bank.  27  Utah,   222.   75   Pac.  727.    101   Am.    St.   Rep.  906 
(1904);    Jamieson  v.  Heim,  43  Wash.  153,  86  Pac.  165  (1906).     Accord:     Ori 
ental  Bank  v.  Gallo,  112  App.  Div.  360,  98  N.  Y.  Supp.  561  (1906).     See  Heim 
V.  Neubert,  48  Wash.  587,  94  Pac.  104  (1908). 


172  FORM   AND    INCEPTION.  (Part   1 

On  which  was  written  a  forged  acceptance  as  follows : 

"Accepted.     Payable  at  Messrs.  Gillett  and  Tawney,  Bankers,  Ban- 
bury. William  Sellers," 
— did  utter  the  same  knowing  the  said  acceptance  to  be  forged,  with 
intent  to  defraud  John  Evans.     And  in  another  count  with  intent  to 
defraud  William  Sellers. 

The  prisoner  brought  the  instrument  described  in  the  indictment 
with  the  acceptance  upon  it  to  the  house  of  John  Evans,  and  uttered 
it  to  his  servant  in  payment  of  a  debt ;  the  servant  seeing  that  it  was 
not  addressed  to  any  one  asked  who  the  acceptor  was.  The  prisoner 
said  it  was  his  brother-in-law,  named  Sellers,  a  paper-maker  near 
Banbury.  The  servant  observed  that  it  was  not  indorsed,  and  desired 
the  prisoner  to  indorse  it,  which  he  did.  The  prisoner  carried  on  busi- 
ness as  a  baker  in  Unett  street,  but  had  removed  from  thence  when  the 
bill  became  due.  William  Sellers  was  his  brother-in-law  and  lived 
near  Banbury.  He  had  given  no  authority  to  the  prisoner  to  accept 
the  bill. 

The  case  of  Gray  v.  Milner,  8  Taunt.  739,  was  cited.  See,  also, 
Edis  V.  Bury,  6  B.  &  C.  433 ;  The  King  v.  Ravenscroft,  Russ.  &  Ry. 
161;   The  King  v.  Hunter,  Russ.  &  Ry.  511. 

The  learned  judge  thought  that  the  writing  upon  the  instrument 
purported  to  be  an  acceptance  by  Sellers  as  drawee  of  the  bill,  and,  if 
not,  that  it  was  an  acceptance  for  the  honor  of  the  drawer ;  and  the 
learned  judge  sentenced  the  prisoner  to  imprisonment  and  hard  labor 
for  two  years. 

The  only  question  for  consideration  was  whether  the  instrument 
upon  which  the  forged  acceptance  was  written  was  properly  described 
as  a  bill  of  exchange,  not  being  addressed  to  any  person  as  drawee. 

This  case  was  considered  by  all  the  judges  except  Park,  J.,  Little- 
dale.  J.,  and  BoLLAND,  B.,  in  Michaelmas  term,  1838.  and  they  were 
of  opinion  that  the  conviction  was  right,  except  Parke,  B.,  Patteson, 
J.,  and  Coleridge,  J.,  who  thought  otherwise." 


FORWARD  V.  THOMPSON  et.  al. 
(Court  of  Queen's  Bench,  Upper  Canada,  1S54.     12  U.  C.  Q.  B.  103.) 

Assumpsit  on  an  instrument  in  the  following  words : 
"£228.  7s.  6d.  Port  Hope,  December  8,  1853. 

"Three  months  after  date,  pay  to  the  order  of  William  Thompson, 
at  Port  Hope,  the  sum  of  two  hundred  and  twenty-eight  pounds, 
seven  shillings,  and  six  pence,  currency,  for  value  received. 

"[Signed]  John  Thompson." 

87  As  to  the  sufficiency  of  the  designation  of  the  drawee,  see  Ball  v.  Al- 
len, 15  Mass.  433  (1819);  Alabama  Co.  v.  Brainard,  35  Ala.  476  (18G0) ; 
Cork  V.  Bacon,  45  Wis.  192,  30  Am.  Hep.  712  (187S). 


Ch.  1)  FORM   OF   BILL  AND   OF   NOTE.  173 

This  was  declared  upon  as  a  promissory  note,  made  by  John  Thomp- 
son in  favor  of  the  defendant  William  Thompson,  who  was  stated 
to  have  indorsed  to  the  defendant  John  Thompson,  who  indorsed  to 
the  plaintiffs. 

Pleas  denying  the  making  and  indorsing,  and  other  pleas  not  ma- 
terial to  mention. 

At  the  trial  at  Cobourg,  before  McLean,  J.,  it  was  objected  that 
the  instrument  produced  was  not  a  promissory  note.  Several  other 
objections  were  raised;  but  it  is  only  material  to  notice  the  one  on 
which  the  judgment  of  the  court  proceeded.^^ 

Draper,  J.,  delivered  the  judgment  of  the  court. 

The  first  question  to  be  decided  is  whether  the  instrument  declared 
upon  in  point  of  law  amounts  to  a  promissory  note. 

The  authorities  cited  (to  which  may  be  added  Russell  v.  Powell, 
14  M.  &  W.  418,  and  Peto  v.  Reynolds,  18  Jur.  472)  establish  clearly, 
as  we  think,  that  it  could  not  have  been  treated  and  declared  upon  as 
a  bill  of  exchange  for  want  of  a  drawee ;  and,  if  not,  then  those  cases 
which  have  been  decided  on  the  ground  that  the  instrument  in  question 
is  made  in  terms  so  ambiguous  as  to  make  it  doubtful  whether  it  be  a 
bill  of  exchange  or  promissory  note,  have  no  application.  Then  as  a 
promissory  note  it  wants  the  very  essence  of  a  promissory  note,  that 
which  mainly  distinguishes  it  from  a  bill  of  exchange,  viz.,  a  promise 
in  terms  by  the  maker,  which  makes  him  primarily  liable  to  pay  the 
money.  Here  are  the  proper  words  used,  and  no  others,  for  drawing 
a  bill  of  exchange,  and  if  there  had  been  a  drawee  there  would  have 
been  no  room  whatever  for  treating  the  instrument  as  anything  but  a 
bill  of  exchange.  But  for  want  of  a  drawee  it  is  incomplete  as  a  bill 
of  exchange ;  and  for  want  of  a  promise  it  appears  to  us  incomplete 
as  a  note.  It  is  quite  true  that  no  particular  words  are  indispensable, 
but  that  any  form  of  words  from  which  the  court  can  extract  an  ex- 
pressed intention  to  promise  to  pay  are  sufficient;  but  in  this  case  we 
see  nothing  but  an  omission  to  complete,  by  adding  a  drawee's  name, 
what  in  all  other  respects  is  a  good  bill  of  exchange,  and  we  cannot 
find  either  reason  or  authority  for  holding  that  this  is  sufficient  to  con- 
vert it  into  a  promissory  note. 

Rule  absolute.^* 


PETO  v.  REYNOLDS. 

(Court  of   Exchequer,   1854.     9  Exch.   410.) 

Assumpsit.  The  first  count  charged  the  defendant  as  acceptor  of  a 
bill  of  exchange.  The  second  charged  him  as  a  maker  of  a  promis- 
sory note. 

88  Arguments  of  counsel  are  omitted. 

8  8  Accord:    Watrous  v.  Halbrook,  39  Tex.  573  (1873). 


174  FORM  AND   INCEPTION.  (Part  1 

Pleas,  to  the  first  count,  that  the  defendant  did  not  accept  the  bill ; 
to  the  second  count,  that  the  defendant  did  not  make  the  note.  Issues 
thereon. 

At  the  trial,  before  Talfourd,  J.,  at  the  last  Bristol  assizes,  it  ap- 
peared that  the  defendant  was  a  merchant  at  Bristol  and  owner  of  a 
vessel  called  the  "Mary,"  which,  in  April,  1852,  had  sailed  from  that 
port  to  the  coast  of  Africa  under  the  command  of  one  Righton.  The 
plaintiff  was  treasurer  of  a  foreign  missionary  society,  and  the  regis- 
tered owner  of  a  vessel  called  the  "Dove,"  which  had  been  sent  by 
that  society  to  the  coast  of  Africa.  Whilst  Righton  was  at  Cameroons 
in  Africa,  he  there  saw  the  Dove,  and  agreed  with  one  Saker,  an 
agent  of  the  missionary  society,  to  purchase  that  vessel  for  £300,  for 
the  purpose  of  loading  the  Mary.  He  paid  £100,  and,  in  respect  of  the 
residue,  Saker  drew  the  following  bill  in  sets : 

"Cameroons,  September  3,  1852. 
"Exchange  for  £200. 

"At  sight  of  this  my  third  of  exchange,  the  first  and  second  of  the 
same  tenor  and  date  being  unpaid,  please  to  pay  to  S.  M.  Peto,  Esq.. 
or  order,  the  sum  of  two  hundred  pounds  sterling  for  value  received, 
and  place  the  same,  as  by  letter  of  advice  of  3d  September,  to  the 
account  of  Alfred  Righton." 

AcrQss  the  face  of  the  bill  Righton  wrote  the  defendant's  acceptance, 
as  follows :  "Accepted.  Samuel  Reynolds,  Esq.,  Shorn  Lane,  Bed- 
minster,  Bristol." 

A  witness  for  the  plaintiff  stated  that,  in  January,  1853,  he  presented 
the  above  bill  to  the  defendant,  who  denied  the  authority  of  Righton 
to  accept  bills  in  his  name,  but  nevertheless  promised  to  pay  this  bill. 
It  was  not.  however,  clear  from  the  testimony  of  the  witness,  whether 
the  defendant  had  made  an  absolute  promise  to  pay,  or  a  conditional 
promise  to  pay  at  a  future  period.  The  defendant,  who  was  called, 
denied  that  he  had  absolutely  promised  to  pay  the  bill. 

It  was  objected,  on  the  part  of  the  defendant,  that  there  could  be 
no  valid  acceptance  of  a  bill  which  was  not  addressed  to  any  one.  The 
learned  judge  told  the  jury  that,  if  they  believed  from  the  evidence 
that  the  defendant  made  an  absolute  and  unconditional  promise  to  pay 
the  bill,  that  would  amount  to  a  parol  acceptance  of  it.  The  jury  found 
a  verdict  for  the  plaintiff  on  the  first  count,  for  the  amount  of  the  bill 
and  interest,  and  for  the  defendant  on  the  second;  leave  being  re- 
served to  the  defendant  to  move  to  enter  a  nonsuit. 

A  rule  nisi  having  been  obtained  accordingly,*"* 

Parke,  B.  I  think  that  there  ought  to  be  a  new  trial,  because  the 
evidence,  as  to  the  acceptance  of  the  bill,  is  unsatisfactory.  At  the 
next  trial,  the  parties  will  have  an  opportunity  of  putting  on  the  rec- 
ord the  question  whether  this  instrument  is  a  bill  of  exchange ;    and 

8  0  Argiiments  of  counsel  are  omitted,  and  the  statement  is  abridged.  Pol- 
lock, C.  B.,  and  Alderson,  B.,  also  delivered  opiuious. 


Ch.  1)  FORM  OF  BILL  AND  OF  NOTE.  175 

therefore  it  is  not  necessary  to  express  any  decided  opinion  on  the 
point.  I  cannot,  however,  help  observing  that,  with  the  exception  of 
Regina  v.  Hawkes,  there  is  no  case  in  which  it  has  ever  been  decided 
that  an  instrument  could  be  a  bill  of  exchange  where  there  was  not  a 
drawer  and  a  drawee.  With  respect  to  that  case,  it  does  not  seem  to 
me  entitled  to  the  same  weight  of  authority  as  a  decision  pronounced 
in  the  presence  of  the  public,  and  on  reasons  assigned  after  hearing  an 
argument  in  public.  I  must  own  that,  but  for  that  case,  I  should  have 
had  no  doubt  that  the  law  merchant  required  that  every  bill  of  ex- 
change should  have  a  drawer  and  a  drawee.  This  instrument,  though 
in  the  form  of  a  bill,  is  not  addressed  to  any  one,  for  I  think  it  im- 
possible to  consider  the  acceptance  as  an  address ;  but  I  do  not  see 
why  the  instrument  may  not  be  treated  as  a  promissory  note,  because, 
upon  the  face  of  it,  there  is  a  promise  to  pay  the  amount  written  in 
the  name  of  Samuel  Reynolds.  Tlien,  if  the  authority  to  subscribe 
his  name  has  been  subsequently  ratified,  that  amounts  to  a  promise  by 
him.  Therefore,  if,  on  the  next  trial,  there  is  satisfactory  evidence  to 
show  that  the  defendant  absolutely  promised  to  pay  the  amount  men- 
tioned in  the  instrument,  he  will  be  liable  as  upon  a  promissory  note. 

Martin,  B.  I  am  of  the  same  opinion.  The  verdict  is  unsatisfac- 
tory, and  therefore  there  ought  to  be  a  new  trial.  With  respect  to 
the  matter  of  law,  if  it  were  necessary  to  express  a  decided  opinion,  I 
should  concur  with  my  Brothers  Parke  and  Alderson.  It  seems  to 
me  that  it  is  absolutely  essential  to  the  validity  of  a  bill  of  exchange, 
that  it  should  have  a  drawer  and  a  drawee ;  and,  except  for  the  case 
of  Gray  v.  Milner,  I  should  have  doubted  whether  the  making  a  bill 
payable  at  a  particular  place  was  a  sufficient  address.  However,  as- 
suming that  in  this  case  the  defendant  made  an  absolute  promise  to 
pay,  why  may  not  this  instrument  be  treated  as  a  promissory  note? 
A  promissory  note  need  not  be  in  any  particular  words.  Here  there 
is  a  request  to  pay  a  sum  of  money ;  then  a  person  accepts  that  in  the 
name  of  Samuel  Reynolds,  which  acceptance  is  a  direct  engagement  to 
pay.  The  person  so  accepting  is  not  Samuel  Reynolds,  but  a  person 
who  professes  to  do  it  with  Samuel  Reynolds'  authority.  Then,  if  one 
man  professes  to  make  a  contract  on  behalf  of  another,  and  that  other 
adopts  it,  it  is  the  same  as  if  he  had  made  it  himself.  Therefore,  if 
there  was  evidence  of  an  absolute  undertaking  by  Samuel  Reynolds 
to  pay,  this  instrument  is  his  promissory  note. 

Rule  absolute.®^ 

81  See  Wheeler  v.  Webster,  1  E.  D.  Smith  (N.  Y.)  1  (1850). 

"I  am  of  the  opinion  that  the  omission  of  the  name  of  the  drawee  at  the 
foot  of  the  bill  will  not  vitiate  It.  The  acceptance  may  be  considered  as  sup- 
plying the  defect,  and  as  being  an  admission  by  the  acceptor  that  he  is  the 
person  intended.  At  any  rate,  it  does  not  lie  with  him  to  make  such  defei^se, 
after  having  admitted,  by  the  acceptance,  that  he  was  the  person  intended, 
and  after  having  promised  to  pay  the  draft  at  maturity.  He  is  estopped,  by 
his  own  act,  from  such  a  defense."  Per  Ingraham,  J.,  in  Wheeler  v.  Web- 
ster,  supra. 


176  FORM    AND    INCEPTION.  (Part    1 

ALLEN  V.  SEA,  FIRE  &  LIFE  ASSUR.  CO. 

(Court  of  Common  Pleas.  1850.     9  C.  B.  574.) 

Assumpsit.  The  declaration  stated  that  the  defendants  theretofore, 
to  wit,  on  the  28th  of  October,  1849,  made  their  promissory  note  in 
writing-,  and  dehvered  the  same  to  the  plaintiff,  and  thereby  promised 
to  pay  to  the  plaintiff,  in  the  said  note  described  as  Mrs.  Ann  Allen, 
or  order,  the  sum  of  i311.  9s.  6d.,  thirty  days  after  the  date  thereof, 
and  that  the  note  was  unpaid,  etc. 

The  defendants  traversed  the  making  of  the  note  mentioned  in  the 
third  count. 

At  the  trial,  before  Wilde,  C.  J.,  at  the  last  assizes  at  Maidstone,  the 
plaintiff  put  in  an  instrument  in  the  following  form,  bearing  an  8s.  6d. 
stamp : 

"Marine  Department,  Sea,  Fire,  Life  Assurance  Society. 

"31  Cornhill,  October  20th,  1849. 

"689,617.        iail.  9s.  6d. 
"To  the  Cashier : 

"Ninety  days  after  date,  credit  Mrs.  Ann  Allen,  or  order,  with  the 
sum  of  three  hundred  and  eleven  pounds,  nine  shillings,  and  six- 
pence, claims  per  'Susan  King,'  in  cash,  on  account  of  this  corporation. 

"A.  Davis,       }  ^.      ^ 
<an7-    /->  -1  •       }  Directors. 
W.  Ogilvie,   5 

"Entered.  F.  F.  A.,  Accountant." 

On  the  part  of  the  defendants,  it  was  submitted  that  this  was  not  a 
promissory  note  at  all,  but  a  mere  order  for  the  payment  of  money. 
There  was  a.  verdict  for  the  plaintiff,  but  leave  was  reserved  to  the 
defendants  to  move  to  set  aside  the  verdict  if  the  court  should  think 
the  objection  well  founded.    The  defendants  moved  accordingly.®^ 

Wilde,  C.  J.  I  think  there  should  be  no  rule  in  this  case.  The 
first  objection  is  that  the  instrument  declared  on  in  the  third  count  is 
not  a  promissory  note.  What  is  necessary  to  constitute  a  promissory 
note?  These  parties  issue  this  instrument,  importing  that  the  com- 
pany promise  to  pay.  The  note  is  addressed  by  the  drawers  to  their 
own  clerk.  My  Brother  Shee  treats  the  cashier  as  a  drawer.  But  at 
the  trial  it  was  insisted  for  the  plaintiff  that  the  instrument  was  pre- 
cisely what  we  think  it  is.  The  company  indicate  that  they  mean  to 
pay,  by  a  direction  to  their  officer  to  pay — "credit  in  cash,"  meaning, 
as  we  held  in  the  former  case,  "pay ;"  and  they  point  out  to  whom 
payment  is  to  be  made.  It  appears  to  me  that  the  instrument  contains 
all  that  is  essential  to  constitute  a  promissory  note.     *     *     * 

Rule  refused.®* 

•  2  The  statement  Is  abridged,  and  the  arguments  and  part  of  the  opinion 
are  omitted. 

e3  Accord:  Roach  v.  Oster,  1  Manning  &  R.  120  (1827),  an  instrument 
'Irawn  by  O.,  directed  to  O.,  and  payable  to  R;    Hegeman  v.  Moon,  131  N. 


Cb.  1)  FORM   OF   BILL   AND   OF   NOTE.  177 

ALMY  V.  WINSLOW. 
(Supreme   Judicial  Court  of  Miassachusetts,   Bristol,   1879.     126  Mass.   342.) 

Contract  on  the  following  instrument,  declared  on  as  a  promissory 
note: 

"New  Bedford,  April  26,  1870. 

"On  demand,  with  interest  for  value  received,  please  pay  Charles 
Almy,  or  order,  fifty-five  and  ^^/loo  dollars. 

"George  F.  Winslow. 

"Witness :    Asa  C.  Smith." 

Writ  dated  March  28,  1877,  and  returnable  to  the  superior  court. 
The  defendant  demurred,  on  the  ground  that  the  declaration  set  forth 
no  legal  cause  of  action.  The  court  overruled  the  demurrer,  and  the 
defendant  alleged  exceptions. 

The  defendant  then  filed  an  answer,  admitting  the  execution  of  the 
paper  declared  on,  and  that  the  same  was  for  a  valid  consideration, 
and  alleging  that  the  cause  of  action  did  not  accrue  within  six  years. 
At  the  trial,  before  Gardner,  J.,  without  a  jury,  the  judge  ruled  that 
the  instrument  declared  on  was  a  witnessed  promissory  note,  and  was 
not  barred  by  the  statute  of  limitations,  and  ordered  judgment  for 
the  plaintiff.     The  defendant  alleged  exceptions.** 

SouLE,  J.  The  only  question  in  this  case  is  whether  the  instru- 
ment sued  on  is  or  is  not  a  witnessed  promissory  note.  That  it  is  wit- 
nessed is  admitted.  The  controversy  is  as  to  the  legal  effect  to  be 
given  to  its  terms.  It  does  not  purport  to  be  a  mere  acknowledgment 
of  the  existence  of  a  debt,  and  is  admitted  to  have  been  given  for  a 
valuable  consideration.  It  is  in  the  form  of  a  draft  or  bill  of  ex- 
change, except  that  it  is  not  addressed  to  or  drawn  upon  any  one, 
and  therefore  lacks  one  essential  characteristic  of  a  bill.  It  is  not  in 
the  ordinary  form  of  a  promissory  note,  for  it  is  not  in  express  terms 
a  promise,  but  a  request  to  pay.  It  is  familiar  law,  however,  that  no 
particular  form  of  words  is  necessary  to  constitute  a  promissory  note. 
There  need  not  be  a  promise  in  express  terms ;  it  being  sufficient  if 
an  undertaking  to  pay  is  implied  in  the  contents  of  the  instrument. 
Daggett  v.  Daggett,  124  Mass.  149 ;  Franklin  v.  March,  6  N.  H. 
364,  25  Am.  Dec.  462;  Carver  v.  Hayes,  47  Me.  257;  Russell  v. 
Whipple,  2  Cow.  (N.  Y.)  536;   Brooks  v.  Elkins,  2  M.  &  W.  74. 

The  instrument  sued  on  was  intended  by  the  parties  to  take  effect 
as  a  contract.  The  language  imports  this;  and  no  other  inference 
can  be  drawn  from  the  fact  that  it  was  given  for  value.  It  cannot 
operate  as  a  draft,  check,  or  bill  of  exchange,  because  there  is  no 
drawee.     One  who  signed  an  acceptance  on  it  would  not  be  liable  as 

Y.  462,  30  N.  E.  487  (1892),  an  instrument  in  the  form  of  a  bill  drawn  by  H. 
directing  her  executors,  one  year  after  her  death,  to  pay  M. 
94  Part  of  the  opinion  is  omitted. 
Sm.&  M.B.&  N.— 12 


178  FORM   AND   INCEPTION.  (Part    1 

acceptor  of  a  bill.  Peto  v.  Reynolds,  9  Exch.  410.  To  be  operative 
at  all,  as  a  contract,  it  must  be  as  a  promissory  note.  It  was  said  in 
EJis  V.  Bury,  G  B.  &  C.  433,  by  Lord  Tenterden,  that,  "where  a  par- 
ty issues  an  instrument  of  an  ambi^ous  nature,  the  law  ought  to 
allow  the  holder,  at  his  option,  to  treat  it  either  as  a  promissory  note 
or  a  bill  of  exchange."  In  that  case  the  instrument  was  in  the  form 
of  a  promissory  note,  but  had  been  accepted  by  a  person  whose  name 
had  been  written  on  the  corner  of  the  paper  at  which  the  name  of 
the  drawee  of  a  bill  is  usually  placed.  The  maker,  being  sued,  con- 
tended that  he  was  discharged  for  want  of  notice  of  dishonor  as 
drawer  of  a  bill.  The  court  decided  otherwise.  To  the  same  effect 
is  the  decision  in  Lloyd  v.  Oliver.  18  Q.  B.  471.  It  has  been  repeat- 
edlv  held  that,  where  the  drawer  and  drawee  of  an  instrument  in  the 
form  of  a  bill  of  exchange  are  the  same  person,  it  may  be  declarea 
on  as  a  promissory  note.  Miller  v.  Thomson,  3  Man.  &  Gr.  576 ;  Al- 
len V.  Sea  Assur.  Co.,  9  C.  B.  574;  Fairchild  v.  Ogdensburgh,  etc., 
Railroad.  15  N.  Y.  337,  69  Am.  Dec.  606.  The  reason  is  obvious. 
The  drawer  of  a  bill  on  another  assumes  only  a  conditional  liability. 
His  contract  is  that  he  will  pay  if  duly  notified  of  dishonor  of  the 
draft;  but  when  the  drawer  is  the  drawee  too,  such  notice  would  be 
an  empty  form,  and  his  undertaking  is  not  conditional,  but  absolute. 
The  doctrine  of  the  cases  cited  above  on  this  point  is  recognized  and 
approved  in  Commonwealth  v.  Butterick,  100  Mass.  12. 

In  view  of  the  foregoing  authorities,  there  seems  to  be  no  injus- 
tice in  holding  that  an  instrument  in  the  form  of  that  sued  on  is  to 
be  regarded,  in  passing  upon  the  rights  of  the  signer  and  the  payee, 
as  a  promissory  note.  The  signer,  having  made  the  instrument  in 
the  form  of  a  bill  of  exchange,  but  without  addressing  it  to  any  one 
as  drawee,  may  properly  be  held  to  have  intended  to  assume  the  ab- 
solute liability  to  pay.  which  he  would  have  assumed  if  he  had  ad- 
dressed the  instrument  to  himself.  Any  other  view  makes  the  instru- 
ment valueless.  It  does  not  contain  anything  which  informs  the  payee 
what  is  to  be  done  in  order  to  fix  the  liability  of  the  signer.  If  the 
undertaking  of  the  signer  is  not  absolute,  it  is  nothing.     *     *     * 

We  are  of  the  opinion  that  the  instrument  sued  on  was  in  legal 
effect  a  promissory  note,  and  that,  being  duly  attested,  action  on  it 
was  not  barred  by  the  statute  of  limitations. 

Exceptions  overruled.'* 

95  .\ccord:  Did.ito  v.  Coni^lio.  .=>0  Misc.  Rep.  280.  100  N.  T.  Snpp.  466 
il90tJ);  Funk  v.  Babbitt,  l.>6  111.  408.  410,  41  N.  E.  166  (1895).  In  the  latter 
case  the  court  said :  "Said  instruments  were  declared  on  as  promissory  notes. 
It  is  urged  that  they  are  not  notes,  or  even  promises  to  pay.  and,  not  being 
directed  to  any  one,  do  not  constitute  drafts  or  orders,  and  in  fact  amount 
to  no  more  than  blank  pieces  of  paper.  Tbey  are.  undoubtedly,  very  irreg- 
ular and  informal  instruments;  but  they  are  not  void  as  written  evidences 
of  indebtedness.  A  person  may  draw  a  bill  upon  himself,  payable  to  a  third 
person,  in  which  case  he  is  both  drawer  and  drawee.  Here  the  firm  drew 
bills,  but  did  not  address  them  to  any  third  person  or  persons,  and  it  is 
therefore  to  be  regarded  that  tbey  were  in  legal  effect  addressed  to  them- 


Ch.  1)  FORM  OF  BILL   AND   OF   NOTE.  179 

selves,  as  drawees,  and  the  signatures  of  the  firm  to  the  several  bills  bound 
the  firm  both  as  drawers  and  acceptors.  The  instruments  are  inland  bills 
of  exchange,  to  which  the  firm  sustains  the  triple  relation  of  drawers, 
drawees  and  acceptors,  and,  as  the  declaration  contains  the  consolidated 
common  counts,  the  bills  were  admissible  in  evidence  under  them.  More- 
over, the  drawers  and  drawees  being  the  same,  the  bills  are,  in  legal  effect, 
promissory  notes,  and  may  be  treated  as  such,  or  as  bills,  at  the  holder's 
option.     1  Daniel  on  Neg.  Inst.  §§  128,  129." 


ISO 


FORM   AND   INCEPTION.  (Part    1 

CHAPTER  II 
ACCEPTANCE 


SECTION   1.— GENERAL  AND  QUALIFIED  ACCEPTANCES 


PETIT  V.  BENSON. 

(Court    of    King's   Bench,    1G97.      Comberbach,    452.) 

A  bill  was  drawn  upon  the  defendant,  who  accepts  it  by  indorse- 
ment in  this  manner:  ''I  do  accept  this  bill  to  be  paid,  half  in  money 
and  half  in  bills."  And  the  question  was  whether  there  could  be  a 
qualification  of  an  acceptance ;  for  it  was  alleged,  that  his  writing  up- 
on the  bill  was  sufficient  to  charge  him  with  the  whole  sum.  But 
'twas  proved  by  divers  merchants,  that  the  custom  among  them  was 
quite  otherwise,  and  that  there  might  be  a  qualification  of  an  accept- 
ance, for  he  that  may  refuse  the  bill  totally,  may  accept  it  in  part ; 
but  he  to  whom  the  bill  is  due  may  refuse  such  acceptance,  and  pro- 
test it  so  as  to  charge  the  first  drawer ;  and  tho'  there  be  an  accept- 
ance, yet  after  that  he  hath  the  same  liberty  of  charging  the  first  draw- 
er, as  he  before  had. 


BOEHM  V.  GARCIAS. 
(Nisi  Prius.  before  Tjord  Elllenborough,  C.  J..  1S07.    1  Campb.  425,  note.) 

Action  on  a  bill  drawn  on  Lisbon,  "payable  in  effective  and  not  in 
vals  reals."  The  defendant  was  the  drawer  of  the  bill ;  and  the  ques- 
tion was,  whether  it  had  been  dishonored  for  nonacceptance?  The 
drawees  offered  to  accept  it,  payable  in  vals  denaros.  another  sort  of 
currency,  which  was  refused.  The  defendant  now  proposed  to  show 
that  vals  denaros  was  sufficient  to  answer  what  was  meant  by  effective. 
But, 

Per  Lord  EllEnborough.  The  plaintiff  had  a  right  to  refuse  this 
acceptance.  The  drawee  of  a  bill  has  no  right  to  vary  the  acceptance 
from  the  terms  of  the  bill,  unless  they  be  unambiguously  and  unequiv- 
ocally the  same.  Therefore,  without  considering  whether  a  payment 
in  denaros  might  not  have  satisfied  the  term  "effective,"  an  acceptance 
to  pay  in  denaros  was  not  a  sufficient  acceptance  of  a  bill  drawn  paya- 
ble in  effective.  The  drawees  ought  to  have  accepted  generally,  and 
an  action  being  brought  against  them  on  the  general  acceptance,  the 
question  would  properly  have  arisen  as  to  the  meaning  of  the  term. 


Ch.  2)  ACCEPTANCE.  181 

HALSTEAD  v.  SKELTON. 

(Court  of  Exchequer  Chamber,  1843.     5  Q.  B.  86.) 

Assumpsit.  The  first  count  of  the  declaration  stated  that  William 
Harland,  on,  etc.,  made  his  bill  of  exchange  in  writing,  and  directed 
the  same  to  defendant,  and  thereby  required  defendant  to  pay  to  the 
order  of  the  said  W.  H.  the  sum  of  £66.  lis.  for  value  received,  four 
months  after  the  date  thereof,  which  period  had  elapsed,  etc.,  "and  the 
defendant  then  accepted  the  said  bill,  payable  at  Messrs.  Cunliffe  & 
Co.'s,  bankers,  London."  Averment  that  W.  H.  indorsed  to  plaintiff, 
and  that  defendant  "then  promised  the  plaintiff  to  pay  her  the  said 
bill  according  to  the  tenor  and  eft'ect  thereof,  and  of  the  said  accept- 
ance and  indorsement." 

The  defendant  demurred,  assigning,  as  a  ground,  that,  although  it 
appears  by  the  first  count  that  the  bill  therein  mentioned  was  special- 
ly accepted  by  the  defendant,  and  by  him  made  payable  at  Messrs. 
Cunliffe  &  Co.'s,  bankers,  London,  yet  it  is  not  averred,  nor  does  it 
appear  from  the  said  count,  that  the  said  bill  was  ever  presented  at 
Messrs.  Cunliffe  &  Co.'s  for  payment,  according  to  the  terms  of  the 
said  acceptance.  Another  ground  assigned  was,  that  the  defendant 
was  not  stated  to  have  had  notice  of  the  indorsement. 

On  motion  in  the  bail  court,  in  Trinity  term,  1842,  the  demurrer  was 
set  aside  as  frivolous  (Skelton  v.  Halstead,  2  Dowl.  P.  C.  [N.  S.]  69) ; 
and  the  plaintiff  afterwards  signed  judgment  by  default.  The  de- 
fendant then  brought  error  in  the  Exchequer  Chamber,  assigning,  as 
error,  "that  the  first  count  of  the  said  declaration,  and  the  matters 
therein  contained,  are  not  sufficient  in  law  for  the  said  M.  S.  to  have 
or  maintain  her  aforesaid  action,"  etc.    Joinder  in  error. ^ 

TiNDAL,  C.  J.  This  was  an  action  by  the  indorsee  of  a  bill  of  ex- 
change against  the  acceptor.  The  declaration  stated  the  bill  to  have 
been  accepted  payable  at  a  particular  banker's  in  London,  and  did  not 
aver  any  presentment  at  the  house  of  that  banker ;  and  the  question 
argued  before  us  was,  whether  the  omission  of  such  an  averment  made 
the  declaration  bad.  The  plaintiff  in  error  contended  that  it  did,  for 
that,  since  the  statute  1  &  2  Geo.  IV,  c.  78,  an  acceptance  payable  at 
a  banker's  generally  without  restrictive  words,  is  a  general  acceptance, 
and  ought  to  be  so  pleaded ;  whereas,  by  declaring,  as  in  this  case,  on 
an  acceptance  payable  at  a  bankers,  the  plaintiff  must  be  understood 
as  referring  to  an  acceptance  payable  at  a.  banker's  only,  and  not  else- 
where. And,  if  the  plaintiff  in  error  is  right  in  this  proposition,  it 
must  certainly  follow  that  the  declaration  is  bad  for  not  averring  per- 
formance of  what,  according  to  his  argument  is  a  condition  precedent 
to  any  right  of  action,  namely,  a  presentment  at  the  banker's. 

But  we  are  of  opinion  that  the  argument  of  the  plaintiff  in  error 
cannot  be  supported. 

1  The  arguments  of  counsel  are  omitted. 


182  FORM   AND   INCEPTION.  (Part    1 

The  statute  enacts  that,  where  a  bill  is  accepted  payable  at  a  bank- 
er's, without  further  expression  in  the  acceptance,  such  acceptance 
shall  be  deemed  and  taken  to  be  to  all  intents  and  purposes  a  general 
acceptance  of  such  bill ;  but  the  meaning  of  this  enactment  is,  not  that, 
in  such  a  case,  presentment  at  the  banker's  shall  be  an  invalid  present- 
ment, but  that,  in  an  action  against  the  acceptor,  presentment  to  him 
shall  be  good,  and  consequently  that  it  shall  be  unnecessary  to  pre- 
sent or  to  aver  presentment  at  the  banker's.  A  bill  of  exchange  drawn 
generally  on  a  party  may  be  accepted  in  three  different  forms ;  either 
generally,  or  payable  at  a  particular  banker's,  or  payable  at  a  particu- 
lar banker's  and  not  elsewhere.  If  the  drawee  accepts  generally,  he 
undertakes  to  pay  the  bill  at  maturity  when  presented  to  him  for  pay- 
ment. If  he  accepts  payable  at  a  banker's,  he  undertakes  (since  the 
statute)  to  pay  the  bill  at  maturity  when  presented  for  payment  either 
to  himself  or  at  the  banker's.  If  he  accepts  payable  at  a  banker's  and 
not  elsewhere,  he  contracts  to  pay  the  bill  at  maturity  provided  it  is 
presented  at  the  banker's  but  not  otherwise. 

Here  the  bill  was  accepted  according  to  the  second  of  these  three 
forms,  i.  e.,  payable  at  a  banker's,  without  any  restrictive  words ;  so 
that  presentment  at  the  banker's  (though  if  made  it  would  have  been 
a  good  presentment)  was  yet  not,  as  against  the  acceptor,  necessary. 
Acceding,  therefore,  as  we  do,  to  the  argument  of  the  plaintiff  in  er- 
ror, that  the  bill  must  be  taken  to  have  been  pleaded  according  to  its 
legal  effect,  we  do  not  go  along  with  him  in  the  conclusion  at  which 
he  arrives.  For  the  reasons  which  we  have  given,  we  do  not  think 
that,  in  this  case,  the  legal  effect  of  the  bill,  as  pleaded,  was  to  render 
necessary  any  presentment  at  the  banker's;  and  the  judg^iient  of  the 
court  below  will  therefore  be  affirmed. 

Judgment  affirmed. 


PECK  v.  COCHRAN. 

(Supreme  Judicial  Court  of  Massachusetts,  1828.    7  Pick.  34.) 

Assumpsit  on  an  order,  dated  April  1,  1821,  payable  at  sight,  drawn 
by  the  deputy  Postmaster  General  of  the  United  States,  at  Washing- 
ton, upon  the  defendant,  who  was  postmaster  at  Watertown,  in  this 
state,  in  favor  of  the  plaintiffs. 

At  the  trial  before  Parker,  C.  J.,  it  appeared  that  the  plaintiffs  sent 
the  bill  for  collection  to  S.  Burt,  who  delivered  it  to  J.  Sawyer,  with 
directions  to  call  on  the  defendant  and  demand  payment.  Sawyer  tes- 
tified that  in  the  early  part  of  May  he  presented  the  bill  for  acceptance 
and  payment ;  that  the  defendant  said  he  did  not  think  the  money  was 
due  to  the  government ;  that  the  witness  pressed  him  to  pay  the  bill ; 
that  the  defendant  refused  to  pay  then,  but  said  he  would  answer  it 
at  the  commencement  of  the  next  quarter,  which  would  be  in  about 
60  days.    The  witness  did  not  agree  to  wait,  but  told  the  defendant  he 


Ch.  2)  ACCEPTANCE.  183 

would  return  the  bill  to  Burt,  who  would  send  it  to  Washington.  The 
defendant  was  irritated,  and  intimated  that  he  did  not  care  if  it  was 
sent  to  Washington.  The  witness  afterwards,  in  September,  called 
again  on  the  defendant,  who  again  refused  to  pay,  saying  that  if  the 
witness  had  called  at  the  commencement  of  the  quarter  next  after  the 
time  of  the  first  presentment,  he  should  have  paid  it,  but  that  he  had 
accepted  other  drafts  presented  since,  and  he  would  not  pay  it. 

The  plaintiffs  offered  to  show  that  the  defendant,  at  the  time  of  the 
first  presentment,  was  indebted  to  the  United  States  in  a  larger  sum 
than  the  amount  of  the  bill ;    but  the  evidence  was  deemed  irrelevant. 

A  nonsuit  was  entered  by  consent,  which  was  to  be  taken  off,  if  the 
above  testimony  was  sufficient  in  law  to  authorize  a  verdict  in  favor  of 
the  plaintiffs. 

Per  Curiam.  It  appears  clearly  that  there  was  no  contract  between 
the  parties.  The  oft"er  to  pay  at  a  future  day  would  have  been  an  ac- 
ceptance, had  the  plaintiffs'  agent  acceded  to  it ;  but  he  did  not,  and 
said  he  should  return  the  bill.  The  circumstance  of  the  defendant's 
having  funds  at  the  time  of  the  presentment  is  immaterial  and  the  evi- 
dence of  it  was  rightly  rejected. 

Nonsuit  made  absolute. 


CAMPBELL  v.  PETTENGILL. 

(Supreme  .Tudicial  Ck)urt  of  Maine,  1830.     7  Greenl.  126.  20  Am.  Dec.  349.) 

Assumpsit  for  the  price  of  certain  logs  sold,  with  a  count  on  an  or- 
der for  the  same  sum,  drawn  by  the  defendants,  as  follows: 

"Orono,  June  13,  1827.     Thomas  Bartlett,  Esquire,   Collector  and 

Treasurer  of  the  Penobscot  Boom  Corporation :    Please  to  pay  Henry 

Campbell,  or  the  bearer,  ninety-seven  dollars  and  seventy-seven  cents, 

being  for  value  received."     This  order  was  accepted  in  these  terms : 

"July  9,  1827,    Accepted  to  pay  when  in  funds  of  the  Penobscot  Boom 

Corporation.      Thomas    Bartlett,    Treasurer    of    said    Corporation." 
*     *     * 

At  the  trial  it  appeared  that  the  treasurer  had  no  cash  funds  of  the 
corporation  in  his  hands,  but  held  its  negotiable  securities  to  the 
amount ;  that  he  had  not  paid  the  draft  to  the  plaintiff.  Verdict  for 
defendant.     Plaintiff  excepted.^ 

Weston,  J.  *  *  *  The  plaintiff,  the  payee,  and  holder  of  the 
bill  might  have  required  an  absolute  acceptance,  without  which  he 
might  have  treated  the  bill  as  dishonored ;  but  having  received  a  spe- 
cial and  conditional  acceptance,  he  must  abide  by  its  terms.  Parker  v. 
Gordon,  7  East,  387 ;    Gammon  v.  Schmoll,  5  Taunt.  344 ;    Sebag  v. 

2  The  statement  is  abridged,  and  the  arguments  of  counsel  and  part  of  the 
opinion  omitted. 


184  FOUM  AND  INCEPTION.  (Part  1 

Abitbol,  5  Maule  &  S.  462.  It  does  not  appear  that  there  has  been  any 
failure,  on  the  part  of  the  acceptor,  to  pay  according  to  the  terms  of 
the  acceptance.  He  was  to  pay,  when  in  funds  of  the  Penobscot 
Boom  Corporation.  He  had  no  cash  funds  at  the  time,  but  he  had 
demands  which  were  good  and  available,  and  subject  to  his  control 
as  treasurer.  But  these,  until  collected,  were  not  funds,  within  the 
meaning  of  the  acceptance.  He  has  paid  one-half  the  bill;  and  is 
holden  to  pay  the  residue  when  in  funds.  Under  these  circumstan- 
ces, independent  of  the  objection  arising  from  the  want  of  notice,  it 
cannot  be  pretended  that  there  is  any  legal  ground  to  charge  the  draw- 
ers, until  there  has  been  a  violation  of  the  terms  of  the  acceptance. 
No  evidence  to  this  efifect  has  been  adduced ;  but  the  testimony  was 
that,  up  to  the  time  of  trial,  the  acceptor  had  no  funds  of  the  Boom 
Corporation  with  which  to  pay  the  bill.  Upon  this  ground,  we  are 
satisfied  that  the  verdict  is  right.  The  exceptions  are  accordingly 
overruled  ;  and  there  must  be 
Judgment  for  the  defendants. 


HEENAN  V.  NASH. 

(Supreme  Court  of  Minnesota,  1863.     8  Minn.  407  [Gil.  363].  83  Am.  Dec.  790.) 

Flandrau,  J.  Action  on  bill  of  exchange  against  acceptor.  On 
the  18th  day  of  September,  1858,  the  defendant,  Patrick  Nash,  and 
one  William  B.  McGrorty  were  partners  under  the  name,  firm,  and 
style  of  "Nash  &  McGrorty."  On  that  day  Patrick  Murnane  drew 
the  bill  in  question  on  the  said  firm,  in  favor  of  William  Devine,  and 
to  his  order,  payable  in  one  month  from  date.  William  Devine  in- 
dorsed the  bill  to  the  plaintiff,  who,  on  the  25th  day  of  July.  1859,  pre- 
sented the  same  to  Patrick  Nash,  who  accepted  it  by  writing  on  its 
face  the  following  words:     "Accepted  this  25th  July,  1859." 

The  statute  of  this  state,  on  the  subject  of  acceptances,  is  as  fol- 
lows :  "No  person  within  this  territory  shall  be  charged  as  an  accept- 
or on  a  bill  of  exchange,  unless  his  acceptance  shall  be  in  writing, 
signed  by  himself  or  his  lawful  agent."    Pub.  St.  p.  375,  §  7. 

We  will  have  to  consider,  in  deciding  this  case,  two  questions : 
First,  whether  the  acceptance  by  Nash  was  good  as  a  partnership  ac- 
ceptance, and  binding  on  the  firm ;  and,  second,  whether  it  was  com- 
petent for  him  to  accept  the  bill  as  an  individual,  and  incur  a  liabil- 
ity against  himself  alone.  If  the  acceptance  was  binding  upon  the 
firm,  the  action  is  well  brought  against  one  of  the  members.  Pub. 
St.  p.  536,  §  38,  provides,  that  "any  one  of  the  joint  associates  may 
also  be  sued  for  the  obligations  of  all."  If  the  liability  was  individ- 
ual, the  acceptor  was,  of  course,  the  proper  defendant. 

In  the  case  of  Mason  v.  Rumsey,  1  Camp.  384,  it  was  held  that  an 


Cll.  2)  ACCEPTANCE.  185 

acceptance  by  one  member  of  a  firm  in  his  own  name  would  bind  the 
firm  when  the  bill  was  drawn  on  the  firm.  The  same  was  again  held 
in  Wells  v.  Masterman,  2  Esp.  731.  This  doctrine  seems  to  have  been 
adopted  in  Collyer  on  Partnership,  §  410,  and  in  Byles  on  Bills,  144, 
on  the  authority  of  these  cases,  and  some  others  there  collected.  In 
the  case  of  Dougal  v.  Cowles,  5  Day  (Conn.)  511,  the  same  is  again 
laid  down  on  the  authority  of  the  case  of  Mason  v.  Rumsey.  There 
are  other  cases,  that  hold  an  acceptance  by  a  member  of  a  firm,  in  a 
name  other  than  the  firm  name,  to  raise  a  question  of  fact,  to  be  left 
to  the  jury,  whether  the  name  used  substantially  describes  the  firm, 
or  whether  it  so  far  varies  that  the  acceptor  must  be  taken  to  have 
made  it  on  his  own  account.  See  Faith  v.  Richmond,  11  Adol.  &  E. 
339,  39  Eng.  Com.  Law  Rep.  113;  Drake  v.  Elwyn,  1  Caines  (N. 
Y.)  184. 

Acceptances  could  formerly  be  made  by  parol,  which  was  the  law 
in  Connecticut  at  the  time  of  the  decision  cited  from  5  Day,  and  that 
point  is  expressly  made  by  the  court  in  deciding  the  case.  The  same 
may  be  said  of  the  case  of  Mason  v.  Rumsey,  which  was  decided  be- 
fore the  statute  of  1  &  2  Geo.  IV.  c.  78,  §  2,  which  provided  that  ac- 
ceptances, to  be  valid,  must  be  in  writing.  Even  after  this  statute 
the  English  courts  have  held  that  the  word  "Accepted,"  written  on 
the  bill  by  one  having  authority,  is  sufficient  to  bind  the  drawees.  The 
only  principle  upon  which  the  courts  have  held  that  an  acceptance  by 
one  partner  in  his  own  name  will  bind  the  firm  is  the  implied  author- 
ity which  each  member  has  to  act  for  the  whole,  and  when  the  bill  is 
drawn  upon  the  firm,  and  accepted  by  one,  they  hold  that  he  intend- 
ed to  accept  it  as  drawn. 

I  find  one  English  case,  decided  in  the  Court  of  Exchequer  in  1841, 
which  holds  a  doctrine  much  more  in  accordance  with  our  views  of 
the  principles  which  should  govern  the  question.  In  Kirk  v.  Blurton, 
9  Mees.  &  W.  283,  the  defendants  were  partners  under  the  name  of 
"John  Blurton."  One  of  the  firm  drew  a  bill  in  the  name  of  "John 
Blurton  &  Co."  The  firm  was  sued  upon  it,  and  the  partner  who  did 
not  draw  the  bill  defended.  Faith  v.  Richmond,  Mason  v.  Rumsey, 
and  other  cases,  were  cited.  Alderson,  B.,  in  delivering  the  opinion, 
says :  "The  court  do  not  entertain  any  doubt  as  to  the  principles  of 
law  applicable  to  this  case.  One  partner  can  bind  his  copartner  only 
to  the  extent  of  the  authority  which  is  given  to  partners  generally, 
to  enable  them  to  carry  on  the  partnership  business,"  which  author- 
ity he  says,  in  another  part  of  the  opinion,  is  "to  bind  the  firm  in  the 
name  of  the  partnership,  and  in  that  only." 

Since  the  passage  of  our  statute  on  the  subject  of  acceptances,  no 
inferences  can  be  indulged  in.  To  make  an  acceptance  valid,  it  must 
be  in  writing,  signed  by  the  acceptor  or  his  lawful  agent.  Mr.  Nash, 
as  a  partner  of  the  firm  of  Nash  &  McGrorty,  had  a  right  to  accept 
the  bill  for  the  firm  by  virtue  of  his  general  powers  as  a  partner,  but 
this  power  of  a  partner  is  to  bind  the  firm  by  the  use  of  the  firm  name. 


IS6  FOUM    AND    INCEPTION,  (Part    1 

and  in  no  other  way.  This  he  did  not  do,  and  we  are  clear  that  the 
acceptance  cannot  be  held  to  bind  the  firm.^ 

We  are  next  to  consider  whether  the  defendant  can  be  held  as  ac- 
ceptor individually.  It  is  a  well-settled  rule  of  commercial  law  that 
no  one  can  accept  a  bill  but  the  person  upon  whom  it  is  drawn,  ex- 
cept for  honor.  Polhill  v.  Walter,  3  Barn.  &  Adol.  114;  Davis  v. 
Clark,  1  Car.  &  K.  177;  May  v.  Kelly,  27  Ala.  497.  If  a  bill  is 
drawn  upon  A.,  and  B.  accepts  it,  the  act  is  merely  voluntary,  with- 
out any  consideration,  and  creates  no  liability  whatever  in  the  law. 
It  is  allowed,  for  the  convenience  of  commerce,  that  a  person  other 
than  the  drawee  may,  after  presentation,  refusal,  and  protest,  accept, 
for  the  honor  of  the  drawer,  or  any  of  the  indorsers,  or  of  all  the 
parties  as  he  may  see  fit ;  but  this  is  a  well-understood  transaction, 
and  is  done  supra  protest,  and  under  certain  well-settled  forms  and 
ceremonies.  There  is  no  pretense  that  Mr.  Nash  was  such  an  ac- 
ceptor of  the  bill  in  question. 

Where  a  bill  is  drawn  upon  several  individuals,  an  acceptance  by 
any  one  of  them  is  binding  upon  him,  although  the  bill  may  be  treat- 
ed, and  should  be,  as  dishonored,  if  not  accepted  by  all  the  drawees, 
because  the  holder  is  entitled  to  the  acceptance  of  them  all ;  but  in 
such  case  a  liability  accrues  against  the  party  accepting,  because  he  is 
a  drawee,  as  much  as  if  the  bill  had  been  drawn  upon  him  alone. 
Where,  however,  the  bill  is  drawn  upon  a  firm,  any  member  of  the 
partnership,  in  his  individual  capacity,  is  quite  as  much  a  stranger  to 
the  same  as  a  third  person.  He  is  only  connected  with  the  bill  through 
his  membership  of  the  firm,  which  is  drawee,  and  in  virtue  of  such 
membership  he  has  power  to  use  the  firm  name  in  accepting  it.  If 
he  accepts  it  in  his  individual  name  he  does  not  bind  the  firm,  and 
there  is  no  consideration  for  his  act.  It  is  the  case  of  a  bill  drawn 
on  one  party  and  accepted  by  another. 

The  court,  in  deciding  the  case  below,  after  stating  that,  "if  one  of 
several  parties  to  whom  a  bill  is  addressed  accepts  the  same,  such  ac- 
ceptance will  bind  him,"  adds,  in  another  part  of  the  opinion :  "It  can 
hardly  be  said  that  one  of  two  or  more  partners,  upon  whom  a  bill  is 
drawn,  is  so  far  a  stranger  to  the  bill  that  an  acceptance  will  not  bind 
him.  If  one  of  several  persons,  between  whom  no  business  relations 
exist,  can  bind  himself,  by  accepting  a  bill  drawn  on  all.  it  is  not  per- 
ceived why  any  one  of  several  partners  may  not  do  the  like."  We 
have  endeavored  to  show  the  error  of  this  position  above.     In  the  case 

8  "The  action  is  not  upon  the  bill  of  exchange,  ♦  •  •  but  is  for  goods 
sold  and  delivered.  But  were  it  otherwise,  as  the  bill  was  drawn  upon  the 
partnership  for  goods  sold  to  the  partnership,  an  acceptance  by  one  partner 
in  his  own  name  would  bind  the  firm.  This  is  too  well  settled  to  require 
the  citation  of  authorities  in  its  support."  Per  Cole,  J.,  in  Tolman  v.  Han- 
rahan,  44  Wis.  133,  135  (1878). 

A  note  signed  by  the  partner  in  any  other  than  the  firm  name  would  not 
be  the  note  of  the  firm.  Palmer  v.  Stephens,  1  Denio  (N.  Y.)  471  (1S45);: 
Tilford  V.   Ramsey,  37  Mo.  563,  567  (1866). 


Oh.  2)  ACCEPTANCE.  187 

of  a  bill  drawn  upon  several  individuals,  "between  whom  no  business 
relations  exist,"  each  is  a  drawee  in  his  individual  capacity,  and  com- 
petent as  such  to  accept ;  but,  in  the  case  of  a  bill  drawn  upon  a  firm, 
the  association,  and  not  the  individual  members  thereof,  is  the  draw- 
ee, and  an  acceptance  by  one  member  in  his  own  name  is  not  an  ac- 
ceptance by  the  drawee.  The  complaint  is  demurrable,  and  the  de- 
murrer should  have  been  sustained. 
Order  overruling  demurrer  reversed.* 


SECTION  2.— FORM  OF  ACCEPTANCE 


ERESKINE  v.  MURRAY. 

(Court  oi:  King's  Bench,  172S.     2  Str.  817.) 

In  case  upon  a  bill  of  exchange  against  the  acceptor,  it  was  alleged 
generally,  quod  acceptavit.  And  on  demurrer  to  the  dedaration  ex- 
ception was  taken,  that  by  3  Anne,  c.  9,  the  acceptancaMJ^st  be  in 
writing,  and  therefore  this  ought  to  be  alleged  to  be  so.   ^R 

Sed  Per  Curiam.  Acceptavit  is  enough,  and  if  writing  is  neces- 
sary, it  will  be  implied. °  Besides,  the  writing  required  by  the  statute 
is  only  in  order  to  make  the  drawer  liable  to  damages  and  costs.  The 
plaintiff  must  have  judgment. 


WYNNE  et  al.  v.  RAIKES  et  al. 
(Court  of  King's  Bench,   1SU4.     5  East,  514.) 

The  first  count  of  the  declaration  stated,  that  on  the  9th  of  Novem- 
ber, 1801,  Aquila  Brown  drew  a  bill  of  exchange  on  the  defendants 
for  £500.  payable  to  the  order  of  Thomas  Andrews  and  Butler  at  60 
days'  sight;  that  Thomas  Andrews  and  Butler  indorsed  the  said  bill 
to  the  plaintiffs;  and  that  the  defendants  upon  sight  thereof,  duly  ac- 
cepted the  bill.  There  were  also  counts  for  money  paid,  and  for 
.money  had  and  received.     The  defendants  pleaded  the  general  issue, 

*  Contra:  Owen  v.  Van  Uster.  20  L.  J.  C.  P.  61  (1850). 

"The  only  objection  made  to  the  fifth  and  sixth  counts  is  that  the  build- 
ing committee  as  an  official  body  is  the  drawee,  and  the  order  cannot  be  ac- 
cepted by  individuals.  But  it  does  not  appear  that  the  committee  differs 
from  any  association  of  individuals ;  and  an  order  drawn  upon  it  is  drawn 
upon  a  number  of  individuals  ass(x?iated  together,  but  not  incorporated  nor 
copartners.  In  such  case,  although  a  bill  may  be  treated  as  dishonored  if 
not  accepted  by  all  the  drawees,  if  accepted  by  a  part  it  will  be  a  good  ac- 
■ceptance  as  to  them."     Smith  v.  Milton,  133  Mass.  369-371  (1882). 

0  Accord:  Barnsdall  v.  Waltftmeyer,  142  Fed.  415,  419,  73  C.  a  A.  515  (1905). 


188  FORM   AND    INCEPTION.  (Part    1 

and  at  the  trial  before  Lord  Ellenborough,  C.  ].,  at  the  sittings  after 
last  Hilary  term  at  Guildhall,  a  verdict  was  found  for  the  plaintiffs 
for  £555.  subject  to  the  opinion  of  this  court  on  the  following  case: 

On  the  yth  of  November,  1801,  Aquila  Brown,  who  resides  at  Balti- 
more, in  North  America,  drew  the  bill  of  exchange  in  question  at  that 
place  upon  the  defendants,  who  reside  in  London,  and  for  a  valuable 
consideration  paid  the  bill  to  Thomas  Andrews  and  Butler,  residing 
in  Baltimore,  who  afterwards,  for  a  valuable  consideration,  indorsed 
it  to  the  plaintiffs,  who  reside  in  London.     On  the  9th  of  November, 

1801,  Aquila  Brown,  by  letter  of  that  date,  advised  the  defendants  of 
having  valued  on  them  by  divers  bills  amounting  together  to  £5,548.  14s. 
2d.  sterling,  of  which  the  bill  in  question  was  one,  the  amount  of  which 
bills  Aquila  Brown  in  that  letter  requested  the  defendants  to  honor 
with  acceptance,  and  place  the  amount  to  his  debit,  and  which  letter  of 
advice  was  duly  received  by  the  defendants.  The  plaintiffs,  on  receiv- 
ing the  bill  in  question  in  England,  presented  it  on  the  2d  of  January, 

1802,  to  the  defendants  for  their  acceptance,  but  the  defendants  refused 
to  accept  it.  On  the  13th  of  January,  1802,  the  defendants  wrote  a 
letter  to  Aquila  Brown,  the  drawer,  which  letter  after  mentioning  some 
damage  which  the  cargo  of  the  Chesapeake,  consigned  to  the  defend- 
ants, had  sustained,  and  difficulties  in  which  it  had  been  involved ;  as 
also  an  attachment  laid  upon  the  property  of  Aquila  Brown  in  the 
hands  of  the  defendants  (among  other  things),  contains  the  following 
passages :  "Under  these  circumstances,  while  your  property  in  the 
Chesapeake  appeared  in  so  very  questionable  a  state  that  we  could  not 
tell  what  security  to  rest  upon  it,  you  could  not  expect  that  we  could 
interfere  for  any  of  your  bills  refused  by  Mr.  Mangin,  or  even  accept 
all  the  bills  of  yours  which  came  in  upon  us.  Several  of  them  of 
course  have  been  noted  for  nonacceptance,  and  Messrs.  Finlay  Banna- 
tyne  &  Co.  have  officiously  sent  you  a  protest  on  that  for  iool.  15s. 
for  nonacceptance.  We  have  however  now  the  satisfaction  to  mention 
to  you  that  Mr.  Mangin,  having  resolved  to  pay  many  of  your  bills  on 
him,  Messrs.  Mellish  &  Co.  have  taken  off  the  attachment  in  our  hands, 
and  since  the  receipt  of  Messrs.  Muilman's  letter,  of  the  5th  instant, 
our  prospect  of  security  on  the  Chesapeake  is  so  much  improved  that 
we  shall  accept  or  certainly  pay  all  the  bills  which  have  hitherto  ap- 
peared ;  the  one  for  £6,500.,  the  19th  of  October,  has  not  yet  been  pre- 
sented to  us,  but  we  will  hope  that  the  state  of  your  funds  will  like- 
wise permit  us  to  take  care  of  that."  The  bill  in  question  was  one  of 
those  which  had  appeared  prior  to  the  writing  the  above  letter  of  the 
13th  January,  1802.  and  which  letter  was  received  by  Aquila  Brown 
in  America  on  the  19th  March,  1802.  On  the  6th  of  March,  1802, 
which  was  60  days  and  3  days  of  grace  after  the  bill  in  question  was 
presented  for  acceptance,  the  plaintiffs  presented  the  bill  to  the  de- 
fendants for  payment ;  but  the  defendants  refused  to  pay  the  same^ 
and  the  plaintiffs  caused  it  to  be  protested  for  nonpayment.  Aquila 
Brown,  the  drawer  of  the  bill,  was  at  the  time  the  same  was  drawn 


Ch.  2)  ACCEPTANCE.  189 

indebted  to  the  defendants  in  the  sum  of  i5,000.  and  hath  so  continued 
to  the  present  time.  The  question  for  the  opinion  of  the  court  was, 
Whether  the  plaintiffs  were  entitled  to  recover?  If  the  court  should 
be  of  that  opinion,  the  present  verdict  to  stand ;  if  otherwise,  a  nonsuit 
to  be  entered.*^ 

Lord  ElIvEnborough,  C.  J.,  delivered  judgment. 

This  case,  in  all  its  material  circumstances,  resembles  that  of  Powell 
V.  Monnier,  1  Atk.  6.11,  the  authority  of  which  has  not  been,  as  far  as 
we  have  been  able  to  find,  ever  shaken.  The  letter  of  the  defendants, 
stated  in  the  case  to  have  been  written  on  the  13th  of  January,  1802, 
to  Aquila  Brown,  the  drawer,  when  the  bill  in  question,  amongst  others 
drawn  by  him  upon  them,  had  been  refused  acceptance,  after  com- 
menting upon  the  circumstances  which  had  before  made  the  property 
of  the  drawer  appear  to  them,  the  defendants,  to  be  in  a  very  question- 
able state,  particularly  in  respect  to  what  the  drawer  had  in  the  Chesa- 
peake, says:  "Our  prospect  of  security  in  the  Chesapeake  is  so  much 
improved  that  we  shall  accept  or  certainly  pay  all  the  bills  which  have 
hitherto  appeared."  And  the  first  question  in  this  case  is,  Whether 
this  promise  be  an  acceptance?  If  either  branch  of  the  alternative 
contained  in  this  promise  would  be  an  effectual  acceptance,  if  standing 
alone,  surely  it  cannot  be  less  so  because  the  promise  is  couched  in 
terms  of  an  alternative  of  which  each  branch  is  an  acceptance.  A 
promise  to  accept  an  existing  bill  is  an  acceptance.  A  promise  to  pay 
it  is  also  an  acceptance.  A  promise  therefore  to  do  the  one  or  the 
other — i.  e.,  to  accept  or  certainly  pay — cannot  be  less  than  an  accept- 
ance. It  amounts,  I  think,  in  effect  to  this :  "Whether  we  shall  send 
for  the  bill  again,  and  accept  it  in  form  or  not,  is  uncertain,  but  at 
any  rate  you  may  depend  upon  its  being  paid."  Supposing  it  to  be  an 
acceptance,  the  time  when  it  is  to  be  considered  as  made,  namely, 
Whether  at  the  date  of  the  letter,  or  at  the  time  when  it  reached  the 
drawer  to  whom  it  was  written  in  America  (which  was  on  the  19th  of 
March,  1802,  after  the  bill  had  become  due),  is  immaterial,  inasmuch 
as  an  acceptance  after  the  time  appointed  for  the  payment  of  a  bill 
is  good.  Jackson  v.  Piggot,  1  Ld.  Raym.  364,  Salk.  127,  and  Mut- 
ford  V.  Walcot,  1  Ld.  Raym.  574,  Salk.  129,  etc. 

The  second  question  in  this  case  is,  Whether,  inasmuch  as  the  bill 
was  not  taken  by  the  holders  upon  the  credit  of  this  promise  of  the  de- 
fendants so  made  to  the  drawers,  nor  was  the  same  known  to  them  to 
have  been  made  at  all  till  after  the  bill  was  due,  they,  the  holders,  can 
avail  themselves  of  it  as  an  acceptance?  In  the  case  of  Powell  v.  Mon- 
nier, already  mentioned,  that  which  was  holden  an  acceptance  inuring  to 
the  benefit  of  the  indorsees,  the  plaintiffs,  was  an  acceptance  contained  in 
a  letter  to  the  drawer,  one  Newburgh,  promising,  "that  his  bill  should  be 
duly  honored."  The  promise,  being  long  subsequent  to  the  time  when 
the  plaintiffs  in  that  case  became  possessed  of  the  bill  by  indorsement, 

6  The  arguments  of  counsel  are  omitted- 


IDO  FORM   AND    INCEPTION.  (Part  1 

could  of  course  have  formed  no  part  of  their  orig-inal  inducement  to 
take  it.  And  the  promise  was  in  that  case,  as  well  as  in  this,  made  to 
a  drawer,  who  had  drawn  without  having  any  effects  in  the  acceptor's 
hands ;  and  it  docs  not  appear  in  the  one  case  more  than  in  the  other 
that  the  holders,  the  plaintiff's,  ever  knew  of  the  acceptance  on  which 
they  afterwards  relied  prior  to  the  time  when  the  bill  became  due. 
Without  oversetting  the  authority  of  the  case  of  Powell  v.  Monnier, 
we  cannot  say  that  the  plaintiffs  are  not  in  the  present  case,  which  so 
entirelv  resembles  it,  entitled  to  recover.  And  as  in  adhering  to  it  we 
violate  no  principles  of  commercial  convenience,  but  confirm  a  rule  of 
law,  which  we  find  established  on  a  subject  which  least  of  all  others 
endures  uncertainty  and  change,  we  cannot  do  otherwise  than  hold  the 
plaintiffs  in  this  case  entitled  to  recover. 
Postea  to  the  plaintiffs.* 


COOLIDfeE  et  al.  v.  PAYSON  et  al. 
(Supreme  Court  of  the  United  States.  1817.    2  Wheat.  66,  4  L.  Ed.  185.) 

Marshall,  C.  J.,  delivered  the  opinion  of  the  court. 

This  suit  was  instituted  by  Payson  &  Co.,  as  indorsers  of  a  bill  of 
exchange,  drawn  by  Cornthwaite  &  Gary,  payable  to  the  order  of  John 
Randall,  against  Coolidge  &  Co.  as  the  acceptors. 

A.t  the  trial  the  holders  of  the  bill,  on  which  the  name  of  John  Ran- 
dall was  indorsed,  offered,  for  the  purpose  of  proving  the  indorsement, 
an  affidavit  made  by  one  of  the  defendants  in  the  cause,  in  order  to 
obtain  a  continuance,  in  which  he  referred  to  the  bill  in  terms  which, 
they  supposed,  implied  a  knowledge  on  his  part  that  the  plaintiffs  were 
the  rightful  holders.  The  defendants  objected  to  the  bill's  going  to 
the  jury  without  further  proof  of  the  indorsement;  but  the  court  de- 
termined that  it  should  go  with  the  affidavit  to  the  jury,  who  might 
be  at  liberty  to  infer  from  thence  that  the  indorsement  was  made  by 
Randall.  To  this  opinion  the  counsel  for  the  defendants  in  the  Cir- 
cuit Court  excepted,  and  this  court  is  divided  on  the  question  wheth- 
er the  exception  ought  to  be  sustained. 

On  the  trial  it  appeared  that  Coolidge  &  Co.  held  the  proceeds  of 
part  of  the  cargo  of  the  Hiram,  claimed  by  Cornthwaite  &  Cary,  which 
had  been  captured  and  libeled  as  lawful  prize.  The  cargo  had  been 
acquitted  in  the  District  and  Circuit  Courts,  but  from  the  sentence  of 
acquittal  the  captors  had  appealed  to  this  court.  Pending  the  appeal 
•Cornthwaite  &  Co.  transmitted  to  Coolidge  &  Co.  a  bond  of  indemnity, 

7  No  acceptanc-e  of  any  bill  of  exchange,  whether  inland  or  foreign,  made 
after  the  31st  day  of  December,  1856.  shall  be  suflieient  to  bind  or  charge 
any  i)erson,  unless  the  same  be  in  writing  on  such  bill,  or,  if  there  be  more 
than  one  part  of  such  bill,  on  one  of  the  said  parts,  and  signed  by  the  ac- 
ceptor or  some  person  duly  authorized  by  him.  Mercantile  Law  Amendment 
Act.  19  &  20  Vict.  c.  97,  §  6  (1856). 


Ch.  2)  ACCEPTANCE.  191 

executed  at  Baltimore  with  scrolls  in  the  place  of  seals,  and  drew  on 
them  for  $2,700.  This  bill  was  also  payable  to  the  order  of  Randall,, 
and  indorsed  by  him  to  Payson  &  Co.  It  was  presented  to  Coolidg^e 
&  Co.  and  protested  for  nonacceptance.  After  its  protest  Coolidge  & 
Co.  wrote  to  Cornthwaite  &  Cary  a  letter,  in  which,  after  acknowl- 
edging the  receipt  of  a  letter  from  them,  with  the  bond  of  indemnity, 
they  say:  "This  bond,  conformably  to  our  laws,  is  not  executed  as 
it  ought  to  be;  but  it  may  be  otherwise  in  your  state.  It  will  there- 
fore be  necessary  to  satisfy  us  that  the  scroll  is  usual  and  legal  with 
you  instead  of  a  seal.  We  notice  no  seal  to  any  of  the  signatures." 
"We  shall  write  our  friend  Williams  by  this  mail,  and  will  state  to 
him  our  ideas  respecting  the  bond,  which  he  will  probably  determine. 
If  Mr.  W.  feels  satisfied  on  this  point,  he  will  inform  you,  and  in  that 
case  your  draft  for  $2,000  will  be  honored." 

On  the  same  day  Coolidge  &  Co.  addressed  a  letter  to  Mr.  Wil- 
liams, in  which,  after  referring  to  him  the  question  respecting  the  le- 
gal obligation  of  the  scroll,  they  say:  "You  know  the  object  of  the 
bond,  and,  of  course,  see  the  propriety  of  our  having  one  not  only 
legal,  but  signed  by  sureties  of  unquestionable  responsibility,  respect- 
ing which,  we  shall  wholly  rely  on  your  judgment.  You  mention  the 
last  surety  as  being  responsible.     What  think  you  of  the  others?" 

In  his  answer  to  this  letter,  Williams  says :  "I  am  assured  that  the 
bond  transmitted  in  my  last  is  sufficient  for  the  purpose  for  which  it 
was  given,  provided  the  parties  possess  the  means ;  and  of  the  last 
signer,  I  have  no  hesitation  in  expressing  my  firm  belief  of  his  being 
able  to  meet  the  whole  amount  himself.  Of  the  principals  I  cannot 
speak  with  so  much  confidence,  not  being  well  acquainted  with  their 
resources.  Under  all  circumstances,  I  should  not  feel  inclined  to 
withhold  from  them  any  portion  of  the  funds  for  which  the  bond  was 
given." 

On  the  day  on  which  this  letter  was  written,  Cornthwaite  &  Cary 
called  on  Williams,  to  inquire  whether  he  had  satisfied  Coolidge  &  Co. 
respecting  the  bond.  Williams  stated  the  substance  of  the  letter  he 
had  written,  and  read  to  him  a  part  of  it.  One  of  the  firm  of  Pay- 
son  &  Co.  also  called  on  him  to  make  the  same  inquiry,  to  whom  he 
gave  the  same  information,  and  also  read  from  his  letter  book  the  let- 
ter he  had  written. 

Two  days  after  this,  the  bill  in  the  declaration  mentioned  was  drawn 
by  Cornthwaite  &  Cary,  and  paid  to  Payson  &  Co.  in  part  of  the  pro- 
tested bill  of  $2,700,  by  whom  it  was  presented  to  Coolidge  &  Co.,  who 
refused  to  accept  it,  on  which  it  was  protested,  and  this  action  brought 
by  the  holders. 

On  this  testimony,  the  counsel  for  the  defendants  insisted  that  the 
plaintiffs  were  not  entitled  to  a  verdict;  but  the  court  instructed  the 
jury  that  if  they  were  satisfied  that  Williams,  on  the  application  of 
the  plaintiffs,  made  after  seeing  the  letter  from  Coolidge  &  Co.  to 
Cornthwaite  &  Cary,  did  declare  that  he  was  satisfied  with  the  bond 


192  FORM   AND   INCEPTION.  (Part  1 

referred  to  in  that  letter,  as  well  with  respect  to  its  execution,  as  to 
the  sufficiency  of  the  obligors  to  pay  the  same,  and  that  the  plain- 
tiffs, upon  the  faith  and  credit  of  the  said  declaration,  and  also  of 
the  letter  to  Cornthwaite  &  Gary,  and  without  having  seen  or  known 
the  contents  of  the  letter  from  Coolidge  &  Co.  to  Williams,  did  re- 
ceive and  take  the  bill  in  the  declaration  mentioned,  they  were  enti- 
tled to  recover  on  the  present  action,  and  that  it  was  no  legal  objec- 
tion to  such  recovery  that  the  promise  to  accept  the  present  bill  was 
made  to  the  drawers  thereof,  previous  to  the  existence  of  such  bill, 
or  that  the  bill  had  been  taken  in  part  payment  of  a  pre-existing  debt, 
or  that  the  said  Williams,  in  making  the  declarations  aforesaid,  did 
exceed  the  private  instructions  given  to  him  by  Coolidge  &  Co.,  in 
their  letter  to  him. 

To  this  charge  the  defendants  excepted.  A  verdict  was  given  for 
the  plaintiffs,  and  judgment  rendered  thereon,  which  judgment  is 
now  before  this  court  on  a  writ  of  error. 

The  letter  from  Coolidge  &  Co.  to  Cornthwaite  &  Cary  contains  no 
reference  to  their  letter  to  Williams  which  might  suggest  the  neces- 
sity of  seeing  that  letter,  or  of  obtaining  information  respecting  its 
contents.  They  refer  Cornthwaite  &  Cary  to  Williams,  not  for  the 
instructions  they  had  given  him,  but  for  his  judgment  and  decision 
on  the  bond  of  indemnity.  Under  such  circumstances,  neither  the 
drawers  nor  the  holders  of  the  bill  could  be  required  to  know,  or 
could  be  affected  by,  the  private  instructions  given  to  W^illiams.  It 
was  enough  for  them,  after  seeing  the  letter  from  Coolidge  &  Co.  to 
Cornthwaite  &  Cary,  to  know  that  Williams  was  satisfied  with  the  ex- 
ecution of  the  bond  and  the  sufficiency  of  the  obligors,  and  had  in- 
formed Coolidge  &  Co.  that  he  was  so  satisfied. 

This  difficulty  being  removed,  the  question  of  law  which  arises  from 
the  charge  given  by  the  court  to  the  jury  is  this:  Does  a  promise  to 
accept  a  bill  amount  to  an  acceptance  to  a  person  who  has  taken  it  on 
the  credit  of  that  promise,  although  the  promise  was  made  before  the 
existence  of  the  bill,  and  although  it  is  drawn  in  favour  of  a  person 
who  takes  it  for  a  pre-existing  debt? 

In  the  case  of  Pillans  &  Rose  v.  Van  Mierop  &  Hopkins,  3  Burr. 
1663,  the  credit  on  which  the  bill  was  drawn  was  given  before  the 
promise  to  accept  was  made,  and  the  promise  was  made  previous  to 
the  existence  of  the  bill.  Yet  in  that  case,  after  two  arguments,  and 
much  consideration,  the  Court  of  King's  Bench  (all  the  judges  being 
present  and  concurring  in  opinion)  considered  the  promise  to  accept 
as  an  acceptance. 

Between  this  case,  and  that  under  the  consideration  of  the  court, 
no  essential  distinction  is  perceived.  But  it  is  contended  that  the  au- 
thority of  the  case  of  Pillans  &  Rose  v.  Van  Mierop  &  Hopkins  is 
impaired  by  subsequent  decisions. 

In  the  case  of  Pierson  v.  Dunlop  et  al.,  Cowp.  571,  the  bill  was 
drawn   and  presented  before  the  conditional   promise  was  made  on 


Ch.  2)  ACCEPTANCE.  193 

which  the  suit  was  instituted.  Although,  in  that  case,  the  holder  of 
the  bill  recovered  as  on  an  acceptance,  it  is  supposed  that  the  princi- 
ples laid  down  by  Lord  Mansfield,  in  delivering  his  opinion,  contra- 
dict those  laid  down  in  Pillans  &  Rose  v.  Van  Mierop  &  Hopkins. 
His  Lordship  observes:  "It  has  been  truly  said,  as  a  general  rule, 
that  the  mere  answer  of  a  merchant  to  the  drawer  of  a  bill,  saying, 
"He  will  duly  honor  it,"  is  no  acceptance,  unless  accompanied  with 
circumstances  which  may  induce  a  third  person  to  take  the  bill  by 
indorsement;  but  if  there  are  any  such  circumstances,  it  may  amount 
to  an  acceptance,  though  the  answer  be  contained  in  a  letter  to  the 
drawer." 

H  the  case  of  Pillans  &  Rose  v.  Van  Mierop  &  Hopkins  had  been 
understood  to  lay  down  the  broad  principle  that  a  naked  promise  to 
accept  amounts  to  an  acceptance,  the  case  of  Pierson  v.  Dunlop  cer- 
tainly narrows  that  principle  so  far  as  to  require  additional  circum- 
stances proving  that  the  person  on  whom  the  bill  was  drawn  was 
bound  by  his  promise,  either  because  he  had  funds  of  the  drawer  in 
his  hands,  or  because  his  letter  had  given  credit  to  the  bill,  and  in- 
duced a  third  person  to  take  it. 

It  has  been  argued  that  those  circumstances  to  which  Lord  Mans- 
field alludes  must  be  apparent  on  the  face  of  the  letter.  But  the  court 
can  perceive  no  reason  for  this  opinion.  It  is  neither  warranted  by 
the  words  of  Lord  Mansfield,  nor  by  the  circumstances  of  the  case 
in  which  he  used  them.  "The  mere  answer  of  a  merchant  to  the  draw- 
er of  a  bill,  saying  he  will  duly  honor  it,  is  no  acceptance  unless  accom- 
panied with  circumstances,"  etc.  The  answer  must  be  "accompanied 
with  circumstances" ;  but  it  is  not  said  that  the  answer  must  con- 
tain those  circumstances.  In  the  case  of  Pierson  v.  Dunlop,  the  an- 
swer did  not  contain  those  circumstances.  They  were  not  found  in 
the  letter,  but  were  entirely  extrinsic.  Nor  can  the  court  perceive  any 
reason  for  distinguishing  between  circumstances  which  appear  in  the 
letter  containing  the  promise,  and  those  which  are  derived  from  oth- 
er sources.  The  great  motive  for  construing  a  promise  to  accept  as 
an  acceptance  is  that  it  gives  credit  to  the  bill,  and  may  induce  a  third 
person  to  take  it.  If  the  letter  be  not  shown,  its  contents,  whatever 
they  may  be,  can  give  no  credit  to  the  bill;  and,  if  it  be  shown,  an 
absolute  promise  to  accept  will  give  all  the  credit  to  the  bill  which  a 
full  confidence  that  it  will  be  accepted  can  give  it.  A  conditional 
promise  becomes  absolute  when  the  condition  is  performed. 

In  the  case  of  Mason  v.  Hunt,  Doug.  296,  Lord  Mansfield  said: 
"There  is  no  doubt  but  an  agreement  to  accept  may  amount  to  an  ac- 
ceptance ;  and  it  may  be  couched  in  such  words  as  to  put  a  third  per- 
son in  a  better  condition  than  the  drawee.  If  one  man,  to  give  credit 
to  another,  makes  an  absolute  promise  to  accept  his  bill,  the  drawee, 
or  any  other  person,  may  show  such  promise  upon  the  exchange,  to 
get  credit,  and  a  third  person,  who  should  advance  his  money  upon 
Sm.&  M.B.&  N.— 13 


194  FORM   AND   INCEPTION.  (Part  1 

it,  would  have  nothing  to  do  with  the  equitable  circumstances  which 
might  subsist  between  the  drawer  and  acceptor." 

What  is  it  that  "the  drawer,  or  any  other  person,  may  show  upon 
the  exchange"  ?  It  is  the  promise  to  accept — the  naked  promise.  The 
motive  to  this  promise  need  not,  and  cannot,  be  examined.  The  prom- 
ise itself,  when  shown,  gives  the  credit;  and  the  merchant  who  makes 
it  is  bound  by  it. 

The  cases  cited  from  Cowper  and  Douglass  are,  it  is  admitted,  cases 
in  which  the  bill  is  not  taken  for  a  pre-existing  debt,  but  is  purchas- 
ed on  the  credit  of  the  promise  to  accept.  But  in  the  case  of  Pillans 
\ .  Van  Mierop  the  credit  was  given  before  the  promise  was  received 
or  the  bill  drawn ;  and  in  all  cases  the  person  who  receives  such  a 
bill  in  payment  of  a  debt,  will  be  prevented  thereby  from  taking  other 
means  to  obtain  the  money  due  to  him.  Any  ingredient  of  fraud 
would,  unquestionably,  afifect  the  whole  transaction ;  but  the  mere 
circumstance  that  the  bill  was  taken  for  a  pre-existing  debt  has  not 
been  thought  sufficient  to  do  away  the  effect  of  a  promise  to  accept. 

In  the  case  of  Johnson  and  Another  v.  Collins,  1  East,  98,  Lord 
Kenyon  shows  much  dissatisfaction  with  the  previous  decisions  on 
this  subject;  but  it  is  not  believed  that  the  judgment  given  in  that 
case  would,  even  in  England,  change  the  law  as  previously  estab- 
lished. In  the  case  of  Johnson  v.  Collins,  the  promise  to  accept  was 
in  a  letter  to  the  drawer,  and  is  not  stated  to  have  been  shown  to  the 
indorser.  Consequently  the  bill  does  not  appear  to  have  been  taken 
on  the  credit  of  that  promise.  It  was  a  mere  naked  promise,  unac- 
companied with  circumstances  which  might  give  credit  to  the  bill. 
The  counsel  contended  that  this  naked  promise  amounted  to  an  ac- 
ceptance ;  but  the  court  determined  otherwise.  In  giving  his  opin- 
ion, Le  Blanc,  J.,  lays  down  the  rule  in  the  words  used  by  Lord  Mans- 
field in  the  case  of  Pierson  v.  Dunlop ;  and  Lord  Kenyon  said  that 
"this  was  carrying  the  doctrine  of  implied  acceptances  to  the  utmost 
verge  of  the  law,  and  he  doubted  whether  it  did  not  even  go  beyond 
it."  In  Clarke  and  Others  v.  Cock,  4  East,  57,  the  judges  again  ex- 
press their  dissatisfaction  with  the  law  as  established,  and  their  re- 
gret that  any  other  act  than  a  written  acceptance  on  the  bill  had  ever 
been  deemed  an  acceptance.  Yet  they  do  not  undertake  to  overrule 
die  decisions  which  they  disapprove.  On  the  contrary,  in  that  case, 
fhey  unanimously  declared  a  letter  to  the  drawer  promising  to  accept 
the  bill,  which  was  shown  to  the  person  who  held  it,  and  took  it  on 
the  credit  of  that  letter  to  be  a  virtual  acceptance.  It  is  true,  in  the 
case  of  Clarke  v.  Cock,  the  bill  was  made  before  the  promise  was 
given,  and  the  judges,  in  their  opinions,  use  some  expressions  which 
indicate  a  distinction  between  bills  drawn  before  and  after  the  date 
of  the  promise ;  but  no  case  has  been  decided  on  this  distinction,  and 
in  Pillans  &  Rose  v.  Van  Mierop  &  Hopkins,  the  letter  was  written 
before  the  bill  was  drawn. 


Ch.  2)  ACCEPTANCE.  195 

The  court  can  perceive  no  substantial  reason  for  this  distinction. 
The  prevaiHng  inducement  for  considering-  a  promise  to  accept  as  an 
acceptance  is  that  credit  is  thereby  given  to  the  bill.  Now,  this  credit 
is  given  as  entirely  by  a  letter  written  before  the  date  of  the  bill  as 
by  one  written  afterwards. 

It  is  of  much  importance  to  merchants  that  this  question  should  be 
at  rest.  Upon  a  review  of  the  cases  which  are  reported,  this  court  is 
of  opinion  that  a  letter  written  within  a  reasonable  time  before  or 
after  the  date  of  a  bill  of  exchange,  describing  it  in  terms  not  to  be 
mistaken,  and  promising  to  accept  it,  is,  if  shown  to  the  person  who 
afterwards  takes  the  bill  on  the  credit  of  the  letter,  a  virtual  accept- 
ance binding  the  person  who  makes  the  promise.  This  is  such  a  case. 
There  is,  therefore,  no  error  in  the  judgment  of  the  Circuit  Court, 
and  it  is  affirmed  with  costs. 

Judgment  affirmed. 


SPEAR  &  PATTEN  v.  PRATT. 

(Supreme  Court  of  New  York,  1842.     2  Hill,  582,  38  Am.  Dec.  600.) 

Assumpsit,  tried  at  the  Onondaga  circuit,  in  September,  1841,  be- 
fore Moseley,  C.  J.  The  action  was  against  the  defendant,  Fred- 
erick Pratt,  as  acceptor  of  a  bill  of  exchange,  payable  to  the  order 
of  the  plaintiffs.  The  defendant's  name  was  written  across  the  face 
of  the  bill ;  and  the  question  was  whether  this  was  such  an  accept- 
ance as  is  required  by  the  statute.  It  was  admitted  that  the  defend- 
ant, at  the  time  of  the  acceptance,  was  a  resident  of  this  state.  His 
counsel  insisted  at  the  trial  that  the  acceptance  was  insufficient  to 
charge  him,  but  the  circuit  judge,  being  of  a  different  opinion,  di- 
rected the  jury  to  find  for  the  plaintiffs,  which  they  accordingly  did; 
and  the  defendant's  counsel,  having  excepted,  now  moved  for  a  new 
trial  upon  a  bill  of  exceptions. 

CowEN,  J.  Any  words  written  by  the  drawee  on  a  bill,  not  put- 
ting a  direct  negative  upon  its  request,  as  "Accepted,"  "Presented," 
"Seen,"  the  day  of  the  month,  or  a  direction  to  a  third  person  to  pay 
it,  is  prima  facie,  a  complete  acceptance,  by  the  law  merchant.  Bay- 
ley  on  Bills  (Am.  Ed.  1836)  163,  and  the  cases  there  cited.  Writing 
his  name  across  the  bill,  as  in  this  case,  is  a  still  clearer  indication  of 
intent,  and  a  very  common  mode  of  acceptance.  This  is  treated  by 
the  law  merchant  as  a  written  acceptance — a  signing  by  the  drawee. 
"It  may  be,"  says  Chitty,  "merely  by  writing  the  name  at  the  bottom 
or  across  the  bill;"  and  he  mentions  this  as  among  the  more  usual 
modes  of  acceptance.    Chitty  on  Bills  (Am.  Ed.  1839)  320. 

It  is  supposed  that  the  rule  has  been  altered  by  1  Rev.  St.  (2d  Ed.) 
p.  757,  §  6.  This  requires  the  acceptance  to  be  in  writing,  and  signed 
by  the  acceptor  or  his  agent.  The  acceptance  in  question  was,  as  we 
have  seen,  declared  by  the  law  merchant  to  be  both  a  writing  and  sign- 


196  FORM   AND   INCEPTION.  (Part   1 

ing.  The  statute  contains  no  declaration  that  it  should  be  considered 
less.  An  indorsement  must  be  in  writing  and  signed;  yet  the  name 
alone  is  constantly  holden  to  satisfy  the  requisition.  No  particular 
form  of  expression  is  necessary  in  any  contract.  The  customary  im- 
port of  a  word,  by  reason  of  its  appearing  in  a  particular  place,  and 
standing  in  a  certain  relation,  is  considered  a  written  expression  of 
intent  quite  as  full  and  effectual  as  if  pains  had  been  taken  to  throw 
it  into  the  most  labored  periphrase.  It  is  said  the  revisers,  in  their 
note,  refer  to  the  French  law  as  the  basis  of  the  legislation  which  they 
recommended ;  and  that  the  French  law  requires  more  than  the  draw- 
ee's name — the  word  "Accepted,"  at  least.  That  may  be  so;  but  it 
is  enough  for  us  to  see  that  both  the  terms  and  the  spirit  of  the  act 
may  be  satisfied  short  of  that  word,  and  more  in  accordance  with 
the  settled  forms  of  commercial  instruments  in  analogous  cases.  The 
whole  purpose  was  probably  to  obviate  the  inconveniences  of  the  old 
law,  which  gave  effect  to  a  parol  acceptance. 
New  trial  denied.' 


LUGRUE  V.  WOODRUFF. 

(Supreme  Court  of  Georgia,  1860.     29  Ga.  64S.) 

This  was  an  action  by  James  F.  Lugrue  against  Minus  W.  Wood- 
ruff on  a  draft,  of  which  the  following  is  a  copy,  viz. : 

"Chattanooga,  January  23,  1858. 

■'164.  Three  days  after  date,  pay  to  the  order  of  myself  one  hun- 
dred and  sixty-four  dollars,  value  received,  and  charge  the  same  to 
account  of  202  sacks  oats,  marked  W.  [Signed]     R.  Hooper. 

"To  M.  W.  Woodruff,  Augusta,  Ga." 

Indorsed:     "Pay  James  F.  Lugrue.  [Sigiied]     R.  Hooper." 

8  Section  6:  "No  person  within  this  state  shall  be  charged  as  an  ac- 
ceptor on  a  bill  of  exchange,  unless  his  acceptance  shall  be  in  writing,  sign- 
ed by  himself,  or  his  lawful  agent." 

Section  7 :  "If  such  acceptance  be  written  on  a  paper,  other  than  the  bill, 
It  shall  not  bind  the  acceptor,  except  in  favor  of  a  person  to  whom  such  ac- 
ceptance shall  have  been  shou-n,  and  who,  on  the  faith  thereof,  shall  have 
received  the  bill  for  a  valuable  consideration." 

Section  8:  "An  unconditional  promise,  in  writing,  to  accept  a  bill  before 
It  is  drawn,  shall  be  deemed  an  actual  acceptance,  in  favor  of  every  per- 
son who,  upon  the  faith  thereof,  shall  have  received  the  bill  for  a  valuable 
consideration." 

1  N.  Y.  Rev.  St.  (2d  Ed.)  p.  757. 

Many  states  have  or  had  statutes  to  the  same  effect.  See  Stimnson,  Am. 
Stat.  Law,  §  4720. 

Sections  6,  7,  and  8,  above,  which  related  to  normegotiable  as  well  as  ne- 
gotiable bills,  were  repealed  by  section  341,  the  general  repealing  section,  of 
the  New  York  negotiable  instruments  law  (chapter  612.  Laws  1897). 

In  Nelson  v.  Nelson,  31  Wash.  116,  71  Pac.  749  (1903),  section  132  of  the 
negotiable  instruments  law  was  held  applicable  to  a  nonnegotiable  bill.  But 
see  Westberg  v.  Lumber  Co.,  117  Wis.  589,  94  N.  W.  572  (1903). 


Ch.  2)  ACCEPTANCE.  197 

Noted  and  protested  for  nonacceptance  January  27,  1858. 

Noted  and  protested  for  nonpayment  January  29,  1858. 

Plaintiff,  at  the  trial,  offered  the  draft  in  evidence,  to  which  defend- 
ant objected,  on  the  ground  that  it  was  not  accepted  on  its  face.  The 
court  sustained  the  objection,  and  plaintiff"  excepted. 

Plaintiff  then  off'ered  in  evidence  the  following  letter  from  defend- 
ant to  Hooper,  the  drawer  of  the  draft,  as  evidence  of  acceptance: 

"Augusta,  January  26,  1858. 

"Mr.  R.  Hooper — Dear  Sir:  Your  draft  on  the  oats  at  three  days 
was  presented  to-day  for  payment,  and  the  oats  not  yet  arrived,  and 
money  as  tight  as  bricks.  It  is  almost  impossible  to  collect  anything 
here.  It  is  utterly  impossible  for  me  to  pay  the  draft  to-day ;  but  as 
soon  as  the  oats  get  here  I  can  reaHze  on  them  immediately,  and  will 
then  attend  to  the  draft.  It  will  be  all  right  in  a  few  days.  If  the 
draft  should  come  back  to  you,  have  it  sent  down  again,  and  I  will 
certainly  arrange  it;  and  send  on  all  the  oats  you  can.  Our  market  is 
almost  entirely  bare  of  them  and  a  good  demand  at  60  to  65  cents. 

"Respectfully,  M.  W.  Woodruff." 

Defendant  objected  to  this  letter,  on  the  ground  that  it  was  not  an 
acceptance  as  to  third  persons,  whatever  it  might  be  as  to  Hooper. 
The  court  sustained  the  objection,  and  plaintiff  excepted. 

Plaintiff  then  proposed  to  prove  that  the  conditions  expressed  in  the 
letter  had  been  performed ;  that  the  oats  did  arrive  and  were  sold,  and 
the  draft  sent  back  to  defendant.  The  court  rejected  this  evidence 
also,  and  plaintiff"  excepted. 

There  being  no  further  evidence,  plaintiff  was  nonsuited,  and  there- 
fore tendered  his  bill  of  exceptions,  assigning  as  error  the  above  rulings 
and  decisions. 

Lumpkin,  J.  The  proof  in  this  case  did  not  go  far  enough.  It 
should  have  been  shown,  either  that  the  letter  written  by  Woodruff, 
and  which  we  hold  to  be  a  sufficient  acceptance,  was  written  to  Hooper 
before  the  draft  was  indorsed  to  the  plaintiff,  which  we  are  quite  sure 
was  not  the  fact,  or  that  the  paper,  after  acceptance  was  refused,  was 
returned  to  Hooper,  and  redehvered  by  him  to  Lugrue,  who  took  it 
upon  the  faith  of  the  letter,  or,  that  he  advanced  money  or  paid  some- 
thing of  value  upon  it.  If  this  proof  can  be  supplied,  the  plaintiff"  will 
be  entitled  to  recover.  As  the  testimony  stands,  however,  we  hold,  the 
judge  was  right  in  awarding  a  nonsuit. 

Judgment  affirmed.' 

9  Accord:  Eakin  v.  Bank,  67  Kan.  338,  72  Pac.  874  (100.3),  a  case  of  a  tele- 
graphic acceptance,  decided  under  a  statute  copied  from  1  N.  Y.  Rev.  St.  (2d 
Ed.)'  p.  757,  %  7. 


198  FOKM   AND   INCEPTION.  (Part   1 

JONES  V.  COUNCIL  BLUFFS  BRANCH  BANK  OF  IOWA. 

(Sui)reuie  Court  of  Illinois,  18G4.     34  111.  313,  85  Am.  Dec.  30(j.) 

Beckwitii,  J.  This  is  an  action  of  assumpsit  to  recover  the  sum 
of  money  mentioned  in  a  draft  dated  July  IG,  1861,  drawn  by  Green  & 
Stone  on  the  appellants,  alleged  to  have  been  verbally  accepted  by  them, 
but  protested  for  nonacceptance.  The  defense  was  that  the  premise 
of  the  appellants  to  accept  did  not  constitute  ^n  acceptance,  that  such 
promise  was  obtained  by  fraud,  and  thSt  its  consideration  had  failed. 
On  the  trial,  the  plaintiffs  offered  in  evidence  the  draft  and  a  written 
agreement  of  Green  &  Stone,  dated  August  1,  1861,  by  which  they 
transferred  to  the  appellants  all  their  interest  in  certain  property  and 
claims  for  commissions,  in  consideration  of  the  appellants  undertaking 
to  pay  the  draft  in  question.  The  plaintiffs  also  offered  evidence  tend- 
ing to  prove  that  the  appellants  promised  Green  &  Stone  that  they 
would  accept  and  pay  the  draft,  and  that  the  appellees,  after  they  had 
taken  it,  were  informed  of  this  undertaking.  A  promise  by  the  drawee 
to  pay  an  existing  bill  is  an  acceptance,  or,  in  law,  amounts  to  an 
acceptance,  whether  the  bill  was  taken  upon  the  faith  of  the  promise 
or  not.  A  promise  to  any  person  interested  in  having  a  bill  paid  inures 
to  the  benefit  of  the  holder.  These  principles  were  settled  in  the  time 
of  Lord  Eilenborough,  and  a  reference  to  any  of  the  text-books  will 
furnish  the  names  of  a  great  number  of  cases  in  which  they  have  been 
dCted  upon  in  England  and  in  this  country.  They  are  too  well  settled 
to  be  discussed  at  the  present  day.  The  court  below  found  there  was 
no  fraud  in  obtaining  the  promise,  and  we  are  entirely  satisfied  with 
its  finding. 

The  appellants'  agreement  to  accept  the  bill  was  for  the  benefit  of 
its  holders ;  and  the  agreement  of  Green  and  Jones  that  the  net  pro- 
ceeds of  the  property  and  the  commissions  transferred  to  the  appel- 
lants should  amount  to  a  certain  sum  was  solely  for  their  benefit.  The 
nonperformance  of  the  latter  agreement  furnishes  no  excuse  for  not 
accepting  and  paying  the  bill.  The  agreements  were  not  intended  to  be 
dependent  on  each  other.  The  undertaking  on  the  part  of  the  appel- 
lants was  that  they  would  pay  the  bills  when  they  became  due.  They 
were  to  convert  the  property  transferred  to  them  into  money  at  the 
best  price  they  could  obtain  for  it,  and  ascertain  the  amount  of  the 
commissions ;  and  if  these  sums  did  not  amount  to  sufificient  to  pay 
the  bills  which  they  undertook  to  pay,  Green  and  Jones  undertook  to 
pay  them  the  difference.  Such  was  the  legal  effect  of  their  agreement. 
We  do  not  deem  it  necessary  to  make  a  critical  examination  of  the 
special  pleas  filed  by  the  appellants.  All  the  matters  set  up  in  them 
were  admissible  in  evidence  under  the  general  issue,  and  on  the  trial 
were  given  in  evidence  under  it.  The  appellants  have  had  all  the  bene- 
fit which  they  can  derive  from  the  facts ;  and  if  the  demurrer  to  some  of 


Ch.  2)  ACCEPTANCE.  199 

the  pleas  was  improperly  sustained,  we  should  not  reverse  the  judg- 
ment after  the  appellants  have  had  the  full  benefit  of  their  defense  un- 
der the  general  issue.     Atlantic  Ins.  Co.  v.  Wright,  28  111.  463. 

Perceiving  no  error  in  the  record,  the  judgment  of  the  court  below 
will  be  affirmed.^" 


JARVIS  V.  WILSON. 
(Supreme  Court  of  Errors  of  Connecticut,  1878.    46  Conn.  90,  33  Am.  Rep.  18.) 
See  ante,  p.  29,  for  a  report  of  the  case,     r^^^^-**-  ^  * 


LEWIN  V.  GREIG,  JONES  &  WOOD. 

(Supreme  Court  of  Georgia,  1902.     115  Ga.  127,  41  S.  E.  497.) 

Fish,  J,  Lewin  brought  his  action,  on  a  bill  of  exchange,  against 
Greig,  Jones  &  Wood  as  acceptors,  L.  F.  Wood  as  drawer,  and  James 
Dixon  as  indorser,  in  which  it  was  sought  to  hold  Greig,  Jones  & 
Wood  liable  on  a  parol  acceptance  of  the  bill.  With  reference  to  the 
parol  acceptance  the  allegations  of  the  petition  were  as   follows: 

"Par.  6.  Petitioner  further  shows  that  he  was  a  merchant  doing 
business  in  the  city  of  Savannah,  and  that  the  said  Dixon,  who  is  a 
colored  man,  and  a  total  stranger,  came  into  his  store  to  purchase  cer- 
tain goods,  and  exhibited  to  him  the  draft  in  question ;  that  then  James 
Dixon  selected  the  articles  he  desired  to  purchase,  and  before  deliver- 
ing to  him  the  articles  he  went  to  the  office  of  Greig,  Jones  &  Wood, 
in  the  city  of  Savannah,  to  inquire  as  to  whether  the  draft  was  good, 
and  whether  they  would  accept  the  draft,  and  was  then  and  there  told 
that  the  draft  was  'as  good  as  gold,'  and  they  would  and  did  accept 
it,  and  it  would  be  paid  in  a  few  days,  but  petitioner  shows  that  they 
have  failed  to  accept  formally,  and  refused  to  pay,  same. 

"Par.  7.  Petitioner  shows  that  he  relied  entirely  upon  the  state- 
ment of  said  Greig,  Jones  &  Wood,  *  *  *  and  it  was  only  up- 
on the  faith  of  their  assurance  of  the  payment  of  the  draft  that  the 
goods  were  furnished;  *  *  *  that  the  draft  was  accepted  as  to 
payment  of  petitioner  and  the  goods  finally  delivered." 

No  defense  was  made  by  Wood  or  Dixon.  Greig,  Jones  &  Wood 
moved  to  dismiss  the  petition  upon  the  ground  "that  said  draft  shows 
on  its  face  that  these  defendants  never  accepted  the  same  in  writing." 
This  motion  the  court  sustained,  and  dismissed  the  petition,  to  which 
ruling  the  plaintiff  excepted. 

10  Accord:    Scudder  v.  Bank.  91  U.  S.  406,  ^  L.  Ed.  245  (1875);    Davis  v. 

Rittenhouse,  72  111.  App.  58  (1897). 


->-»-4)~( 


200  FORM   AND   INCEPTION.  (Part   1 

« 

Under  Civ.  Code,  §  2G93,  par.  8,  to  make  an  acceptance  of  a  bill  of 
exchange  binding,  it  must  be  in  writing,  signed  by  the  party  to  be 
charged  therewith,  or  by  some  person  by  him  lawfully  authorized  so 
to  do.  Counsel  for  the  plaintiff  in  error  contend  that  the  allegations 
of  the  petition,  as  quoted  above,  take  the  present  case  out  of  this  rule 
and  bring  it  within  the  exception  thereto  contained  in  section  2694, 
par.  3,  which  provides  that  the  previous  section  does  not  apply  "where 
there  has  been  such  part  performance  of  a  contract  as  would  render 
it  a  fraud  of  the  party  refusing  to  comply,  if  the  court  did  not  com- 
pel a  performance."  The  case  of  Saulsbury,  Respess  &  Co.  v.  Blandy, 
53  Ga.  665,  and  60  Ga.  64:6,  is  cited  to  support  such  contention.  It 
V^s  in  that  case  held  (60  Ga.  6i6):  "Where  property  was  sold  and 
delivered  to  a  third  person  on  the  faith  of  the  promise  of  the  defend- 
ants to  accept  his  draft  on  them  for  the  purchase  money,  a  specific 
performance  of  the  contract  will  be  enforced."  In  that  case  the  com- 
plainants, the  Blandys,  were  induced  to  sell  an  engine  to  Wimberly 
on  credit,  and  to  deliver  the  same  to  him,  by  the  promise  of  the  de- 
fendants, Saulsbury,  Respess  &  Co.,  to  accept  Wimberly's  draft  for 
the  price  of  the  engine ;  and  when  complainants  had  performed  their 
part  of  the  contract  made  with  defendants,  by  parting  with  the  prop- 
erty, the  defendants  were  forced  to  specifically  comply  with  their  part 
of  such  contract.  In  the  case  now  in  hand,  the  plaintiff  sought  to  re- 
cover on  a  parol  acceptance,  and  while  the  petition  alleged  that,  be- 
fore he  sold  the  goods  to  Dixon,  plaintiff  made  inquiry  of  Greig,  Jones 
&  Wood  as  to  the  draft,  and  they  informed  him  it  was  good  and  there- 
upon accepted  it  in  parol ;  that  he  relied  entirely  upon  their  state- 
ment, and  it  was  only  upon  the  faith  of  their  assurance  that  the  draft 
would  be  paid  that  he  sold  the  goods  to  Dixon — yet  there  is  no  in- 
timation in  the  petition  that  Greig,  Jones  &  Wood  agreed  to  accept 
the  draft  if  the  plaintiff  would  sell  the  goods  to  Dixon.  Indeed,  it 
does  not  appear  that  they  even  knew  that  the  plaintiff  contemplated 
making  such  a  sale.  This  being  true,  how  can  the  sale  and  delivery 
of  the  goods  by  the  plaintiff  to  Dixon  be  such  part  performance  as 
would  render  it  a  fraud  on  the  part  of  Greig,  Jones  &  Wood  not  to 
comply  with  their  parol  acceptance?  They  were  not  parties  to  the 
contract  of  sale;  they  knew  nothing  about  such  contract  between  the 
plaintiff  and  Dixon ;  and  the  fact  that  the  plaintiff  complied  with  his 
part  of  the  contract  that  he  made  with  Dixon  surely  cannot  be  said  to 
be  such  part  performance  as  would  render  it  a  fraud  for  Greig,  Jones 
&  Wood  to  fail  to  comply  with  their  separate  and  distinct  contract  of 
parol  acceptance  of  the  bill  of  exchange.  Even  though  the  plaintiff, 
in  selling  the  goods  to  Dixon,  relied  entirely  upon  the  parol  accept- 
ance of  the  bill  by  Greig,  Jones  &  Wood,  he  was  bound,  under  the  law, 
to  know  that  such  an  acceptance  was  absolutely  void.  The  allegations 
of  the  petition  did  not  take  the  case  out  of  the  provisions  of  the  Code 
section  requiring  an  acceptance  of  a  bill  of  exchange  to  be  in  writing 


Ch.  2)  ACCEPTANCE.  201 

and  signed  by  the  party  to  be  charged  therewith,  or  by  some  person 
by  him  lawfully  authorized  so  to  do ;    consequently  there  was  no  er- 
ror in  dismissing  the  petition  upon  the  demurrer  made  thereto. 
Judgment  affirmed.^^ 


CHICAGO  HEIGHTS  LUMBER  CO.  v.  MILLER. 

(Supreme   Court   of   Illinois,    1905.     219   111.   79,    76   N.   E.   52,    109   Am.    St. 

Rep.  314.) 

In  this  cause  the  Appellate  Court  for  the  First  District  reversed  the 
judgment  of  the  circuit  court  of  Cook  county,  which  was  against 
Miller,  without  remanding  the  cause,  on  the  ground  that  neither  the 
declaration  nor  the  evidence  shows  a  cause  of  action  against  the  de- 
fendant. Miller  appealed,  and  the  following  accurate  statement  of 
the  facts  in  the  case  was  made  by  the  x\ppellate  Court: 

"This  is  an  appeal  from  a  judgment  of  the  circuit  court  of  Cook 
county  in  favor  of  appellee  (Chicago  Heights  Lumber  Company)  and 
against  appellant,  (David  Miller,)  impleaded  with  Isadore  Miller.  The 
declaration  avers  and  the  proof  shows  that  on  August  10,  1901,  Wil- 
Ham  Frink  drew  an  order  on  Miller  Bros,  for  $682.81  in  favor  of  ap- 
pellee, in  terms  as  follows : 

"  'Chicago  Heights,  111.,  August  10,  1901. 
"  'Mr.  Wra.  Frink — Miller  Job. 
"  'In  Account  with  Chicago  Heights  Lumber  Company  (Incorporated),  Dealer 

in  Lumber,  Lath,  Shingles,  Lime,  etc..  Corner  Sixteenth  Street  and  East 

End  Avenue. 

August  10.     To    mdse $711  47 

Less  material  returned 28  6G 


$G.S2  81 
"  'Chicago  Heights.  111.,  August  10.  1901. 
'"Miller  Bros.:   Please  pay  to  the  order  of  Chicago  Heights  Lumber  Co.  six 
hundred  eighty-two  81/100  dollars.  Yours  truly,  Wm.  Frink.' 

"Frink  delivered  the  order  to  appellee  and  appellee  presented  it  to 
appellant,  who,  on  behalf  of  Miller  Bros.,  gave  appellee  the  check  of 
Miller  Bros,  for  $400  thereon  and  promised  orally  to  pay  the  balance 
of  the  order  in  a  few  weeks,  retaining  the  order  in  his  possession. 
Miller  Bros.,  defendants,  pleaded  the  general  issue,  and  subsequent- 
ly, by  leave  of  court,  filed  two  additional  pleas  of  the  statute  of  frauds, 
averring  that  the  promises  mentioned  in  the  declaration  were  special 

11  Accord:  Pfaff  v.  Cummings,  67  Mich.  143,  34  N.  W.  281  (1887);  Wein- 
hauer  v.  :Morrison,  49  Hun,  498,  2  N.  Y.  Supp.  544  (1888) ;  Anderson  v.  Jones, 
102  Ala.  .537,  14  South.  871  (1893).  See,  also.  Izzo  v.  Ludington,  79  App.  Div. 
272,  79  N.  Y.  Supp.  744  (1903) ;  Baltimore  R.  R.  Co.  v.  Bank,  102  Va.  753,  47 
S.  E.  837  (1904)  ;  Wadhams  v.  Portland  Ry.  Co.,  37  Wash.  86,  79  Pac.  597 
(1905) ;  Van  Buskirk  v.  Bank.  35  Colo.  142,  S3  Pac.  778,  117  Am.  St.  Rep.  182 
(1905) ;  Seattle  Shoe  Co.  v.  Packard,  43  Wash.  527,  86  Pac  845,  117  Am.  St. 
Rep.  1064  (1906). 


202  FORM  AND  INCEPTION.  (Part  1 

promises  to  answer  for  the  debt  of  Frink,  and  that  no  memorandum 
or  note  thereof  in  writing,  signed  by  the  defendants,  or  either  of  them, 
was  made.     To  these  pleas  the  court  sustained  a  demurrer. 

"On  the  trial  the  defendants,  at  the  close  of  plaintiff's  case,  moved 
to  strike  out  the  plaintiff's  evidence,  on  the  ground  that  the  contract 
came  within  the  statute  of  frauds.    This  motion  was  denied." 

The  Appellate  Court  incorporated  in  its  judgment  the  following 
finding  of  facts :  "The  court  finds  that  the  acceptance  sued  on  in  this 
case  was  an  oral  acceptance  of  an  order,  and  that  there  was  no  fund 
in  the  hands  of  appellant,  the  acceptor,  out  of  which  to  pay  the  order." 

The  Chicago  Heights  Lumber  Company  obtained  a  certificate  of 
importance  from  the  Appellate  Court,  and  brings  the  record  to  this 
court  by  appeal. ^^ 

Scott,  J.  (after  stating  the  facts  as  above).  Miller  Bros,  held  no 
fund  belonging  to  Frink  and  were  not  indebted  to  him.  If  Frink,  un- 
der these  circumstances,  had  orally  requested  Miller  Bros,  to  pay  his 
debt  to  Chicago  Heights  Lumber  Company,  and  Miller  Bros,  had  ver- 
bally promised  the  company  to  do  so,  the  promise  would  have  been 
within  the  statute  of  frauds.  Does  the  fact  that  Frink's  request  to 
Miller  Bros,  to  pay  his  debt  was  in  writing,  and  that  the  written  re- 
quest was  left  with  appellee  when  he  paid  a  part  of  the  debt  and  ver- 
bally agreed  to  pay  the  remainder,  make  a  material  difference?  We 
think  not.  In  either  event  Miller  Bros,  could  recover  from  Frink  any 
amount  paid  in  pursuance  of  his  request.  The  only  difference  is  that 
in  one  instance  the  evidence  of  Frink's  request  lies  in  parol,  while  in 
the  other  it  is  in  writing.  In  either  case  the  promise  to  pay  Frink's 
debt  is  verbal,  and  the  statute  of  frauds  presents  a  complete  defense. 

The  only  case  to  which  our  attention  has  been  called,  where,  upon 
the  oral  acceptance  of  such  an  order,  the  writing  itself  was  left  with 
the  acceptor,  is  that  of  Louisville,  etc.,  Railway  Co.  v.  Caldwell,  98 
Ind.  245.  The  views  there  expressed  by  the  court  of  last  resort  of 
the  state  of  Indiana  are  consonant  with  the  conclusion  reached  above. 

If  the  written  request  of  Frink  be  regarded  as  a  bill  of  exchange, 
the  result  would  not  be  different,  as  the  verbal  acceptance  by  the  draw- 
ee of  a  bill  of  exchange,  who  holds  no  funds  of  the  drawer,  is  no  more 
than  a  parol  promise  to  answer  for  the  debt  of  another.  Browne  on 
Frauds,  174;  2  Rob.  Pr.  152;  Quin  v.  Han  ford,  1  Hill  (N.  Y.)  84; 
Pike  v.  Irwin,  1  Sandf.  (N.  Y.y  14;  Manley  v.  Geagan,  105  Mass. 
445;  Plummer  v.  Lyman,  49  Me.  229;  Wakefield  v.Greenhood,  29 
Cal.  600 ;  Walton  v.  Mandeville,  56  Iowa,  597,  9  N.  W.  913,  41  Am. 
Rep.  123. 

The  judgment  of  the  Appellate  Court  will  be  affirmed.^' 

12  The  statement  of  facts  is  abridged. 

18  Accord:   Baruett  v.  Lumber  CJo.,  43  W.  Va.  441,  27  S.  E.  299  (1897). 


Ch.  2)  ACCEPTANCE.  203 

SECTION  3.— CONSTRUCTIVE  ACCEPTANCE 


HARVEY  V.  MARTIN, 
(Nisi  Prius,  before  r^ord  Ellenborougli,  O.  J.,  1S07.     1  Oampb.  425,  note.) 

Action  on  bill  of  exchange,  by  payee  against  acceptor.  Plaintiff 
transmitted  the  bill  by  post  to  defendant,  the  drawee,  as  soon  as  he  re- 
ceived it,  desiring  him  to  accept  and  hand  it  over  to  plaintiff's  agent  in 
London,  which  was  the  usual  mode  of  dealing  between  the  parties. 
Plaintiff  hearing  nothing  of  his  bill  from  his  agent,  wrote  to  defend- 
ant, remonstrating  with  him  for  the  delay.  The  defendant  answered, 
that  he  had  retained  the  bill  because  he  had  once  meant  to  accept  it, 
which  he  now  declined  doing. 

Lord  E1.1.ENBOROUGH.  This  is  clearly  an  acceptance.  If  a  bill  is 
left  for  the  express  purpose  of  being  accepted  and  is  retained  by  the 
drawee,  such  retention  is  as  much  an  acceptance  as  if  he  had  written 
his  name  upon  the  face  of  it. 


JEUNE  V.  WARD. 

(Court  of  King's  Bench,  1818.     1  Barn.  &  Aid.  653.) 

Action  against  defendant  as  acceptor  of  a  bill  of  exchange  for  £150. 
drawn  by  J.  G.  upon  the  defendant,  in  favor  of  the  plaintiff,  Jeune. 
At  the  trial  at  the  London  sittings  after  Hilary  term,  before  Lord 
Ellenborough,  C.  J.,  it  appeared  that  the  defendant,  together  with  an- 
other person  of  the  name  of  Stubbin,  was  the  coexecutor  of  the  will  of 
a  Mrs.  Leake,  under  which  the  drawer  Godfrey  was  entitled  to  a 
legacy  of  £200.  on  his  coming  of  age.  In  consequence  of  this,  God- 
frey, on  the  28th  May,  1817,  drew  the  bill  on  defendant  in  favor  of  the 
plaintiff,  as  a  payment  of  his  bill  for  goods  sold  and  delivered.  The 
plaintiff,  who  lived  in  London,  went  over  on  the  29th  May  to  the  de- 
fendant's house  in  the  country  with  the  bill,  and  there  left  it  for  the 
purpose  of  being  accepted,  but  it  did  not  very  clearly  appear  what  then 
passed  between  the  plaintiff  and  the  defendant.  At  a  subsequent 
period,  however,  in  June,  the  plaintiff  called  on  Mr.  Egerton,  the  agent 
for  the  defendant  in  London,  and  introduced  himself  to  him  by  pro- 
ducing a  letter  from  the  defendant,  and  begged  his  assistance  towards 
enabling  him  to  obtain  payment  of  the  bill  from  the  drawer.  He  then 
stated  that  he  had  been  before  with  the  bill  to  the  defendant,  and  that 
the  defendant  had  refused  to  accept  it.  Mr.  Egerton  told  him  that  de- 
fendant had  done  very  right  in  refusing  to  accept  the  bill ;  that  Godfrey 
was,  on  the  5th  July  to  receive  his  legacy,  and  that  he  recommended 


204  FORM  AND   INCEPTION.  (Part  1 

plaintiff  then  to  attend  in  order  to  secure  the  payment  of  the  bill.  Ac- 
cordingly, on  the  5th  July  the  plaintiff  attended;  but,  owing  to  some 
dispute  as  to  the  stamp  for  the  receipt  of  the  legacy,  it  was  not  paid 
on  that  day,  Godfrey  then  refusing  to  receive  it.  It  was  afterwards 
paid  to  him.  The  plaintiff'  gave  also  in  evidence  a  letter  of  the  de- 
fendant, in  answer  to  an  application  for  the  bill,  which  stated  that 
having  been  applied  to  by  the  mother  of  the  drawer  to  give  up  the  bill 
to  them,  which,  during  all  this  period,  had  remained  in  his  hands,  he 
had,  to  avoid  further  trouble,  destroyed  it.  This  case  having  been 
proved,  Lord  Ellenborough,  C.  J.,  was  of  opinion  that  it  amounted  in 
law  to  an  acceptance  of  the  bill  by  the  defendant,  and  directed  the  jury 
to  find  a  verdict  for  the  plaintiff'.^* 

Lord  Ellenborough,  C.  J.  I  do  not  recollect  that  any  question  was 
made  at  the  trial  as  to  the  correctness  of  Gould's  evidence.  His  state- 
ment was,  that  the  bill  in  this  case  was  originally  left  with  the  de- 
fendant for  acceptance,  and  by  the  defendant's  own  letter  it  after- 
wards appeared  that  the  bill  had  been  destroyed  by  him.  I  certainly 
at  that  time  proceeded  on  the  ground  that  it  was  the  ordinary  and  rec- 
ognized custom  of  merchants,  that  when  a  bill  has  been  left  for  ac- 
ceptance, if  after  a  reasonable  time  has  expired  (and  here  a  reason- 
able time  had  expired)  the  party  omitted  to  return  the  bill,  he  must 
be  considered  as  having  retained  it  for  acceptance.  This  case  goes 
still  further;  for  here  the  defendant  by  his  own  act  puts  it  wholly 
out  of  his  power  ever  to  return  it,  and  thereby  deprived  the  holder 
(there  being  no  power  of  recreating  the  bill)  of  the  advantage  of  be- 
ing able  to  prove  the  handwriting  of  the  drawer.  In  such  a  case  I 
have  always  considered  it  as  a  matter  of  course  that  such  retention 
and  destruction  of  a  bill  of  exchange  was  tantamount  to  an  absolute 
refusal  to  deliver  it,  and  was  therefore,  in  point  of  law,  an  acceptance. 
But  it  is  contended  that  no  case  can  be  cited,  which  goes  so  far  as  this 
proposition.  The  principle  laid  down  by  Lord  Kenyon  in  Trimmer 
v.  Oddy,  seems  to  me  to  govern  this  case.  That  decision,  I  well  re- 
member, made  a  considerable  impression  on  my  mind.  In  the  ordi- 
nary course  of  business,  when  the  bill  is  left  with  the  acceptor,  he  is 
to  consider  whether  he  will  accept  it  or  return  it.  If  he,  without 
sayinq-  anything,  retains  it  in  his  hands,  the  law  then  presumes  that 
he  has  ('.  >ne  that  for  which  the  bill  was  left,  and  which  is  for  the 
benefit  of  the  party  leaving  the  bill,  viz.,  that  he  has  accepted  it.  Here, 
however,  it  is  said  that  Ward  absolutely  refused  to  accept,  and  it  is 
contended  that  that  circumstance  makes  the  difference.  But  the  period 
when  he  did  this  does  not  distinctly  appear.  It  might  be  after  a  rea- 
sonable time  had  elapsed.  Suppose  the  bill  delivered  to  him  on  the 
29th  May ;  the  meeting  of  Egerton  and  Jeune  was  not  till  the  end  of 
June,  and  the  bill  was  not  destroyed  till  the  9th  of  July.    Then  a  rea- 

1*  The  arguments  of  counsel  and  the  opinions  of  Abhott  and  Hohoyd,  JJ., 
who  concurred  with  Bayley,  J.,  are  omitted. 


Ch.  2)  ACCEPTANCE.  205 

sonable  time  mig-ht  have  elapsed  before  the  refusal  took  place,  and  a 
reasonable  time  did  at  all  events  elapse  before  the  destruction.  If  so, 
the  bill  was  in  point  of  law  then  accepted  by  Ward,  and  the  acceptance 
could  not  afterwards  be  retracted.  If  indeed  the  bill  had  not  orig- 
inally been  left  for  acceptance,  the  whole  case  would  certainly  fall  to 
the  ground.  But  I  think  it  clearly  appears  from  the  evidence  that 
it  was  so  left,  and  the  defendant  not  having  in  a  reasonable  time  noti- 
fied his  refusal  to  accept,  and  having  ultimately  destroyed  the  bill, 
must,  as  it  seems  to  me,  be  held  liable  for  it  as  the  acceptor.  I  think, 
therefore,  that  this  rule  must  be  discharged. 

BaylEy,  J.  I  am  not  prepared  to  say  that  the  defendant  can,  in 
the  present  case,  be  considered  as  the  acceptor  of  this  bill.  The  bill, 
as  it  appears  from  the  evidence,  was  drawn  on  the  28th  May,  by  God- 
frey, on  the  defendant,  and  was  payable  at  sight.  And  on  the  29th 
May  the  plaintifif,  having  gone  down  from  London  to  the  defendant's 
house  in  the  country  for  that  purpose,  made  an  application  to  him 
either  for  payment  or  acceptance  of  the  bill ;  but  it  is  not  clear  for 
which  of  these  two  the  apphcation  was  made.  No  payment  is  then 
made,  nor  is  there  any  reason  to  suppose  that  any  acceptance  was  then 
given.  For  some  reason,  however,  which  does  not  appear,  the  bill 
was  then  left  in  the  possession  of  the  defendant,  where  it  remained  till 
the  9th  July,  the  time  when  it  was  ultimately  destroyed. 

Where  a  bill  is,  in  the  usual  course  of  business,  left  for  acceptance, 
it  is  the  duty  of  the  party  who  leaves  it  to  call  again  for  it,  and  to 
inquire  whether  it  has  been  accepted  or  not.  It  is  not,  as  it  seems 
to  me,  the  duty  of  the  other  person  to  send  it  to  him,  unless,  as  in 
the  case  cited  of  Harvey  v.  Martin,  there  is  a  usual  course  of  deal- 
ing between  the  particular  individuals  concerned  so  to  do.  Here  the 
party  who  left  the  bill  does  not  appear  ever  to  have  called  or  sent 
for  it ;  and  that  materially  affects  the  present  case.  I  forbear  to  say,  at 
present,  what  would  be  my  judgment  on  the  effect  of  a  destruction  of 
the  instrument  by  the  party  with  whom  it  was  left  for  acceptance, 
within  the  reasonable  time  during  which  the  other  party  might  expect 
an  acceptance  of  the  bill.  If  a  party  says  he  has  destroyed  the  bill, 
and  that  he  will  not  accept  it,  such  destruction  might  probably  subject 
him  to  an  action  of  trover  for  the  bill ;  but  I  cannot  think  that  it  would 
amount  to  an  acceptance  of  it.  For  what  is  an  acceptance?  It  is  an 
engagement  of  the  one  party  acceding  to  the  proposition  of  the  other ; 
and  it  would  be  very  strange  indeed  if  a  refusal  on  his  part  could  in  law 
be  deemed  an  acceding  to  the  proposition.  But  I  give  no  judgment  on 
this  point ;  for  the  facts  here  do  not  warrant  the  conclusion  that  the  bill 
was  destroyed  by  the  defendant  during  the  period  when  the  plaintiff 
could  consider  it  as  remaining  for  acceptance.  It  appears  that  at  the 
end  of  June  the  plaintiff  called  on  Egerton,  and  introduced  himself  to 
him  by  producing  a  letter  from  the  defendant.  All  the  circumstances 
which  then  came  out  show  plainly  that  this  whole  transaction  was  an 
isolated  one  between  the  parties,  and  that  there  was  no  course  of  deal- 


206  FORM   AND   INCEPTION.  (Part   1 

ing  between  them ;  for  the  drawer,  Godfrey,  was  entitled  to  a  legacy, 
and  on  that  ground  alone  it  was  that  he  drew  on  Ward,  the  executor. 
The  plaintiff  then  tells  Egerton  that  the  defendant  had  refused  to  ac- 
cept the  bill.  He  does  not  complain  that  the  bill  had  been  kept  by  him 
for  an  unreasonable  time,  but  applies  to  Egerton  for  his  assistance  in 
obtaining  the  money.  Egerton  tells  the  plaintiff  that  Ward  has  done 
right  in  so  refusing,  and  informs  him  that  on  the  5th  July  Godfrey  will 
receive  his  legacy.  On  that  day  all  the  parties  attend,  but  the  money 
due  on  the  bill  does  not  appear  to  have  been  paid.  Then  after  all  this, 
on  the  9th  July,  the  defendant  writes  to  the  plaintiff  that  he  has  de- 
stroyed the  bill.  Now,  if  that  were  a  wrongful  destruction  by  him, 
trover  would  lie  against  him,  and  he  would  in  that  form  of  action  be 
subject  to  pay,  not  the  whole  bill  as  the  acceptor  of  it,  but  only  such 
damages  as  the  party  really  sustained  by  this  destruction.  For  if  the 
drawer  were  a  solvent  person  he  would  still  be  liable,  and  might  pay 
the  bill,  either  in  the  whole  or  in  part.  If,  on  the  other  hand,  the  de- 
struction was  excusable  from  the  circumstances  of  the  case,  as  if  it 
appeared  that  the  plaintiff  had  treated  the  bill  as  of  no  importance,  and 
had  shown  his  intention  of  relying,  not  on  the  bill,  but  on  the  original 
consideration,  then  that  would  perhaps  afford  to  the  defendant  an  an- 
swer even  to  the  action  of  trover.  But  at  all  events,  either  in  the  one 
case  or  the  other,  the  destruction  cannot,  as  it  seems  to  me,  amount  to 
an  acceptance  of  the  bill  by  the  defendant.  I  think,  therefore,  that  this 
rule  should  be  made  absolute. 
Rule  absolute. 


DUNAVAN  V.  FLYNN. 
(Supreme  Judicial  Court  of  Massachusetts,  Worcester,  1ST5.     118  Mass.  537.) 

Contract  to  recover  $9  on  an  account  annexed  for  work  and  labor. 
The  answer  of  the  defendant  contained  a  general  denial  and  alleged 
payment.  Trial  in  the  Central  district  court  of  Worcester,  the  judge 
of  which  allowed  a  bill  of  exceptions  in  substance  as  follows : 

At  the  trial,  the  defendant  offered  the  following  order,  signed  by 
the  plaintiff,  drawn  on  the  defendant,  and  payable  to  bearer,  and  dated 
Worcester,  June  27 :  "Please  to  pay  the  bearer  9  dollars  due  to  me 
for  work  (this  woman  is  my  boarding  boss),  and  oblige,  yours,"  etc. 
Below  were  written  the  words,  "Acted  June  30th,  1874,"  over  the  de- 
fendant's signature.  It  appeared  in  evidence,  and  was  not  contra- 
dicted, that  the  bearer  of  the  order  was  Mrs.  Cronan;  that  the  order 
was  delivered  to  her  by  the  plaintiff ;  that  upon  the  receipt  of  the  or- 
der Mrs.  Cronan  presented  it  to  the  defendant,  and  left  the  order  in 
the  defendant's  possession ;  that  the  defendant  said  that  he  could  not 
pay  it  then,  but  that  if  she  could  give  him  three  or  four  days  he  would 
pay  it;  that  she  gave  the  defendant  the  three  or  four  days,  and  the 
order  was  left  in  the  defendant's  possession,  and  there  remains,  and 


Ch.  2)  ACCEPTANCE.  207 

she  never  called  upon  the  defendant  for  payment  afterwards.  The 
defendant  testified  substantially  the  same,  and,  upon  cross-examina- 
tion, testified  that  after  the  departure  of  Mrs.  Cronan  he  wrote  the 
words:  "Acted  June  30th,  1874.  J.  W.  Flynn"— upon  the  face  of 
he  order;  that  he  wrote  that  to  make  him  pay  it  to  Mrs.  Cronan;  that 
he  intended  the  words  written  on  the  face  of  the  order  for  an  accept- 
ance in  writing.  On  cross-examination,  the  defendant,  in  answer  to 
the  plaintiff's  counsel,  said  that  he  did  not  think  his  liability  to  pay 
the  order  commenced  until  after  he  had  written  his  name  on  the  order. 

The  judge,  against  the  objection  of  the  defendant,  instructed  the 
jury:  "If  the  defendant  did  not  verbally,  or  in  writing,  accept  the 
order  when  presented,  but,  the  order  being  left  with  him,  he  after- 
wards wrote  the  acceptance  upon  it,  but  did  not  after  such  acceptance 
inform  either  the  drawer  or  Mrs.  Cronan  of  the  fact,  but  retained 
the  order  in  his  custody,  this  would  not  operate  as  payment  of  the 
plaintiff's  claim  against  him." 

The  jury  returned  a  verdict  for  the  plaintiff;  and  the  defendant 
alleged  exceptions. 

Gray,  C.  J.  An  acceptance  of  a  bill  of  exchange,  or  draft  for  the 
payment  of  money,  may  be  oral,  or  may  be  implied  from  acts  such  as 
detention  for  a  long  time,  contrary  to  the  usage  of  the  parties  and 
under  such  circumstances  as  to  give  credit  to  the  bill.  Storer  v.  Lo- 
gan, 9  Mass.  55,  60;  Pierce  v.  Kittredge,  115  Mass.  374;  Hough  v. 
Loring,  24  Pick.  254,  257,  3  Kent,  Com.  (12th  Ed.)  85. 

But  in  the  case  before  us  the  jury  have  found  that  there  was  no  oral 
acceptance,  and  were  warranted  in  so  doing;  for  although  the  tes- 
timony of  the  defendant  and  of  the  holder  of  the  bill,  tending  to  prove 
such  acceptance,  is  stated  in  the  bill  of  exceptions  not  to  have  been 
contradicted,  the  jury  were  not  obliged  to  believe  it.  Allowing  the 
utmost  weight  to  all  the  evidence,  there  was  nothing  to  show  that 
the  detention  of  the  bill  by  the  defendant  was  contrary  to  the  usual 
course  of  dealing  between  the  parties  (for  it  did  not  appear  that  they 
had  had  any  other  dealings),  or  that  the  defendant  was  under  any  ob- 
ligation to  return  the  bill  to  the  holder,  or  detained  it  for  any  other 
reason  except  that  she  did  not  call  for  it.  Under  these  circumstances, 
it  was  rightly  held  that  the  mere  writing  of  the  acceptance  upon  the 
bill,  not  communicated  to  the  drawer  or  holder,  and  the  detention  of 
the  bill  in  the  defendant's  custody,  did  not  bind  him,  or  operate  as  a 
payment  of  his  debt  to  the  drawer. 

Exceptions  overruled.^"* 

15  Accord:  Cox  v.  Troy,  5  Barn.  &  Aid.  474  (1822),  when  his  acceptance 
was  erased  by  drawee  before  delivery  to  the  holder;  Freuud  v.  Bunk.  3 
Hun  (N.  Y.)  689  (1875).    But  see  Wilde  v.  Sheridan,  21  L.  J.  Q.  B.  260  (1852). 

In  the  principal  case,  the  statement  of  facts  is  abridged. 


208  FORM  AND  INCEPTION.  (Part  1 

DICKINSON  V.  MARSH. 
(Kansas  City  Court  of  Appeals,  Missouri,  1894.    57  Mo.  App.  566.) 

Gill,  J.  This  action  is  founded  on  the  following  bill  of  exchange 
alleged  to  have  been  accepted  by  the  defendant: 

"November  26th,  1892. 

"Mr.  Ed.  Marsh :  Please  pay  to  J.  E.  Dickinson  eighty  dollars  and 
thirty  cents.  Fred  Nichols." 

Plaintiff  offered  certain  evidence  tending  to  prove  that  Nichols,  the 
drawer,  owed  the  plaintiff,  and  that  defendant.  Marsh,  prior  to  the 
date  of  the  order,  informed  plaintiff  that  if  he  (plaintiff)  would  pro- 
cure an  order  from  said  Nichols  on  him  (Marsh)  for  said  sum,  he 
(Marsh)  would  pay  the  same.  This  proffered  evidence  was,  on  ob- 
jection of  the  defendant,  excluded  as  immaterial.  Plaintiff  also  of- 
fered testimony  tending  to  prove  that,  on  the  day  he  received  said  or- 
der from  Nichols,  he  took  the  same  to  the  defendant,  who  received 
said  order,  remarking  that,  "It  is  all  right,"  and  kept  and  retained  same 
until  date  of  trial ;  that  defendant,  at  the  time  he  received  the  order, 
promised  orally  to  pay  it.  To  the  introduction  of  this  evidence  de- 
fendant's counsel  objected  on  the  ground  that,  since  this  is  a  suit  on 
an  alleged  accepted  order  or  bill  of  exchange,  proof  of  such  accept- 
ance must  be  in  writing  and  could  not  be  otherwise  established.  The 
court  sustained  the  objection.  Thereupon  plaintiff  took  a  nonsuit  with 
leave,  and  brought  the  case  here  by  appeal. 

The  action  of  the  trial  court  is  approved,  and  its  judgment  will  be 
affirmed.  The  statute  provides :  "No  person  within  this  state  shall 
be  charged  as  an  acceptor  of  a  bill  of  exchange,  unless  his  acceptance 
shall  be  in  writing,  signed  by  himself  or  his  lawful  agent."  Rev.  St. 
1889.  §  719.  There  is  no  pretense  that  the  defendant  ever  so  accept- 
ed this  bill  of  exchange.     He  cannot,  therefore,  be  held  thereon. 

It  is,  however,  claimed  that  there  was  a  constructive  acceptance  un- 
der the  provisions  of  a  section  724  of  the  same  statute.  It  reads: 
"Every  person  upon  whom  a  bill  of  exchange  may  be  drawn,  and  to 
whom  the  same  shall  be  delivered  for  acceptance,  who  shall  destroy 
such  bill,  or  refuse  within  twenty-four  hours  after  such  delivery,  or 
within  such  period  as  the  holder  may  allow,  to  return  the  bill,  accept- 
ed or  nonaccepted,  to  the  holder,  shall  be  deemed  to  have  accepted 
the  same."  The  facts  sought  to  be  proved,  and  as  giving  color  to  this 
position,  are  that  plaintiff  delivered  the  written  order  or  bill  of  ex- 
change to  the  defendant  on  its  date  and  that  with  the  consent  of  plain- 
tiff, and  under  a  promise  by  defendant  to  pay,  he  (defendant)  contin- 
ued to  hold  the  same  till  the  trial  of  the  cause.  These  facts,  it  is 
urged,  amount  to  a  refusal  to  return  the  bill  after  delivery,  and  such 
as  will  be  deemed  an  acceptance  under  the  foregoing  section. 

We  must  hold  this  point  against  the  plaintiff.  The  mere  receipt  of 
the  bill  of  exchange  and  holding  the  same,  without  more,  does  not, 


Ch.  2)  ACCEPTANCE.  209" 

in  our  opinion,  constitute  the  refusal  to  return  that  will  be  deemed 
a  constructive  acceptance  by  force  of  the  statute  above  referred  to. 
Rousch  V.  Duff,  35  Mo.  512;  Matteson  v.  Moulton,  11  Hun  (N.  Y.) 
2G8,  and  79  N.  Y.  627.  In  the  case  last  cited  the  New  York  court 
so  construed  a  statute  of  which  ours  is  an  exact  copy.  The  court  there 
said:  "The  refusal  mentioned  in  the  statute,  as  it  seems  to  us,  re- 
fers to  something  of  a  tortious  character  implying  an  unauthorized 
conversion  of  the  bill  by  the  drawee."  It  cannot  be  called  a  tortious 
or  wrongful  holding  of  the  bill  when,  as  here,  the  plaintiflf  volunta- 
rily left  it  with  the  drawee  and  never  demanded  its  return.  Lockhart 
V.  Moss,  53  Mo.  App.  633,  does  not  support  plaintiff's  contention. 
Indeed,  that  decision  is  in  harmony  with  the  cases  before  cited,  since 
it  was  there  admitted  that  return  of  the  bill  was  demanded. 

We  may  further  say,  too,  in  answer  to  the  claim  made  on  account 
of  the  defendant's  alleged  promise  to  pay  the  order,  using  the  lan- 
guage of  the  New  York  case,  that  "the  attempt  to  charge  the  defend- 
ant with  the  payment  of  the  bill  upon  the  ground  of  a  promise  is 
simply  an  attempt  to  charge  the  defendant  with  a  liability  on  the  bill 
upon  a  parol  acceptance.  If  an  action  can  be  maintained  under  such 
circumstances,  the  provisions  of  section  719  of  the  statute  before  re- 
ferred to  would  be  rendered  wholly  nugatory."  See,  also,  Rousch  v.. 
Duff,  supra. 

Judgment  affirmed.    All  concur." 


WESTBERG  v.  CHICAGO  LUMBER  &  COAL  CO. 

(Supreme  Court  of  Wisconsin,  1903.     117  Wis.  589,  94  N.  W.  572.) 

Action  upon  a  [non]  negotiable  bill  of  exchange  drawn  upon  the 
defendant  in  favor  of  the  plaintiff  by  the  Lien-Neally  Lumber  Com- 
pany for  $585,  alleged  to  have  been  accepted  by  the  defendant.  The 
answer  was  a  general  denial.  The  evidence  disclosed  that  the  Lien- 
Neally  Lumber  Company,  sawmill  owners,  had  purchased  from  the 
plaintiff  certain  logs  or  stumpage  amounting  to  $585 ;  that  they  had 
sold  product  of  their  mill,  including  that  of  these  logs,  to  the  defend- 
ant, and  were  in  the  habit  of  making  orders  and  drafts  upon  the  latter 
for  money  to  pay  their  various  bills.  About  April  21st,  upon  plaintiff's 
application  for  payment,  they  made  out  an  order  upon  the  defendant 
substantially  as  follows :  "To  Chicago  Lumber  &  Coal  Co. :  Please 
pay  to  John  Westbergfive  hundred  eighty-five  (585)  dollars  for  logs  de- 
livered at  Bibon  as  per  contract.     [Signed]     Lien-Neally  Lumber  Co." 

16  Accord:  Matteson  v.  Moulton,  11  Hun.  268  (1877),  affirmerl  79  N.  Y.  627 
(1880) ;  St.  Louis  &  S.  W.  Rv.  v.  .James,  78  Arlv.  490.  95  S.  W.  804  (190G).  Con- 
tra: State  Bank  v.  Weiss,  40  Misc.  Ren.  93,  91  N.  Y.  Snr)]>.  270  (1904);  Wis- 
ner  v.  Bank,  220  Pa.  21.  68  Atl.  955,  17  L.  R.  A.  (N.  S.)  120G  (1908). 

In  the  principal  case,  arguments  of  counsel  are  omitted. 
Sm.&  M.B.&  N.— 14 


210  FOUM  AND  INCEPTION.  (Part  1 

They  had  plaintiff  write  his  name  on  the  back  of  it,  and  then  Mr. 
lyien  mailed  that  order,  in  connection  with  other  orders  and  time- 
checks  aggregating  some  $2,000,  to  the  defendant,  accompanied  by  a 
letter  the  contents  of  which  are  not  disclosed.  The  defendant's  rep- 
resentative denied  any  memory  of  the  order  or  draft  in  favor  of  the 
plaintirt.  It  was  proved,  however,  that  he  sent  to  the  Lien-Neally 
Company  the  money  for  the  other  orders  inclosed  in  the  same  letter. 
Plaintiff  never  heard  from  the  defendant,  but  made  repeated  applica- 
tions to  the  Lien-Neally  Company  for  payment,  and  was  put  oft'  from 
time  to  time  by  promises,  until  finally  they  refused  to  pay,  saying  he 
must  look  to  the  defendant.  At  that  time  the  defendant  had  paid 
drafts  of  that  company  to  more  than  the  amount  of  the  indebtedness 
to  it,  and  refused  to  pay  this.  The  plaintiff's  draft  never  was  returned 
to  him. 

On  the  trial,  a  special  verdict  being  requested,  the  court  submitted 
but  one  question,  namely,  whether  the  defendant  received  this  draft  on 
or  before  April  23d,  which  was  answered  in  the  affirmative,  and  there- 
upon the  court  found  that  the  plaintiff  delivered  that  order  for  accept- 
ance on  or  before  April  23d  ;  that  it  was  received  by  the  defendant,  and 
was  by  it  destroyed,  and  that  the  defendant  is  indebted  to  the  plaintiff" 
in  the  amount  thereof,  with  interest;  the  last  conclusion  being  predi- 
cated upon  the  theory  that  the  retention  and  destruction  of  the  order 
constituted  an  acceptance.  From  judgment  in  accordance  with  that 
finding  the  defendant  appeals. 

Dodge,  J.  (after  stating  the  facts  as  above).  Rendition  of  judgment 
in  favor  of  plaintiff  in  this  case  can  be  justified  only  on  one  of  two 
theories — either  that  in  law  an  implication  of  acceptance  results  from 
the  mere  physical  receipt  of  a  bill  of  exchange  by  the  drawee,  followed 
by  silence,  or  that  all  other  facts  essential  to  such  implication  were  un- 
disputed, or  were  supported  by  inference  from  undisputed  facts  so 
clear  and  unavoidable  that  no  reasonable  mind  could  draw  any  other. 
Appellant  had  the  right  to  have  each  controverted  question  of  fact 
decided  by  the  jury. 

Upon  the  question  of  law  as  to  when  implied  or  constructive  accept- 
ance takes  place,  the  authorities  are  reasonably  clear  and  approximately 
unanimous.  Upon  delivery  for  acceptance,  the  drawee  is  not  bound 
to  act  at  once.  He  has  a  right  to  a  reasonable  time — usually  24  hours 
— to  ascertain  the  state  of  accounts  between  himself  and  the  drawer, 
and  until  expiration  of  that  time  the  holder  has  no  right  to  demand  an 
answer,  nor,  without  categorical  answer,  to  deem  the  bill  either  accepted 
or  dishonored  ;  not  accepted,  because  of  the  right  of  drawee  to  consider 
before  he  binds  himself;  not  dishonored,  because  both  draw^er  and 
drawee  have  the  right  that  their  paper  be  not  discredited  during  such 
period  of  investigation.  After  the  expiration  of  that  reasonable  time 
the  holder  has  a  right  to  know  whether  the  drawee  assumes  liability 
to  him  by  accepting,  and.  if  not,  he  has  a  right  to  return  of  the  docu- 
ment, so  that  he  may  protest  or  otherwise   proceed  to  preserve  his 


Ch.  2)  ACCEPTANCE.  211 

rights  against  the  drawer.  The  consensus  of  authority  is,  however, 
that  the  duty  rests  on  the  holder  to  demand  either  acceptance  or  re- 
turn of  the  bill,  and  that  mere  inaction  on  the  part  of  the  drawee  has 
no  effect.  After  the  expiration  of  this  time  for  investigation,  the 
drawee  may,  by  retention  of  the  bill,  accompanied  by  other  circum- 
stances, become  bound  as  an  acceptor;  not,  however,  by  mere  reten- 
tion. 

There  seem  to  be  two  phases  of  conduct  recognized  by  the  authori- 
ties as  charging  the  drawee — one  purely  contractual,  as  where  the  re- 
tention is  accompanied  by  such  custom,  promise,  or  notification  as  ta 
warrant  the  holder,  to  the  knowledge  of  the  drawee,  in  understanding 
that  the  retention  declares  acceptance ;  the  other,  where  the  conduct 
of  the  drawee  is  substantially  tortious,  and  amounts  to  a  conversion  of 
the  bill.  This  is  the  phase  of  conduct  which  our  negotiable  instrument 
statute  (section  1680k,  c.  356,  p.  735,  Laws  of  1899)  has  undertaken 
to  define  and  limit  as  refusal  (not  mere  neglect)  to  return  the  bill,  or 
destruction  of  it;  reiterating  the  common-law  rule  that  mere  retention 
of  the  bill  is  not  acceptance.  Overman  v.  Hoboken  Bank,  31  N.  J. 
Law,  563 ;  McEowen  &  Co.  v.  Scott,  49  Vt.  376 ;  Colo.  Nat.  Bank  v. 
Boettcher,  5  Colo.  185,  40  Am.  Rep.  142;  Dickinson  v.  Marsh,  57 
Mo.  App.  566  ;  Dunavan  v.  Flynn,  118  Mass.  537 ;  Holbrook  v.  Payne^ 
151  Mass.  383,  24  N.  E.  210,  21  Am.  St.  Rep.  456;  Gates  v.  Eno,  4 
Hun  (N.  Y.)  96;  Matteson  v.  Moulton,  11  Hun  (N.  Y.)  268,  affirmed 
79  N.  Y.  627 ;  Hall  v.  Steel,  68  111.  231 ;  First  Nat.  Bank  v.  McMi- 
chael,  106  Pa.  460,  51  Am.  Rep.  529 ;  Koch  v.  Howell,  6  Watts  &  S. 
(Pa.)  350;  Short  v.  Blount,  99  N.  C.  49,  5  S.  E.  190;  Boyce  v.  Ed- 
wards, 4  Pet.  Ill,  7  E.  Ed.  799 ;  Bank  of  the  Republic  v.  Millard,  10 
Wall.  152,  19  L.  Ed.  897;   1  Daniel,  Neg.  Inst.  §§  499,  500. 

The  doctrine  of  constructive  acceptance  is  based  on  the  general  prin- 
ciples of  estoppel.  If  the  conduct  of  the  drawee  will  prejudice  the  ex- 
isting rights  of  the  holder,  unless  it  means  acceptance,  and  the  drawee 
has  knowledge  of  such  fact,  he  is  estopped  to  deny  the  only  purpose 
which  could  render  his  conduct  innocuous ;  namely,  acceptance  of  the 
bill.  This  underlying  principle  suggests  the  reasons  for  many  of  the 
limitations  upon  the  implication  of  acceptance  from  conduct ;  as,  for 
example,  that  such  implication  arises  only  when  the  bill  is  presented 
for  acceptance,  and  that  no  one  but  the  holder  (payee  or  indorsee)  can 
make  such  technical  presentment.  2  Randolph,  Com.  Paper,  §§  568, 
572;  1  Daniel,  Neg.  Inst.  §§  455,  1681,  1682;  Neg.  Inst.  Law  Wis. 
1899,  p.  738,  c.  356.  Only  when  the  drawee  knows  that  acceptance  is 
expected  would  he  suppose  that  his  conduct  can  lead  to  a  belief  that 
he  does  accept.  Only  when  the  presentment  is  by  the  holder,  whose 
conduct  and  rights  must  be  affected  by  acceptance  or  refusal,  is  the 
drawee  charged  by  the  strict  rules  of  the  law  merchant  with  notice 
that  his  conduct  may  so  injuriously  affect  the  person  delivering  the 
bill  to  him. 


212  FORM   AND    INCEPTION.  (Part  1 

In  the  light  of  these  rules  of  law  it  is  at  once  apparent  that  the  ver- 
dict alone  does  not  present  sufficient  facts  to  charge  defendant  with 
constructive  acceptance.  Not  only  must  he  have  received  the  bill,  as 
the  jury  found,  but  he  must  knowingly  have  received  it  from  the  pay- 
ee or  his  authorized  agent,  and  for  acceptance;  and  even  then  there 
must  have  been  something  more  than  mere  retention — either  destruc- 
tion or  refusal  to  return  to  the  holder,  if  within  the  negotiable  instru- 
ment statute,  or  some  circumstances,  contractual  or  tortious,  to  arouse 
estoppel,  if,  by  reason  of  nonnegotiability,  this  instrument  is  governed 
only  by  the  common  law.  We  must,  therefore,  turn  to  the  evidence  to 
ascertain  whether  all  these  necessary  additional  facts  were  established 
beyond  controversy.  True,  the  court  filed  so-called  findings  of  fact 
declaring  some  of  them  to  exist,  but,  as  appellant  claimed  that  the  fact 
of  acceptance  should  be  submitted  to  the  jury,  it  did  not  consent  that 
the  court  might  assume  to  decide  either  the  facts  or  the  inferences 
therefrom,  unless  free  from  controversy. 

The  only  evidence  of  the  manner  and  purpose  of  the  sending  of  this 
draft  is  that  the  drawer  sent  it  in  the  same  inclosure  with  numerous 
other  documents  similar  in  form,  with  which  plaintiff  had  no  connec- 
tion. The  contents  of  the  accompanying  letter  are  not  disclosed,  but 
it  is  reasonably  clear  that  the  other  orders  were  not  sent  for  acceptance 
on  behalf  of  the  payees  therein,  but  merely  as  vouchers  between  the 
drawer  and  drawee ;  for,  evidently,  as  exnected,  the  latter  sent  money 
in  response  thereto  direct  to  the  drawer.  The  plaintiff's  order  or  draft, 
having  no  time  of  payment  expressed,  was  payable  on  demand,  and 
did  not  need  to  be  presented  for  acceptance,  and  therefore  did  not  of 
itself  suggest  any  demand  for  such  action.  1  Randolph,  Com.  Paper, 
§  119 ;  1  Daniel,'Neg.  Inst.  §  454.  The  witness  Lien  testified,  "I  mail- 
ed it  in  behalf  of  the  Lien-Neally  Lumber  Co."  Plamtiff  said:  "I 
didn't  mail  it  myself.  Lien  said  he  would  mail  it.  I  left  it  to  him." 
And  again :  "I  was  expecting  money  on  this  draft.  Mr.  Lien  said  he 
would  send  the  money  down  to  me." 

This  is  the  substance  of  all  the  evidence  as  to  the  circumstances  un- 
der which  this  paper  came  to  the  hands  of  the  defendant.  We  need 
not  say  more  than  that,  instead  of  conclusively  establishing,  as  the 
court  found,  that  "the  plaintiff  delivered  the  said  order  for  acceptance 
to  the  defendant,"  it  quite  as  much  tends  to  show  the  contrary,  name- 
ly, that  the  drawer,  with  consent  of  plaintiff,  sent  it  as  a  voucher  for 
money  expected  to  be  remitted  to  that  corporation,  and  by  it  paid  over 
to  plaintiff.  There  is  no  particle  of  evidence  to  establish  existence  of 
any  communication  or  circumstance  which  could  suggest  to  defendant 
that  plaintiff  sent  it  or  authorized  its  sending,  that  any  acceptance  was 
demanded  or  expected,  or  that  plaintiff's  relations  with  the  drawer 
would  be  affected  by  silence. 

If,  however,  both  of  these  questions  could  be  answered  in  the  af- 
firmative, there  would  still  remain  the  question  of  fact  whether  defend- 


Ch.  2)  ACCEPTANCE.  213 

ant's  conduct  was  such  as  to  warrant  inference  or  implication  of  ac- 
ceptaRce.  There  is  no  direct  evidence  of  anything  except  long-con- 
tinued retention  of  the  draft,  and  no  evidence  that  any  demand  was 
ever  made,  either  for  decision  as  to  acceptance  or  for  return.  The 
court  sought  to  meet  this  question  by  its  finding  that  defendant  destroy- 
ed the  draft.  Of  this  there  is  no  direct  proof,  the  sole  evidence  on 
the  subject  being  that  of  defendant's  agent  that  he  had  no  recollection 
about  it,  and  did  not  know  whether  or  not  it  was  among  papers  in  de- 
fendant's Chicago  office.  Whether  this  might  have  warranted  the 
jury  in  so  doing,  it  certainly  was  not  so  wholly  inconsistent  with  any 
other  as  to  require  the  court  to  raise  the  inference  of  destruction  as 
matter  of  law. 

Hence  we  must  conclude  that  there  were  at  least  three  questions 
of  fact  on  which  the  jury  were  not 'permitted  to  decide,  as  to  which 
the  evidence  and  inferences  were  not  beyond  controversy,  at  least  in 
favor  of  plaintifif.  Whether  there  was  any  evidence  to  support  such 
a  decision  we  need  not  decide,  for  there  was  no  motion,  after  verdict, 
for  judgment  in  defendant's  favor.  A  new  trial  must,  therefore,  be 
directed. 

As  a  guide  to  the  court  and  parties  upon  such  new  trial  it  seems  im- 
portant that  we  declare  whether  the  instrument  in  suit  is  within  the 
purview  and  control  of  our  negotiable  instrument  law,  above  cited. 
Whether  such  paper  continues  to  be  a  bill  of  exchange  in  pursuance 
of  our  earlier  decisions  (Mehlberg  v.  Tisher,  24  Wis.  607 ;  Schierl  v. 
Baumel,  75  Wis.  69,  43  N.  W.  724),  it  certainly  is  not  a  negotiable  bill 
within  the  definition  of  section  1680,  Rev.  St.  1898,  as  amended  by 
chapter  356,  p.  733,  of  the  Laws  of  1899,  which  requires  that  such  an 
instrument  shall  be  payable  to  order  or  bearer.  It  seems  clear  from 
the  title  that  the  codifying  law  of  1899  is  intended  to  regulate  only 
negotiable  instruments.  Selover,  Neg.  Inst.  Laws,  §  2.  It  therefore 
does  not  affect  or  control  the  rights  of  the  parties  upon  this  paper. 

Judgmerit  reversed,  and  cause  remanded  for  a  new  trial. 


214  FORM   AND   INCEPTION,  (Part    1 

CHAPTER  III 
DELIVERY 


FEARING  V.  CLARK. 

(Supreme  Judicial  Court  of  Massachusetts.  Hampden,  ISGO.     16  Gray,  74,  77 

Am.  Dec.  394.) 

Action  of  contract  on  a  promissory  note  for  $600,  made  by  the  de- 
fendant, dated  July  4,  1S5T,  and  payable  in  one  year  after  date  to  the 
order  of  one  Joseph  Lambrite,  and  by  him  indorsed.  The  defendant 
in  his  answer  denied  the  making  and  indorsement  of  the  note  declared 
on,  but  admitted  that  he  signed  such  a  note,  and  averred  that  he  put 
it  into  the  hands  of  third  parties  to  be  delivered  to  Lambrite,  on  the 
liappening  of  contingencies  which  never  did  happen,  and  that  neither 
the  defendant  nor  those  parties,  nor  any  one  else,  by  his  authority  or 
consent,  ever  delivered  the  writing  to  Lambrite  or  to  any  other  person 
as  the  defendant's  promissory  note. 

At  the  trial  in  the  superior  court,  the  plaintiff  proved  the  signatures 
of  the  maker  and  indorser;  and  there  was  evidence  that,  on  the  6th 
of  July,  1857,  the  note  was  in  Lambert's  possession,  and  was  indorsed 
and  delivered  by  him  to  the  plaintiff  as  collateral  security  for  the  pay- 
ment in  six  months  of  $2,000,  of  which  $900  was  still  due  from  Lam- 
brite to  the  plaintiff  at  the  time  of  the  trial,  and  that  the  plaintiff'  took 
the  note  without  any  knowledge  of  the  circumstances  under  which  it 
had  been  given. 

Rockwell,  J.,  allowed  the  defendant  to  introduce  evidence  of  the 
facts  alleged  in  his  answer,  against  the  objection  of  the  plaintiff  that 
they  would  constitute  no  defense  to  the  action  unless  proved  to  have 
been  known  to  the  plaintiff  when  he  took  the  note,  and  instructed  the 
jury  "that  if  they  should  find  that  the  writing  copied  in  the  declaration 
was  never  delivered  by  the  defendant,  or  any  person  authorized  by  him 
so  to  deliver  it,  to  the  payee,  or  to  any  person  for  his  use,  but  that  he 
obtained  possession  of  it  without  the  assent  or  knowledge  of  or  au- 
thority from  the  defendant,  and,  having  obtained  such  possession  with- 
out right  or  authority,  put  his  name  upon  the  back  of  it,  and  delivered 
it  to  the  plaintiff,  then  and  in  that  case  it  never  became  the  negotiable 
note  of  the  defendant,  and  the  defendant  was  entitled  to  their  verdict " 
The  jury  returned  a  verdict  for  the  defendant,  and  the  plaintiff  al- 
leged exceptions. 

BiGELOw,  C.  J.  The  defendant  proved  no  facts  at  the  trial  which 
constituted  a  valid  defense  to  the  note  declared  on  as  against  the  plain- 
tiff, who  is  a  bona  fide  holder  for  value  without  notice.     The  rule  is 


Ch.  3)  DELIVERY.  215 

well  settled  that,  when  a  note  is  transferred  by  a  party  to  whom  it  is 
intrusted  without  authority  or  fraudulently,  it  will  be  valid  as  against 
the  maker  in  the  hands  of  a  holder  who  takes  it  bona  fide  without  no- 
tice of  the  special  circumstances  under  which  the  note  came  into  the 
possession  of  the  payee  or  agent  of  the  maker  who  puts  it  in  circula- 
tion. In  such  case,  the  maker  or  indorser  who  places  it  in  the  hands 
of  another,  for  the  purpose  of  being  used  in  a  particular  way  or  for  a 
special  object,  takes  the  risk  of  its  being  used  in  a  different  way,  and 
cannot  refuse  to  pay  it  to  any  bona  fide  holder  into  whose  hands  it  may 
come.  Chit.  Bills  (10th  Ed.)  198;  Sweetser  v.  French,  2  Cush.  309, 
48  Am.  Dec.  666.  It  is  undoubtedly  true  that,  as  between  the  original 
parties  to  a  note  or  those  who  take  it  with  notice,  it  is  essential  that 
there  should  have  been  a  delivery  of  the  note  by  the  maker  to  take  ef- 
fect as  a  contract.  In  this  sense,  delivery  is  included  in  the  allegation 
of  making.  But  the  rule  is  qualified  and  limited  as  between  the  maker 
and  a  bona  fide  holder.  In  such  case,  a  valid  delivery  can  be  made  by 
any  person  to  whom  the  maker  has  given  the  note  in  such  form  as  to 
enable  him  to  hold  himself  out  as  absolute  owner  of  the  note.  The 
case  of  Putnam  v.  Sullivan,  4  Mass.  45,  3  Am.  Dec.  206,  is  a  strong 
one  on  this  point.  There  the  notes  were  delivered  to  a  clerk  to  be  used 
for  special  purposes  only,  and  it  was  held  that  a  delivery  by  the  clerk, 
whether  through  deception  practiced  on  him,  or  by  a  voluntary  viola- 
tion of  the  trust  reposed  in  him,  must  be  deemed  in  law,  as  against  a 
bona  fide  holder,  a  delivery  by  those  who  were  liable  on  the  notes. 
The  rule  is  different  in  regard  to  a  deed,  bond,  or  other  instrument 
placed  in  the  hands  of  a  third  person  as  an  escrow,  to  be  delivered  on 
the  happening  of  a  future  event  or  contingency.  In  that  case,  no  title  or 
interest  passes  until  a  delivery  is  made  in  pursuance  of  the  terms  and 
conditions  upon  which  it  was  placed  in  the  hands  of  the  party  to  whom 
it  was  intrusted.  But  the  law  aims  to  secure  the  free  and  unrestrained 
circulation  of  negotiable  paper,  and  to  protect  the  rights  of  persons 
taking  it  bona  fide  without  notice.  It  therefore  makes  the  consequen- 
ces, which  follow  from  the  negotiation  of  promissory  notes  and  bills 
of  exchange  through  the  fraud,  deception,  or  mistake  of  those  persons 
to  whom  they  are  intrusted  by  the  makers  to  fall  on  those  who  enabled 
them  to  hold  themselves  out  as  owners  of  the  paper  jure  dispondendi, 
and  not  on  innocent  holders  who  have  taken  it  for  value  without  no- 
tice. 

Exceptions  sustained.^ 

1  Contra:  Chipman  v.  Tucker,  38  Wis.  4.3,  20  Am.  Rep.  1  (187.5).  Ac- 
cord: Borough  of  :\Jontvale  v.  Bank,  74  N.  J.  Law,  4G4,  67  Atl.  67  (1907), 
an  action  or  replevin  brought  by  the  borough  to  recover  two  of  its  nego- 
tiable bonds,  which  after  their  authorization  and  formal  completion  were 
left  in  the  custody  of  the  mayor  until  the  further  order  of  the  borough,  and 
vrere  by  him  negotiated  to  the  plaintiff  who  took  as  a  holder  in  due  course. 
G-ymmere,  C.  .J.,  said:  "Applying  to  the  borough  the  conclusive  presump- 
non  which  this  last-cited  section  (15)  of  the  statute  prescribed  for  the  pro- 
tection of  a  holder  in  due  course,  it  must  be  held  to  have  made  a  valid  de- 


216 


FOKM    AND   INCEI'TION.  (Part    1 


BURSON  V.  HUNTINGTON. 

(Supreme  Court  of  Micbigau,  1S70.     21  Mich.  415,  4  Am.  Rep.  497.) 

This  cause  was  brought  into  the  circuit  court  for  the  county  of  Kal- 
amazoo by  appeal  from  the  judgment  of  a  justice  of  the  peace,  in  an 
action  in  which  Walter  S.  Huntington  was  plaintiff  and  John  W.  Bur- 
son  defendant.  The  justice's  transcript  states  that  the  plaintiff  declar- 
ed verbally  on  the  common  counts  in  assumpsit  and  upon  a  promissory 
note,  which  was  filed  at  the  time  of  declaring,  and  of  which  the  follow- 
ing is  a  copy,  viz. : 

"Schoolcraft,  Mich.,  April  12,  1866. 

"Ninety  days  from  date,  for  value  received,  I  promise  to  pay  A.  N. 
Goldwood,  or  order,  one  hundred  and  twelve  dollars,  and  fifty  cents, 
with  interest.  John  W.  Burson." 

Indorsed  on  the  back :  "A.  N.  Goldwood." 

The  defendant  filed  an  affidavit  denying  the  delivery  of  the  note. 
Judgment  for  plaintiff  and  the  defendant  appealed.^ 

Christi.-vncy,  j.  *  *  *  But  this  note  was  indorsed  by  Gold- 
wood,  the  payee,  to  the  plaintiff,  before  maturity,  for  a  valuable  con- 
sideration, and,  as  plaintiff  claims,  in  good  faith  and  without  notice  ot 
a  want  of  delivery  or  of  consideration,  or  any  other  circumstances 
tending  to  invalidate  it  in  the  hands  of  Goldwood ;  and  his  evidence 
tended  to  show  this,  though  there  was  evidence  of  some  circumstances 
tending  to  show  that  he  had  notice  of  the  circumstances  under  which 
the  paper  had  been  obtained. 

There  was  also  evidence  on  the  part  of  the  defendant,  strongly  tend- 
ing to  show :  That  the  note  never  was  delivered  by  the  defendant,  but 
that  Goldwood,  to  whose  order  it  was  drawn,  was  endeavoring  to  sell 
to  the  defendant  a  patent  right  or  the  right  of  certain  territory  under 
it.  and  that  the  parties  had  so  far  progressed  towards  the  making  of 
an  arrangement  to  this  end,  that  it  was  understood  and  verbally  agreed 
that  Goldwood  was  to  give  him  a  deed  of  certain  territory,  upon  de- 
fendant's executing  to  him  a  note  for  the  amount,  with  some  other 
person  signing  it  as  surety.  That  the  parties  being  in  the  defendant's 
house,  and  defendant's  sister  being  present,  Goldwood  wrote  this  note, 
and  defendant  signed  it ;  but  as  a  surety  was  to  be  obtained,  he  laid 
the  note  on  the  table  and  went  out  to  find  his  uncle  for  that  purpose, 
telling  Goldwood,  as  he  went  out,  not  to  touch  it  till  he  came  back ; 

livery  of  these  bonds,  so  far  as  the  defendant  bank  is  concerned,  and  the 
latter  is  therefore  entitled  to  retain  possession  of  them  as  outstanding  obli- 
gations of  the  municipality.  Our  determination  that  the  negotiable  instru- 
ments act  applies  to  municipal  bonds,  as  well  as  to  bills  of  exchange,  prom- 
issory notes,  and  checks,  makes  unnecessary  a  consideration  of  the  interesting 
question  argued  by  counsel  of  the  resi)ective  rights  of  the  plaintiff  and  de- 
fendant under  the  law  merchant  as  it  existed  prior  to  the  enactment  of  that 
statute." 

2  The  statement  of  facts  is  abridged,  and  the  arguments  of  counsel  and 
part  of  the  opinion  are  omitted. 


Ch.  3)  DELIVERY.  217 

but  that  while  defendant  was  gone,  Goldwood  picked  up  the  paper 
and  started  out  doors  with  it.  That  defendant's  sister  then  told  him 
to  let  the  note  be  on  the  table  till  defendant  should  come  back,  to  which 
Goldwood  replied  he  was  going  to  have  the  note,  and  went  off  with  it, 
without  giving  any  deed  of  territory  or  anything  else  for  it.  That  the 
note,  at  this  time,  was  not  stamped,  and  defendant  never  stamped  or 
authorized  it  to  be  stamped ;  that  some  four  days  after,  Goldwood 
wrote  to  defendant  requesting  him  to  come  immediately  to  Kalamazoo 
"and  sign  stamp  on  the  note,"  and  saying  if  defendant  was  not  there 
by  Tuesday  evening  "I  shall  consider  that  you  refuse  your  signature, 
and  shall  act  accordingly."  The  evidence  also  tended  to  show  that 
defendant  called  upon  Goldwood  about  that  time,  while  the  latter  had 
the  note,  and  demanded  it,  accusing  him  of  stealing  it,  to  which  Gold- 
wood  replied,  "Never  mind,  we  can  fix  that  up,"  and  said  he  was  ready 
to  do  as  he  had  agreed,  and  wanted  defendant  to  get  another  signer, 
and  he  would  give  him  a  deed  of  territory ;  but  defendant  said  he 
did  not  want  the  deed,  but  wanted  the  note.  Goldwood  refused  to  re- 
turn the  note,  or  to  give  a  deed  till  he  got  another  signer. 

These  facts,  if  found  by  the  jury,  would  show,  not  only  that  the 
note  was  never  delivered  to  the  payee,  and  that  it  therefore  never  had 
a  legal  existence  as  a  note  between  the  original  parties,  but  that  there 
was  yet  no  completed  or  binding  agreement  of  any  kind,  and  was  not 
to  be  until  defendant  should  choose  to  get  a  surety  on  the  note,  and  the 
payee  should  give  him  a  deed  of  territory.  Until  thus  completed,  the 
defendant  had  a  right  to  retract. 

As  a  general  rule,  a  negotiable  promissory  note,  like  any  other  writ- 
ten contract,  has  no  legal  inception  or  valid  existence,  as  such,  until  it 
has  been  delivered  in  accordance  with  the  purpose  and  intent  of  the 
parties.  See  Edwards  on  B.  and  N.  175,  and  authorities  cited,  and  1 
Pars,  on  B.  and  N.,  48  and  49,  and  cases  cited.  And  see  Thomas 
V.  Watkins,  16  Wis.  549;  Mahon  v.  Sawyer,  18  Ind.  73;  Carter  v. 
McCHntock,  29  Mo.  464. 

Delivery  is  an  essential  part  of  the  making  or  execution  of  the  note, 
and  it  takes  effect  only  from  delivery  (for  most  purposes) ;  and  if  this 
be  subsequent  to  the  date,  it  takes  effect  from  the  delivery  and  not  from 
the  date.  1  Pars,  ubi  supra.  This  is  certainly  true  as  between  the 
original  parties. 

But  negotiable  paper  differs  from  ordinary  written  contracts  in  this 
respect :  That  even  a  wrongful  holder,  between  whom  and  the  maker 
or  indorser  the  note  or  indorsement  would  not  be  valid,  may  yet  trans- 
fer to  an  innocent  party,  who  takes  it  in  good  faith,  without  notice 
and  for  value,  a  good  title  as  against  the  maker  or  indorser.  And  the 
question  in  the  present  case  is,  how  far  this  principle  will  dispense 
with  delivery  by  the  maker. 

When  a  note  payable  to  bearer,  which  has  once  become  operative 
by  delivery,  has  been  lost  or  stolen  from  the  owner,  and  has  subse- 
quently come  to  the  hands  of  a  bona  fide  holder  for  value,  the  latter 


218  FORM   AND   INCEPTION.  (Part    I 

may  recover  against  the  maker,  and  all  indorsers  on  the  paper  when 
in  the  hands  of  the  loser ;  and  the  loser  must  sustain  the  loss.  In  such 
a  case  there  was  a  complete  legal  instrument.  The  maker  is  clearly  lia- 
ble to  pay  it  to  some  one ;   and  the  question  is  only  to  whom. 

But  in  the  case  before  us,  where  the  note  had  never  been  delivered, 
and  therefore  had  no  legal  inception  or  existence  as  a  note,  the  ques- 
tion is  whether  he  is  liable  to  pay  at  all,  even  to  an  innocent  holder 
for  value. 

The  wrongful  act  of  a  thief  or  a  trespasser  may  deprive  the  holder 
of  his  property  in  a  note  which  has  once  become  a  note,  or  property, 
by  delivery,  and  may  transfer  the  title  to  an  innocent  purchaser  for  val- 
ue. But  a  note  in  the  hands  of  the  maker  before  delivery  is  not  prop- 
erty, nor  the  subject  of  ownership,  as  such;  it  is,  in  law,  but  a  blank 
piece  of  paper.  Can  the  theft  or  wrongful  seizure  of  this  paper  create 
a  valid  contract  on  the  part  of  the  maker  against  his  will,  where  none 
existed  before?  There  is  no  principle  of  the  law  of  contracts  upon 
which  this  can  be  done,  unless  the  facts  of  the  case  are  such  that,  in 
justice  and  fairness,  as  between  the  maker  and  the  innocent  holder, 
the  maker  ought  to  be  estopped  to  deny  the  making  and  delivery  of 
the  note. 

But  it  is  urged  that  this  case  falls  within  the  general  principle,  which 
has  become  a  maxim  of  law,  that  when  one  of  two  innocent  persons 
must  suffer  by  the  acts  of  a  third,  he  who  has  enabled  such  third  per- 
son to  occasion  the  loss,  must  sustain  it.  This  is  a  principle  of  mani- 
fest justice  when  confined  within  its  proper  limits.  But  the  principle, 
as  a  rule,  has  many  exceptions ;  and  the  point  of  difficulty  in  its  ap- 
plication consists  in  determining  what  acts  or  conduct  of  the  party 
sought  to  be  charged,  can  properly  be  said  to  have  "enabled  the  third 
person  to  occasion  the  loss,"  within  the  meaning  of  the  rule.  If  I 
leave  my  horse  in  the  stable,  or  in  the  pasture,  I  cannot  properly  be  said 
to  have  enabled  the  thief  to  steal  him,  within  the  meaning  of  this  rule, 
because  he  found  it  possible  to  steal  him  from  that  particular  locality. 
And  upon  examination  it  will  be  found  that  this  rule  or  maxim  is  main- 
ly confined  to  cases  where  the  party  who  is  made  to  suffer  the  loss 
has  reposed  a  confidence  in, the  third  person  whose  acts  have  occasion- 
ed the  loss,  or  in  some  other  intermediate  person  whose  acts  or  negli- 
gence have  enabled  such  third  person  to  occasion  the  loss,  and  that 
the  party  has  been  held  responsible  for  the  acts  of  those  in  whom  he 
had  trusted  upon  grounds  analogous  to  those  which  govern  the  rela- 
tion of  principal  and  agent;  that  the  party  thus  reposing  confidence 
in  another  with  respect  to  transactions,  by  which  the  rights  of  others 
may  be  aft'ected,  has,  as  to  the  persons  to  be  thus  afifected,  constituted 
the  third  person  his  agent  in  some  sense,  and  having  held  him  out  as 
such,  or  trusted  him  with  papers  or  indicia  of  ownership  which  have 
enabled  him  to  appear  to  others  as  principal,  as  owner,  or  as  possessed 
of  certain  powers,  the  person  reposing  this  confidence  is,  as  to  those 
who  have  been  deceived  into  parting  with  property  or  incurring  obli- 


Ch.  3)  DELIVERY.  219 

gations  on  the  faith  of  such  appearances,  to  be  held  to  the  same  extent 
as  if  the  fact  had  accorded  with  such  appearances. 

Hence,  to  confine  ourselves  to  the  question  of  delivery,  the  authori- 
ties in  reference  to  lost  or  stolen  notes  which  have  become  operative 
by  delivery  have  no  bearing  upon  the  question.  If  the  maker  or  indors- 
er,  before  delivery  to  the  payee,  leave  the  note  in  the  hands  of  a  third 
person  as  an  escrow,  to  be  delivered  upon  certain  conditions  only,  or 
voluntarily  deliver  it  to  the  payee,  or  (if  payable  to  bearer)  to  any  oth- 
er person  for  a  special  purpose  only,  as  to  be  taken  to  or  discounted 
by  a  particular  bank,  or  to  be  carried  to  any  particular  place  or  person, 
or  to  be  used  only  in  a  certain  way,  or  upon  certain  conditions  not  ap- 
parent upon  the  face  of  the  paper,  and  the  person  to  whom  it  is  thus 
intrusted  violate  the  confidence  reposed  in  him,  and  put  the  note  into 
circulation,  this,  though  not  a  valid  delivery  as  to  the  original  parties, 
must,  as  between  a  bona  fide  holder  for  value,  and  the  maker  or  in- 
dorser,  be  treated  as  a  delivery,  rendering  the  note  or  indorsement 
valid  in  the  hands  of  such  bona  fide  holder ;  or  if  the  note  be  sent  by 
mail,  and  get  into  the  wrong  hands,  as  the  party  intended  to  deliver 
to  some  one,  and  selects  his  own  mode  of  delivery,  he  must  be  responsi- 
ble for  the  result.  These  principles  are  too  well  settled  to  call  for  the 
citation  of  authorities,  and  manifestly  it  will  make  no  difference  in 
this  respect,  if  the  note  or  indorsement  were  signed  in  blank,  if  the 
maker  or  indorser  part  with  the  possession,  or  authorize  a  clerk  or 
agent  to  do  so,  and  it  is  done.  1  Parsons  on  Bills  and  Notes,  109  to 
114,  and  cases  cited,  especially  Putnam  v.  Sullivan,  4  Mass.  45,  3  Am. 
Dec.  306,  which  was  decided  expressly  upon  the  ground  of  the  con- 
fidence reposed  in  the  third  person,  as  to  the  filling  up,  and  in  the 
clerks  as  to  the  delivery. 

And  when  the  maker  or  indorser  has  himself  been  deceived  by  the 
fraudulent  acts  or  representations  of  the  payee  or  others,  and  there- 
by induced  to  deliver  or  part  with  the  note  or  indorsement,  and  the 
same  is  thus  fraudulently  obtained  from  him,  he  must,  doubtless,  as 
between  him  and  an  innocent  holder  for  value,  bear  the  consequences 
of  his  own  credulity  and  want  of  caution.  He  has  placed  a  confidence 
in  another,  and  by  putting  the  papers  into  his  hands  has  enabled  him  to 
appear  as  the  owner,  and  to  deceive  others.  Cases  of  this  kind  are 
numerous ;  but  they  have  no  bearing  upon  the  wrongful  taking  from 
the  maker,  when  he  never  voluntarily  parted  with  the  instrument. 
Much  confusion,  however,  has  arisen  from  the  general  language  used 
in  the  books,  and  sometimes  by  judges,  in  reference  to  cases  where  the 
maker  has  voluntarily  parted  with  the  possession,  though  induced  to 
do  so  by  fraud,  when  it  is  laid  down  as  a  general  rule,  that  it  is  no 
defense  for  a  maker,  as  against  a  bona  fide  holder,  to  show  that  the 
note  was  wrongfully  or  fraudulently  obtained,  without  attempting  to 
distinguish  between  cases  where  the  maker  has  actually  and  voluntari- 
ly parted  with  the  possession  of  the  note,  and  those  where  he  has  not. 

We   do  not  assert  that  the  general   rule   we  are  discussing — that 


220  FORM  AND  INCEPTION.  (Part  1 

"where  one  of  two  innocent  parties  must  suffer,"  etc. — must  be  con- 
fined exclusively  to  cases  where  a  confidence  has  been  placed  in  some 
other  person  (in  reference  to  delivery)  and  abused.  There  may  be  cases 
where  the  culpable  negligence  or  recklessness  of  the  maker  in  allow- 
ing an  undelivered  note  to  get  into  circulation,  might  justly  estop  him 
from  setting  up  nondelivery ;  as  if  he  were  knowingly  to  throw  it  into 
the  street,  or  otherwise  leave  it  accessible  to  the  public,  with  no  per- 
son present  to  guard  against  its  abduction  under  circumstances  when 
he  might  reasonably  apprehend  that  it  would  be  likely  to  be  taken. 

Upon  this  principle  the  case  of  Ingham  v.  Primrose,  7  C.  B.  (N.  S.) 
82,  was  decided,  where  the  acceptor  tore  the  bill  into  halves  (with  the 
intention  of  canceling  it)  and  threw  it  into  the  street,  and  the  drawer 
picked  them  up  in  his  presence,  and  afterwards  pasted  the  two  pieces 
together  and  put  them  into  circulation.  See,  also,  by  analogy,  Foster 
V.  Mackinnon,  Law  Rep.  4  Com.  B.  704. 

But  the  case  before  us  is  one  of  a  very  different  character.  No  ac- 
tual delivery  by  the  maker  to  any  one  for  any  purpose. 

The  evidence  tends  to  show  that  when  he  left  the  room  in  his  own 
house,  the  note  being  on  the  table,  and  his  sister  remaining  there,  he 
did  not  confide  it  to  the  custody  of  the  payee,  but  told  him  not  to  take 
it,  and  no  final  agreement  between  them  had  yet  been  made,  and  no 
consideration  given.  Under  such  circumstances  he  can  no  more  be 
said  to  have  trusted  it  to  the  payee's  custody  or  confidence  than  that 
he  trusted  his  spoons  or  other  household  goods  to  his  custody  or  con- 
fidence ;  and  there  w^as  no  more  apparent  reason  to  suppose  he  would 
take  and  carry  off  the  one  than  the  other. 

The  maker,  therefore,  cannot  be  held  responsible  for  any  negligence. 
There  was  nothing  to  prove  negligence,  unless  he  was  bound  to  sus- 
pect, and  treat  as  a  knave,  a  thief,  or  a  criminal,  the  man  who  came  to 
his  house  apparently  on  business,  because  he  afterwards  proved  him- 
self to  be  such.    This,  we  think,  would  be  preposterous. 

We,  therefore,  see  no  ground  upon  which  the  defendant  could  be 
held  liable  on  a  note  thus  obtained,  even  to  a  bona  fide  holder  for  value. 
He  was  guilty  of  no  more  negligence  than  the  plaintiff  who  took  the 
paper,  and  the  plaintiff  shows  no  rights  or  equities  superior  to  those  of 
the  defendant. 

Such,  we  think,  must  be  the  result  upon  principle.  We  have  care- 
fully examined  the  cases,  English  and  American,  and  are  satisfied  there 
is  no  adjudged  case  in  the  English  courts,  so  far  as  their  reports  have 
reached  us,  which  would  warrant  a  recovery  in  the  present  case.  Some 
dicta  may  be  found,  the  general  language  of  which  might  sustain  the 
liability  of  the  maker,  such  as  that  of  Baron  Alderson  in  Marston  v. 
Allen,  8  M.  &  W.  494,  cited  by  Duer,  J.,  in  Gould  v.  Segee,  5  Duer 
(N.  Y.)  260,  and  that  used  by  WilHams,  J.,  in  Ingham  v.  Primrose,  7 
C.  B.  (N.  S.)  82.  But  a  reference  to  the  cases  will  show  that  no  such 
question  was  involved,  and  that  these  remarks  were  wholly  outside  of 
the  case. 


Ch.  3)  DELIVERY.  221 

On  the  other  hand,  Hall  v.  Wilson,  16  Barb.  (N.  Y.)  548,  555,  and 
556,  contains  a  dictum  fully  sustaining  the  views  we  have  taken. 

There  are,  however,  two  recent  American  cases,  where  the  note  or 
indorsement  was  obtained  without  delivery,  under  circumstances  quite 
as  wrongful  as  those  in  the  present  case,  in  one  of  which  the  maker, 
and  in  the  other  the  indorser,  was  held  liable  to  a  bona  fide  holder  for 
value:  Shipley  v.  Carroll  et  al.,  45  111.  285  (case  of  maker),  and  Gould 
V.  Segee,  5  Duer  (N.  Y.)  266.  But  in  neither  of  these  cases  can  we 
discover  that  the  court  discussed  or  considered  the  real  principle  in- 
volved; and  we  have  been  unable  to  discover  anything  in  the  cases 
cited  by  the  court  to  warrant  the  decision.  It  is  possible  that  the  case 
in  Illinois  may  depend  somewhat  upon  their  statute,  and  the  note  being 
made  as  a  mere  matter  of  amusement,  and  the  making  not  being  justi- 
fied by  any  legitimate  pending  business,  the  maker  might  perhaps  just- 
ly be  held  responsible  for  a  higher  degree  of  diligence,  and  therefore 
more  justly  chargeable  with  negligence  under  the  particular  circum- 
stances, than  the  maker  in  the  present  case. 

There  is  another  case  (Worcester  Co.  Bank  v.  Dorchester  &  Milton 
Bank,  10  Cush.  [Mass.]  488, '57  Am.  Dec.  120),  where  bank  bills  were 
stolen  from  the  vault  of  the  bank,  which  though  signed  and  ready  for 
use,  had  never  been  yet  issued,  and  on  which  a  bona  fide  holder  for 
value  was  held  entitled  to  recover.  This,  we  are  inclined  to  think,  was 
correct.  The  court  intimated  a  doubt  whether  the  same  rule  should 
apply  to  bank  bills  as  to  ordinary  promissory  notes,  and  as  to  the  lat- 
ter failed  to  make  any  distinction  between  the  question  of  delivery  and 
questions  afifecting  the  rights  of  the  parties  upon  notes  which  have  be- 
come effectual  by  delivery.  But  we  think  bank  bills  which  circulate 
universally  as  cash,  passing  from  hand  to  hand  perhaps  a  hundred 
times  a  day,  without  such  inquiries  as  are  usual  in  the  cases  of  ordinary 
promissory  notes  of  individuals,  stand  upon  quite  different  grounds. 
And,  considering  the  temptations  to  burglars  and  robbers,  where  large 
masses  of  bank  bills  are  known  to  be  kept,  and  the  much  greater  facili- 
ty of  passing  them  off  to  innocent  parties,  without  detection  or  identi- 
fication of  the  bills  or  the  parties,  and  that  the  special  business  of  banks 
is  dealing  in,  and  holding  the  custody  of,  money  and  bank  bills,  it  is 
not  unreasonable  to  hold  them  to  a  much  higher  degree  of  care,  and 
to  make  them  absolutely  responsible  for  their  safe-keeping.  We  do 
not  therefore  regard  this  case  as  having  any  material  bearing  upon  the 
case  before  us.  *  *  * 
-  Judgment  reversed. 


CLARKE  V.  JOHNSON. 

(Supreme  Court  of  Illinois,  1870.     54  111.  296.) 

Walke;r,  J.    This  was  an  action  of  assumpsit  on  a  promissoiy  note 

executed  by  defendant  to  one  Bush,  on  the  2Sth  of  October,  1869,  for 

$108,  due  at  one  day,  with  10  per  cent,  per  annum  interest.     On  the 


222  FORM  AND  INCEPTION.  (Part  1 

back  of  the  note  was  indorsed  an  assignment,  in  the  usual  form,  but 
without  date,  to  plaintiff.  A  plea,  among  others,  was  tiled  averring 
that  the  making  of  the  note  was  obtained  by  fraud  and  circumvention. 
A  trial  was  had,  resulting  in  a  verdict  and  judgment  in  favor  of  de- 
fendant, and  plaintiff  has  brought  the  record  to  this  court,  and  assigns 
various  errors. 

On  the  trial,  appellee  testified  that  he  signed  the  note  as  it  appeared 
at  the  trial ;  that  it  had  not  been  altered  after  it  was  signed.  He  states 
that  Bush  came  to  his  house  at  the  date  of  the  note,  and  proposed  to 
sell  him  a  plowing  machine,  and  that,  being  in  doubt  as  to  the  truth  of 
Bush's  representations,  and  Bush  having  proposed  to  go  to  the  rail- 
road station  and  telegraph  to  the  manufacturers  for  the  purpose  of  sat- 
isfying appellee,  he  was  about  to  insert  a  condition  in  the  note  that 
would  insure  the  delivery  of  the  plows  or  render  it  void,  when  Bush 
snatched  the  note  from  appellee  and  ran  oft'  with  it ;  that  he  had  never 
seen  Bush  afterwards,  and  was,  at  the  time,  too  unwell  to  prosecute 
him ;  that  he  intended  to  insert  a  condition  in  the  note  before  giving  it 
to  Bush,  and  knew  nothing  of  Clarke  until  the  note  was  assigned  to 
him.  He  states  he  never  received  the  plows  or  machinery,  and,  on 
writing  to  the  manufacturers,  they  denied  knowing  Bush  and  disclaim- 
ed his  agency. 

The  court  thereupon  gave  this  instruction :  "The  plaintiff  is  entitled 
to  recover  on  the  note  in  question  if  the  jury  are  satisfied  that  the  de- 
fendant executed  the  note  in  question.  It  is  no  defense  to  an  action 
on  such  note  that  the  note  was  obtained  in  bad  faith,  or  that  it  was  sur- 
reptitiously obtained  by  the  payee,  or  even  forcibly,  if  it  was  assigned 
before  due.  The  defendant  denies,  by  his  pleas,  the  making  and  deliv- 
ery of  the  note,  as  his  note,  for  a  note  cannot  be  said  to  be  executed 
until  it  is  delivered.  The  making  is  not  complete  without  a  delivery. 
If  the  jury  shall  believe,  from  the  evidence,  that  defendant  never  ex- 
ecuted this  note — that  is,  that  there  was  no  legal  and  valid  execution 
of  the  note  on  his  part,  by  a  delivery  of  it,  as  well  as  signing — it  was 
not  his  note,  and  the  defendant  will  be  entitled  to  a  verdict." 

This  instruction  manifestly  misled  the  jury  in  arriving  at  their  ver- 
dict. It  asserts  that  the  note  was  not  executed  until  it  was  delivered, 
and  that,  if  appellee  did  not  deliver  it,  there  was  no  legal  and  valid 
execution  of  the  note,  that  would  bind  appellee  for  its  payment,  and  he 
was  entitled  to  a  verdict.  This  is,  no  doubt,  true  as  between  the  par- 
ties, but  not  as  to  an  innocent  purchaser  before  maturity.  And  when 
an  assignment  is  found  on  a  note,  without  date,  the  presumption  is 
that  it  was  indorsed  at  the  date  of  its  execution. 

In  the  case  of  Shipley  v.  Carroll,  45  111.  285,  the  plea  averred  that 
the  note  was  written  and  signed  by  the  maker,  simply  and  solely  as 
a  matter  of  amusement,  without  any  design  of  delivering  it  to  the  pay- 
ee, and  that  the  payee  feloniously  stole  the  note  from  the  maker,  and 
that  he  never  was  the  legal  holder  or  owner  of  the  note.  In  that  case, 
the  note  had  been  assigned  before  maturity,  and  on  demurrer  it  was 


Ch.  3)  DELIVERY.  223 

held  that  the  plea  did  not,  as  against  the  assignee  before  it  fell  due, 
present  a  defense  to  its  collection.  That  case  was  certainly  as  strong 
as  this,  and,  being  similar  in  principle,  it  must  control  and  is  decisive 
of  the  case  at  bar. 

The  judgment  of  the  court  below  must  be  reversed  and  the  cause  re- 
manded. 

Judgment  reversed. 


DOUGLASS  V.  MATTING. 

(Supreme  Court  of  Iowa,  1S70.     29  Iowa,  49S,  4  Am.  Rep.  2r]8.) 

Action  by  an  indorsee  upon  a  promissory  note.  A  count  in  the  an- 
swer sets  up  a  defense  in  the  following  words :  "And  this  defendant, 
for  a  further  answer  to  the  petition  of  the  plaintiff,  says :  That  on 
or  about  the  date  of  the  alleged  execution  of  the  said  alleged  prom- 
issory note,  as  set  forth  in  said  petition,  a  stranger  called  on  this  de- 
fendant, representing  that  he,  the  said  stranger,  was  the  agent  of  one 
O.  M.  Pond,  and,  as  such  agent,  was  appointing  other  agents  and  es- 
tablishing agencies,  for  and  in  behalf  of  the  said  O.  M.  Pond,  for  the 
sale  of  a  certain  patent  seeder  and  cultivator,  which  he,  the  said  stran- 
ger, alleged  was  of  great  value  and  meeting  with  ready  sale,  and  that 
a  great  amount  of  money  could  be  made  by  accepting  the  appointment 
as  such  agent,  and  that  as  the  agent  of  said  Pond  he  was  desirous  of 
obtaining  the  consent  of  this  defendant  to  act  as  agent  in  and  for  the 
sale  of  said  machines ;  that  no  money  or  other  pecuniary  or  valuable 
thing  was  or  would  be  required,  and  that  all  that  would  be  necessary 
for  this  defendant  to  do  in  the  premises  would  be  to  sign  a  contract 
in  duplicate,  one  of  which  was  to  be  signed  and  kept  by  this  defendant, 
and  the  other  by  the  said  stranger,  as  the  agent  for  the  said  Pond, 
said  contract  being  nothing  more  than  a  statement  that  he,  this  de- 
fendant, agreed  to  act  as  the  agent  of  the  said  Pond  in  the  sale  of 
said  machines,  and  agreed  to  pay  over  the  profits  on  the  first  four 
sold  as  a  consideration  for  the  appointment  of  such  agent;  and  that 
he  then  and  there  agreed  to  sign  such  a  contract,  and  no  other,  and 
if  he  signed  the  note  sued  on,  he  signed  the  same  believing  and  relying 
upon  the  representations  of  the  said  stranger  that  the  same  was  noth- 
ing but  a  contract  of  the  character  as  above  stated,  and  not  knowing 
that  the  same  was  a  promissory  note.  Wherefore  this  defendant  says 
that  he  never  signed  and  executed  the  said  note  sued  upon." 

The  answer  contains  no  averment  that  the  defense,  above  stated, 
was  known  to  the  plaintiff  when  the  note  was  indorsed  to  him.  To 
the  foregoing  count  of  the  answer  the  plaintiff  demurred.  The  de- 
murrer was  overruled,  and,  plaintiff  standing  upon  his  demurrer,  judg- 
ment was  rendered  for  defendant,  from  which  plaintiff  appeals  to 
this  court. 


224  FORM   AND   INCEPTION.  (Part    1 

Bi-CK,  J.  It  will  be  observed  that  the  answer  substantially  admits 
the  execution  of  the  note,  but,  as  a  defense,  alleged  that  defendant's 
signature  was  obtained  thereto  by  fraudulent  misrepresentations  of 
the  agent  of  the  payee;  that  defendant,  relying  upon  the  representa- 
tions of  the  agent,  to  the  effect  that  the  paper  was  a  contract  of  the 
character  described,  signed  his  name  thereto.  Of  these  facts  it  is  not 
averred  that  plaintiff  had  notice  when  the  note  was  indorsed  to  him. 
We  are  required  to  determine  whether  the  answer  presents  a  suffi- 
cient defense.  It  is  conceded  that,  if  the  transaction  of  the  agent  of 
the  payee  in  procuring  the  signature  of  defendant  amounted  to  less 
than  a  forgery,  the  defense  is  not  sufficient,  as  against  a  bona  fide 
holder,  receiving  it  for  value  before  due.  Plaintiff  must  be  regarded 
as  such  a  holder  under  the  pleadings.  We  must  determine,  then, 
whether  the  note,  according  to  the  averments  of  the  answer,  is  in 
law  a  forgery.  In  our  opinion,  upon  principle,  it  is  not.  The  defend- 
ant intrusted  the  one  with  whom  he  was  dealing  with  the  preparation 
of  the  instrument.  The  instrument  as  prepared  was  not  what  de- 
fendant had  agreed  to  sign,  but  was  voluntarily  executed  by  him. 
The  act  of  the  agent  was  a  fraud  whereby  defendant  was  induced  to 
make  the  note,  and  not  the  false  making  of  it,  which  is  necessary  to 
constitute  forgery.  There  are  authorities  that  hold  differently,  but . 
this  view  appears  to  us  in  accord  with  principle  and  required  by  the 
wants  of  the  commerce  of  the  country,  which  deals  so  extensively  in 
negotiable  paper.  Neither  is  it  unsupported  by  authorities.  See  Put- 
nam V.  Sullivan,  4  Mass.  45,  3  Am.  Dec.  206;  Commonwealth  v. 
Sankey,  22  Pa.  390,  60  Am.  Dec.  91. 

As  between  the  bona  fide  holder,  receiving  the  paper  before  due 
for  value,  and  the  maker,  the  equities  are  all  on  the  side  of  the  first. 
The  maker  puts  his  genuine  signature  to  a  note  appearing  upon  its 
face  fair  and  regular.  In  the  regular  course  of  business  it  comes  into 
the  hands  of  an  innocent  party,  who  has  paid  a  valuable  considera- 
tion for  it  and  has  no  notice  of  any  infirmities  or  defenses  attaching 
to  the  paper.  Now  it  would  be  manifestly  unjust  to  permit  the  maker, 
while  admitting  the  genuineness  of  his  signature,  to  defeat  the  note, 
on  the  ground  that,  through  his  own  culpable  carelessness  while  deal- 
ing with  a  stranger,  he  signed  the  instrument  without  reading  it  or 
attempting  to  ascertain  its  true  contents.  The  law  will  favor,  as  be- 
tween the  holder  and  maker  in  such  a  case,  the  more  innocent  and 
diligent.  The  maker  had  it  in  his  power  to  protect  himself  from  the 
fraud,  but  failed  to  do  so.  When  the  consequences  of  his  act  are 
about  to  be  visited  upon  him,  he  seeks  to  make  another  bear  it,  on 
the  ground  that  he  was  defrauded  through  his  own  gross  negligence. 
He  can  certainly  claim  protection  neither  on  the  ground  of  his  inno- 
cence or  diligence. 

The  rule  contended  for  by  appellee  would  tend  to  destroy  all  con- 
fidence in  commercial  paper.  It  is  better  that  defendant,  and  others 
who  so  carelessly  affix  their  names  to  paper,  the  contents  of  which 


Ch.  3)  DELIVERY.  225 

are  unknown  to  them,  should  suffer  from  the  fraud  which  their  reck- 
lessness invites,  than  that  the  character  of  commercial  paper  should 
be  impaired,  and  the  business  of  the  country  thus  interfered  with  and 
unsettled. 

In  our  opinion  the  demurrer  of  plaintiff  to  the  answer  should  have 
been  sustained. 

Reversed. 


WALKER  V.  EBERT. 

(Supreme  Court  of  Wisconsin,  1871.     29  Wis.  194,  9  Am.  Rep.  548.) 

Action  on  a  promissory  note,  by  a  holder,  who  claims  to  have  pur- 
chased it  for  full  value,  before  maturity.  The  answer  alleges  that 
the  defendant  is  a  German  by  birth  and  education,  and  unable  to  read 
and  write  the  English  language;  that,  on  the  day  of  the  date  of  the 
supposed  note,  the  payees  thereof,  by  their  duly  authorized  agent, 
falsely  and  fraudulently  represented  to  him,  v/ith  intent  to  swindle, 
cheat  and  defraud  him,  that  they  would  appoint  him  sole  agent  for 
his  town  of  a  certain  patented  machine,  for  ten  years,  and  would 
deliver  to  him  one  of  said  machines  free  of  cost,  except  freight,  and 
he  should  receive  50  per  cent,  of  all  profits  on  his  sales ;  and  he  ac- 
cepted such  agency  upon  those  terms,  and  that  the  payees,  by  their 
said  agent,  then  presented  to  him  to  sign,  in  duplicate,  an  instrument, 
partly  written  and  partly  printed,  which  he  was  unable  to  read,  and 
which  such  agent  falsely  and  fraudulently  represented  to  be  simply  a 
contract  embracing  the  terms  orally  agreed  upon  between  them,  and 
he,  believing  it  to  be  so,  signed  his  name  to  it  in  duplicate ;  that  such 
payees  never  delivered  the  machine  promised,  and  never  intended  to 
do  so,  and  defendant  never  sold  any. 

On  the  trial,  the  defendant  offered  to  prove  by  his  own  testimony 
the  facts  so  alleged  by  him  relative  to  his  signature  to  the  note  in 
suit,  and  that  he  never  delivered  it  to  any  one,  which  evidence  was 
objected  to  by  the  plaintiff,  and  ruled  out  by  the  court;  and,  there 
being  no  further  evidence,  the  court  directed  a  verdict  for  the  plain- 
tiff. A  motion  for  a  new  trial  was  overruled  and  judgment  entered 
on  such  verdict,  from  which  the  defendant  appeals. 

Dixon,  C.  J.  The  defendant,  having  properly  alleged  the  same 
facts  in  his  answer,  oft'ered  evidence,  and  proposed  to  prove  by  him- 
self as  a  witness  on  the  stand,  that  at  the  time  he  signed  the  sup- 
posed note  in  suit  he  was  unable  to  read  or  write  the  English  lan- 
guage; that,  when  he  signed  the  same,  it  was  represented  to  him  as, 
and  he  believed  it  was,  a  certain  contract  of  an  entirely  different  char- 
acter, which  contract  he  also  offered  to  produce  in  evidence ;  that  the 
contract  offered  to  be  produced  was  a  contract  appointing  him,  de- 
fendant, agent  to  sell  a  certain  patent  right,  and  no  other  or  different 
Sm.&  M.B.&  N.— 15 


226  FORM  AND  INCEPTION.  (Part  1 

contract,  and  not  the  note  in  question ;  and  that  the  supposed  note 
was  never  dehvered  by  the  defendant  to  any  one.  It  was  at  the  same 
time  stated  that  the  defendant  did  not  claim  to  prove  that  the  plain- 
tiff did  not  purchase  the  supposed  note  before  maturity  and  for  value. 
To  this  evidence  the  plaintiff  objected,  and  the  objection  was  sustained 
by  the  court,  and  the  evidence  excluded,  to  which  the  defendant  ex- 
cepted ;   and  this  presents  the  only  question. 

We  think  it  was  error  to  reject  the  testimony.  The  two  cases  cited 
by  counsel  for  the  defendant  (Foster  v.  McKinnon,  L.  R.  4  C.  P. 
70i,  and  Whitney  v.  Snyder,  2  Lans.  [N.  Y.]  477)  are  very  clear  and 
explicit  upon  the  point,  and  demonstrate,  as  it  seems  to  us,  beyond 
any  rational  doubt,  the  invalidity  of  such  paper  even  in  the  hands  of 
a  holder  for  value,  before  maturity,  without  notice.  The  party  whose 
signature  to  such  paper  is  obtained  by  fraud  as  to  the  character  of 
the  paper  itself,  who  is  ignorant  of  such  character,  and  has  no  inten- 
tion of  signing  it,  and  who  is  guilty  of  no  negligence  in  af^xing  his 
signature,  or  in  not  ascertaining  the  character  of  the  instrument,  is 
no  more  bound  by  it  than  if  it  were  a  total  forgery,  the  signature 
included. 

The  reasoning  of  the  above  cases  is  entirely  satisfactory  and  con- 
clusive upon  this  point.  The  inquiry  in  such  cases  goes  back  of  all 
questions  of  negotiability,  or  of  the  transfer  of  the  supposed  paper 
to  a  purchaser  for  value,  before  maturity  and  without  notice.  It 
challenges  the  origin  or  existence  of  the  paper  itself ;  and  the  propo- 
sition is  to  show  that  it  is  not  in  law  or  in  fact  what  it  purports  to 
be,  namely,  the  promissory  note  of  the  supposed  maker.  For  the  pur- 
pose of  setting  on  foot  or  pursuing  this  inquiry,  it  is  immaterial  that 
the  supposed  instrument  is  negotiable  in  form,  or  that  it  may  have 
passed  to  the  hands  of  a  bona  fide  holder  for  value.  Negotiability 
in  such  cases  presupposes  the  existence  of  the  instrument  as  having 
been  made  by  the  party  whose  name  is  subscribed ;  for,  until  it  has 
been  so  made  and  has  such  actual  legal  existence,  it  is  absurd  to  talk 
about  a  negotiation,  or  transfer,  or  bona  fide  holder  of  it,  within  the 
meaning  of  the  law  merchant.  That  which,  in  contemplation  of  law, 
never  existed  as  a  negotiable  instrument,  cannot  be  held  to  be  such ; 
and  to  say  that  it  is,  and  has  the  qualities  of  negotiability,  because 
it  assumes  the  form  of  that  kind  of  paper,  and  thus  to  shut  out  all 
inquiry  into  its  existence,  or  whether  it  is  really  and  truly  what  it 
purports  to  be,  is  petitio  principii — begging  the  question  altogether. 
It  is,  to  use  a  homely  phrase,  putting  the  cart  before  the  horse,  and 
reversing  the  true  order  of  reasoning,  or  rather  preventing  all  correct 
reasoning  and  investigation,  by  assuming  the  truth  of  the  conclusion, 
and  so  precluding  any  inquiry  into  the  antecedent  fact  or  premise, 
which  is  the  first  point  to  be  inquired  of  and  ascertained.  For  the 
purposes  of  this  first  inquiry,  which  must  be  always  open  when  the 
objection  is  raised,  it  is  immaterial  what  may  be  the  nature  of  the 
supposed   instrument,  whether   negotiable  or  not,   or  whether  trans- 


Ch.  3)  DELIVERY.  227 

ferred  or  negotiated,  or  to  whom  or  in  what  manner,  or  for  what 
consideration  or  value  paid  by  the  holder.  It  must  always  be  compe- 
tent for  the  party  proposed  to  be  charged  upon  any  written  instru- 
ment, to  show  that  it  is  not  his  instrument  or  obhgation.  The  prin- 
ciple is  the  same  as  where  instruments  are  made  by  persons  having 
no  capacity  to  make  binding  contracts,  as  by  infants,  married  women, 
or  insane  persons ;  or  where  they  are  void  for  other  cause,  as  for 
usury;  or  where  they  are  executed  as  by  an  agent,  but  without  au- 
thority to  bind  the  supposed  principal.  In  these  and  all  like  cases, 
no  additional  validity  is  given  to  the  instruments  by  putting  them  in 
the  form  of  negotiable  paper.  See  Veeder  v.  Town  of  Lima,  19  Wis. 
297  to  299,  and  authorities  there  cited.  See,  also,  Thomas  v.  Wat- 
kins,  16  Wis.  549. 

And  identical  in  principle,  also,  are  those  cases  under  the  registry 
laws,  where  the  bona  fide  purchaser  for  value  of  land  has  been  held 
not  to  be  protected  when  the  recorded  deed,  under  which  he  pur- 
chased and  claims,  turns  out  to  have  been  procured  by  fraud  as  to  the 
signature,  or  purloined  or  stolen,  or  was  a  forgery,  and  the  like.  See 
Everts  v.  Agnes,  4  Wis.  343  [65  Am.  Dec.  314],  and  the  remarks 
of  this  court,  pages  351-353,  inclusive. 

In  the  case  first  above  cited,  the  defendant  was  induced  to  put  his 
name  upon  the  back  of  a  bill  of  exchange  by  the  fraudulent  represen- 
tation of  the  acceptor  that  he  was  signing  a  guaranty.  In  an  action 
against  him  as  indorser,  at  the  suit  of  a  bona  fide  holder  for  value. 
Lord  Chief  Justice  Boville  directed  the  jury  that,  "if  the  defendant's 
signature  to  the  document  was  obtained  upon  a  fraudulent  represen- 
tation that  it  was  a  guaranty,  and  the  defendant  signed  it  without 
knowing  that  it  was  a  bill,  and  under  the  belief  that  it  was  a  guaranty, 
and  if  he  was  not  guilty  of  any  negligence  in  so  signing  the  paper, 
he  was  entitled  to  the  verdict;"  and  this  direction  was  held  proper. 
In  delivering  the  judgment  of  the  court  upon  a  rule  nisi  for  a  new 
trial,  Byles,  J.,  said:  "The  case  presented  by  the  defendant  is  that 
he  never  made  the  contract  declared  on;  that  he  never  saw  the  face 
of  the  bill;  that  the  purport  of  the  contract  was  fraudulently  mis- 
described  to  him ;  that  when  he  signed  one  thing,  he  was  told  and 
believed  he  was  signing  another  and  an  entirely  different  thing;  and 
that  his  mind  never  went  with  his  act.  It  seems  plain,  on  principle 
and  on  authority,  that  if  a  blind  man,  or  a  man  who  cannot  read,  or 
for  some  reason  (not  implying  negligence)  forbears  to  read,  has  a 
written  contract  falsely  read  over  to  him,  the  reader  misreading  to 
such  a  degree  that  the  written  contract  is  of  a  nature  altogether  dif- 
ferent from  the  contract  pretended  to  be  read  from  the  paper,  which 
the  blind  or  illiterate  man  afterwards  signs,  then,  at  least,  if  there 
be  no  negligence,  the  signature  so  obtained  is  of  no  force;  and  it  is 
invalid,  not  merely  on  the  ground  of  fraud,  where  fraud  exists,  but 
on  the  ground  that  the  mind  of  the  signer  did  not  accompany  the 
signature — in  other  words,  that  he  never  intended  to  sign,  and  there- 


228  FORM  AND  INCEPTION.  (Part  1 

fore,  in  contemplation  of  law,  never  did  sign,  the  contract  to  which 
his  name  is  appended." 

And  again,  after  remarking  the  distinction  between  the  case  under 
consideration  and  those  where  a  party  has  written  his  name  upon  a 
blank  piece  of  paper,  intending  that  it  should  afterwards  be  filled  up. 
and  it  is  improperly  so  filled,  or  for  a  larger  sum,  or  where  he  has 
written  his  name  upon  the  back  or  across  the  face  of  a  blank  bill 
stamp,  as  indorser  or  acceptor,  and  that  has  been  fraudulently  or  im- 
properly filled,  or,  in  short,  where,  under  any  circumstances,  the  party 
has  voluntarily  affixed  his  signature  to  commercial  paper,  knowing 
what  he  was  doing,  and  intending  the  same  to  be  put  in  circulation  as  a 
negotiable  security,  and  after  also  showing  that  in  all  such  cases  the 
party  so  signing  will  be  liable  for  the  full  amount  of  the  note  or  bill, 
when  it  has  once  passed  into  the  hands  of  an  innocent  indorsee  or 
holder,  for  value  before  maturity,  and  that  such  is  the  limit  of  the 
protection  afforded  to  such  an  indorsee  or  holder,  the  learned  judge 
proceeded : 

"But,  in  the  case  now  under  consideration,  the  defendant,  accord- 
mg  to  the  evidence,  if  believed,  and  the  finding  of  the  jury,  never  in- 
tended to  indorse  a  bill  of  exchange  at  all,  but  intended  to  sign  a 
contract  of  an  entirely  different  nature.  It  was  not  his  design,  and. 
if  he  were  guilty  of  no  negligence,  it  was  not  even  his  fault,  that  the 
instrument  he  signed  turned  out  to  be  a  bill  of  exchange.  It  was  as 
if  he  had  written  his  name  on  a  sheet  of  paper  for  the  purpose  of 
franking  a  letter,  or  in  a  lady's  album,  or  an  order  for  admission  to 
Temple  Church,  or  on  the  flyleaf  of  a  book,  and  there  had  already 
been,  without  his  knowledge,  a  bill  of  exchange  or  a  promissory  note 
payable  to  order  inscribed  on  the  other  side  of  the  paper.  To  make  the 
case  clearer,  suppose  the  bill  or  note  on  the  other  side  of  the  paper  in 
each  of  these  cases  to  be  written  at  a  time  subsequent  to  the  signa- 
ture, then  the  fraudulent  misapplication  of  that  genuine  signature 
to  a  different  purpose  would  have  been  a  counterfeit  alteration  of  a 
writing  with  intent  to  defraud,  and  would  therefore  have  amounted 
to  a  forgery.  In  that  case  the  signer  would  not  have  been  bound  by 
his  signature,  for  two  reasons — first,  that  he  never  in  fact  signed  the 
writing  declared  on ;  and.  secondly,  that  he  never  intended  to  sign 
any  such  contract.  In  the  present  case,  the  first  reason  does  not  apply, 
but  the  second  does  apply.  The  defendant  never  intended  to  sign 
that  contract,  or  any  such  contract.  He  never  intended  to  put  his 
name  to  any  instrument  that  then  was  or  thereafter  might  become 
negotiable.  He  was  deceived,  not  merely  as  to  the  legal  effect,  but  as 
to  the  actual  contents  of  the  instrument." 

The  other  case  first  above  cited.  Whitney  v.  Snyder,  was  in  all  re- 
spects like  the  present,  a  suit  upon  a  promissory  note  by  the  pur- 
chaser before  maturity,  for  value,  against  the  maker,  and  the  facts 
offered  to  be  proved  in  defense  were  the  same  as  here;  and  it  was 
held  that  the  evidence  should  have  been  admitted. 


Ch.  3)  DELIVERY.  229 

In  Nance  v.  Lary,  5  Ala.  370,  it  was  held  that  where  one  writes 
his  name  on  a  blank  piece  of  paper,  of  which  another  takes  posses- 
sion without  authority  therefor,  and  writes  a  promissory  note  above 
the  signature,  which  he  negotiates  to  a  third  person,  who  is  ignorant 
of  the  circumstances,  the  former  is  not  liable  as  the  maker  of  the  note 
to  the  holder.  In  that  case  the  note  was  written  over  the  signature 
by  one  Langford,  and  by  him  negotiated  to  the  plaintiff  in  the  action, 
who  sued  the  defendant  as  maker.  Collier,  C.  J.,  said :  "The  making 
of  the  note  by  Langford  was  not  a  mere  fraud  upon  the  defendant. 
It  was  something  more.  It  was  quite  as  much  a  forgery  as  if  he  had 
found  the  blank,  or  purloined  it  from  the  defendant's  possession.  If 
a  recovery  were  allowed  upon  such  a  state  of  facts,  then  every  one  who 
ever  indulges  in  the  idle  habit  of  writing  his  name  for  mere  pastime, 
or  leaves  sufficient  space  between  a  title  and  his  subscription,  might 
be  made  a  bankrupt  by  having  promises  to  pay  money  written  over 
his  signature.  Such  a  decision  would  be  alarming  to  the  community, 
has  no  warrant  in  law,  and  cannot  receive  our  sanction." 

And  in  Putnam  v.  Sullivan,  4  Mass.  54,  3  Am.  Dec.  206,  Chief  Jus- 
tice Parsons  said :  "The  counsel  for  the  defendants  agree  that,  gen- 
erally, an  indorsement  obtained  by  fraud  will  hold  the  indorsers  ac- 
cording to  the  terms  of  it;  but  they  make  a  distinction  between  the 
cases,  where  the  indorser,  through  fraudulent  pretenses,  has  been  in- 
duced to  indorse  the  note  he  is  called  on  to  pay,  and  where  he  never 
intended  to  indorse  a  note  of  that  description  but  a  different  note 
and  for  a  different  purpose.  Perhaps  there  may  be  cases  in  which 
this  distinction  ought  to  prevail,  as  if  a  blind  man  had  a  note  falsely 
and  fraudulently  read  to  him,  and  he  indorsed  it,  supposing  it  to  be 
the  note  read  to  him.  But  we  are  satisfied  that  an  indorser  cannot 
avail  himself  of  this  distinction,  but  in  cases  where  he  is  not  chargeable 
with  any  laches  or  neglect,  or  misplaced  confidence  in  others."  See, 
also,  1  Parsons  on  Notes  and  Bills,  110  to  114,  and  cases  cited  in 
notes. 

The  judgment  below  must  be  reversed,  and  a  venire  de  novo 
awarded.^ 


MASSACHUSETTS  NAT.  BANK  v.  SNOW. 

(Supreme   Judicial    Court   of   Massachusetts,    Suffolk,    1905.      iS7    Mass.    159, 

72  N.    E.   959.) 

Contract  on  three  promissory  notes,  each  for  $2,432.33,  dated  De- 
cember 9,  1899,  payable  to  and  indorsed  by  the  defendant  and  dis- 
counted by  the  plaintiff,  as  described  in  the  first  paragraph  of  the 
opinion.  Writ  dated  April  25,  1900.  At  the  trial  in  the  superior 
court  before  Harris,  J.,  the  jury  returned  a  verdict  for  the  defendant; 

3  Accord :  Lewis  v.  Clay,  77  L.  T.  R.  (N.  S.)  653  (1897) ;  Aukland  v.  Ar- 
nold, 131  Wis.  64,  111  N.  W.  212  (1907). 


230  FORM  AND  iNcioPTiON.  (Part  1 

and  the  plaintiff  alleged  exceptions,  raising  the  questions  stated  by  the 
court* 

Knowlton,  C.  J.  This  is  an  action  of  contract  on  three  promissory 
notes,  signed,  "H.  G.  &  H.  W.  Stevens,"  payable  to  the  order  of  the 
defendant,  indorsed  by  him  in  blank,  and  discounted  by  the  plaintiff. 
They  severally  bear  date  December  9,  1S99,  and  the  rights  of  the 
parties  are  accordingly  governed  by  St.  1898,  p.  492.  c.  533,  some- 
times called  the  "Negotiable  Instruments  Act,"  which  is  now  em- 
bodied in  Rev.  Laws,  c.  73.  §§  18-212.  inclusive.  In  referring  to  dif- 
ferent provisions  of  this  statute,  it  may  be  convenient  to  cite  the  sec- 
tions of  the  Revised  Laws,  rather  than  those  of  the  original  act. 

The  maker  of  the  notes,  H.  W.  Stevens,  who  did  business  under 
the  name  of  H.  G.  &  H.  W.  Stevens,  has  deceased;  and  the  defend- 
ant introduced  evidence  tending  to  show  that,  after  the  defendant  had 
indorsed  the  notes,  they  were  taken  from  his  possession  by  the  maker, 
without  his  knowledge  or  consent,  and  discounted  at  the  plaintiff  bank, 
and  that  they  were  altered  by  the  insertion  of  the  words  "seven  per 
oent."  after  the  words  "with  interest."  The  defense  is  founded  on 
this  evidence.  The  defendant's  counsel  stated  that  he  made  no  con- 
tention that  the  bank  had  actual  knowledge  of  any  infirmity  in  the 
instnmients,  or  defect  in  the  title  to  them,  or  that  it  took  them  in  bad 
faith.  Nor  was  it  contended  by  the  defendant  that  in  discounting  the 
notes  the  bank  acted  otherwise  than  in  the  regular  and  usual  course 
of  business.  But  upon  the  defendant's  testimony  it  might  be  found 
that  the  notes  were  given  to  him  by  the  maker  in  payment  of  indebted- 
ness ;  that,  after  he  had  indorsed  them  in  blank,  and  put  them  in  his 
desk  for  collection  or  discount,  he  was  called  out  of  his  office,  leaving 
the  maker,  Stevens,  there;  and  that  Stevens  then  took  them  without 
right,  and  three  days  later  carried  them  to  the  plaintiff  bank,  and 
caused  them  to  be  discounted  for  his  own  benefit.     *     *     * 

The  defendant's  contention  that,  after  the  notes  had  been  delivered 
to  the  defendant  aad  indorsed  by  him,  they  were  stolen  by  Stevens, 
brings  us  to  the  question  whether,  under  the  negotiable  instrum.ents 
act,  a  holder  in  due  course  of  a  note  payable  to  bearer,  that  has  been 
stolen,  can  acquire  a  good  title  from  the  thief.  Even  before  the 
enactment  of  the  statute,  while  the  decisions  were  not  uniform,  the 
weight  of  authority  was  in  favor  of  an  affirmative  answer  to  the  ques- 
tion. Wheeler  v.  Guild,  20  Pick.  545,  550.  553,  32  Am.  Dec.  231; 
Worcester  County  Bank  v.  Dorchester  &  Milton  Bank,  10  Cush.  488, 
57  Am.  Dec.  120 ;  Wyer  v.  Dorchester  &  Milton  Bank,  11  Cush.  51, 
53,  59  Am.  Dec.  137 ;  Spooner  v.  Holmes,  102  Mass.  503,  3  Am.  Rep. 
491;  London  Joint  Stock  Bank  v.  Simmons,  [1892]  App.  Cas.  201, 
and  cases  cited ;  Smith  v.  Union  Bank  of  London,  1  Q.  B.  D.  31 : 
Goodman  v.  Simonds,  20  How.  343.  365.  15  L-  Ed.  934 ;  Murray  v. 
Lardner,  2  Wall.  110,  17  L.  Ed.  857;    Hotchkiss  v.  National  Shoe  & 

*  Part  of  the  opinion  is  omitted. 


Ch.  3)  DKLlVliUT.  231 

Leather  Bank,  21  Wall.  354,  22  L.  Ed.  645 ;  Kinyon  v.  Wohlfoi'd,  17 
Minn.  239  (Gil.  215),  10  Am.  Rep.  165;  Clarke  v.  Johnson,  54  111. 
296 ;  Seybel  v.  National  Currency  Bank,  54  N.  Y.  288,  13  Am.  Rep. 
583 ;  Evertson  v.  National  Bank  of  Newport,  66  N.  Y.  14,  23  Am. 
Rep.  9  ;   Kuhns  v.  Gettysburg  National  Bank,  68  Pa.  -445. 

The  following  specific  language  of  the  statute  touching  this  question, 
as  well  as  its  provisions  in  other  sections,  was  intended  to  establish 
the  law  in  favor  of  holders  in  due  course :  "But  where  the  instrument 
is  in  the  hands  of  a  holder  in  due  course,  a  valid  delivery  thereof  by 
all  parties  prior  to  him,  so  as  to  make  them  liable  to  him,  is  con- 
clusively presumed."  Rev.  Laws,  c.  73,  §  33.  This  conclusive  pre- 
sumption exists  as  well  when  the  note  is  taken  from  a  thief  as  in  any 
other  case.  Of  course,  this  rule  does  not  apply  to  an  instrument  which 
is  incomplete.  But  in  reference  to  a  complete,  negotiable  promissory 
note,  payable  to  bearer,  it  is  a  wholesome  and  salutary  provision.  See 
Greeser  v.  Sugarman,  37  Misc.  Rep.  799,  76  N.  Y.  Supp.  922. 

Upon  the  defendant's  statement  and  the  counsel's  theory  of  the 
case,  the  rule  is  applicable.  The  note  not  only  was  complete  in  form 
and  in  execution,  but,  upon  his  testimony,  it  had  been  delivered  to 
him  by  the  maker  as  a  binding  instrument,  and  had  afterwards  been 
indorsed  by  him.  Therefore  the  first  sentence  of  Rev.  Laws,  c.  73, 
§  33,  "Every  contract  on  a  negotiable  instrument  is  incomplete  and 
revocable  until  delivery  of  the  instrument  for  the  purpose  of  giving 
effect  thereto,"  was  inapplicable.  The  instrument  had  taken  effect, 
and  was  subsequently  negotiated  by  the  bearer  to  the  plaintiff  as  a 
holder  in  due  course.  That  the  bearer  was  also  the  maker  was  im- 
material after  the  instrument  had  been  so  indorsed  as  to  become  pay- 
able to  bearer. 

Upon  the  plaintiff's  theory  of  the  facts,  there  was  no  theft,  but  an 
ordinary  accommodation  indorsement  by  the  defendant  for  the  benefit 
of  the  maker,  and  none  of  these  questions  arise. 

We  are  of  opinion  that  the  judge  erred  in  giving  the  fourth  and 
fifth  instructions  requested  by  the  defendant,  and  in  refusing  other 
instructions  requested  by  the  plaintiff,  founded  upon  a  different  view 
of  the  statute. 

There  was  also  error  in  the  instructions  given  as  to  the  alleged  al- 
teration of  the  notes.  By  Rev.  Laws,  c.  73,  §  141,  it  is  provided  that 
"when  an  instrument  has  been  materially  altered,  and  is  in  the  hands 
of  a  holder  in  due  course,  not  a  party  to  the  alteration,  he  may  en- 
force payment  thereof  according  to  its  original  tenor."  This  lan- 
guage is  directly  applicable  to  the  present  case.  See  Scholfield  v. 
Earl  of  Londesborough  (1894)  2  Q.  B.  660;  (1895)  1  Q.  B.  536; 
(1896)  A.  C.  514;  Schwartz  v.  WilnTer,  90  Md.  136,  143,  44  Atl.  1059. 

We  understand  that  the  instructions  were  given  independently  of 
any  question  of  pleading,  and  we  therefore  do  not  deem  it  necessary 
to  determine  at  this  stage  of  the  case  whether  the  plaintiff  should 
amend  its  declaration  by  inserting  counts  upon  the  notes  as  they  were 


232  FORM  AND  INCEPTION.  (Part  1 

before  the  alleged  alteration,  if  it  wishes  to  recover  upon  them  as  notes 
bearing  interest  at  only  6  per  cent.     See  Mutual  Loan  Association  v. 
Lesser.  76  App.  Div.  Gli,  78  N.  Y.  Supp.  629.     Nor  do  we  consider 
other  questions  which  are  not  likely  to  arise  upon  a  second  trial. 
Exceptions  sustained.* 


PERRY  V.  BIGELOW. 
(Supreme  Judicial  Court  of  Massachusetts,  Worcester,  ISSO.     128  Mass.  120.) 

Contract  on  a  promissory  note  for  $5,000  signed  by  the  defendant 
and  indorsed  by  the  payee.  Trial  in  the  superior  court,  before  Dewey, 
J.,  who  reported  the  case  for  the  consideration  of  this  court  in  sub- 
stance as  follows : 

The  defendant  offered  to  show  that,  on  January  11,  1877,  the 
parties  made  an  oral  contract,  by  which  the  plaintiff  was  to  let  the 
defendant  have  $5,000  in  money,  less  the  interest  for  four  months, 
and  the  defendant  was  to  transfer  to  the  plaintiff  certain  shares  of 
the  Scotia  Lead  Mining  Company,  and  at  the  end  of  the  four  months 
the  defendant  was  to  have  the  right  to  have  the  stock  back  by  paying 
the  $5,000,  and,  if  he  did  not  do  so,  the  plaintiff  was  to  have  the  stock 
absolutely,  and  the  defendant  was  not  to  pay  the  $5,000 ;  that  the  par- 
ties were  at  the  bankinghouse,  of  which  the  plaintiff  was  president, 
and  he  suggested  that  he  would  like  to  have  it  appear  as  a  bank  trans- 
action, and  accordingly  went  to  the  adjoining  room,  where  was  the 
cashier,  and  returned  to  the  defendant  with  the  note  declared  on ; 
and  that  the  same  was  then  duly  executed  by  the  defendant  and  de- 
livered to  the  plaintiff,  who  paid  him  $5,000.  less  four  months'  dis- 
count. It  was  agreed  that  the  note  was  made  payable  to  the  cashier 
for  the  accommodation  of  the  plaintiff",  and  that  neither  the  bank  nor 
the  cashier  had  any  interest  therein. 

The  plaintiff  contended  that  the  above  offer  of  proof  was  not  com- 
petent. The  judge  so  ruled;  and  directed  a  verdict  for  the  plain- 
tiff." 

Ames.  J.  The  defendant's  written  contract  was  a  negotiable  prom- 
issory note,  requiring  him  to  pay  a  certain  sum  of  money  at  a  definite 
time.  The  evidence  which  he  sought  to  introduce  was  for  the  pur- 
pose of  showing  that  this  written  contract  was  not  the  real  contract 
between  the  parties ;  that  the  note  was  merely  a  memorandum ;  and 
that  certain  certificates  of  stock  described  in  the  note  as  collateral 
security  should  operate  as  payment  of  the  note  at  its  maturity,  if  it 
were  not  previously  paid.  This  evidence  could  not  be  received  with- 
out doing  violence  to  the  rule  that  oral  evidence  cannot  be  admitted 

5  Accord :     Greeser  v.   Sugarman,  37  Misc.   Rep.  799,  76  N.   Y.   Supp.   922 
,1902) ;    Buzzell  v.  Tobin,  201  Mass.  1,  SG  X.  E.  923  (1909). 
•  The  statemeut  of  facts  is  abridged. 


Ch.  3)  DELIVERY.  233 

to  alter  a  written  contract,  or  to  annex  to  it  a  condition  or  defeasance 
not  appearing  in  the  contract  itself.  Adams  v.  Wilson,  12  Mete.  138, 
45  Am.  Dec.  240;  St.  Louis  Ins.  Co.  v.  Homer,  9  Mete.  39;  Allen 
V.  Furbish,  4  Gray,  504,  64  Am.  Dec.  87.  It  is  needless  to  multiply 
citations  on  so  familiar  a  rule  of  evidence. 
Judgment  on  the  verdict.'^ 


McFARLAND  v.  SIKES. 

(Supreme  Court  of   Errors  of  Conuectieut,  18SG.     54  Conn.   250,   7  Atl.  408, 

1  Am.   St.   Rep.   111.) 

Park,  C.  J.  This  is  a  suit  upon  a  note  of  $300.  On  the  trial  in 
the  court  below  the  defendant  offered  evidence  to  prove,  and  claimed 
to  have  proved,  that  previously  to  the  execution  and  delivery  of  the 
note  the  plaintiff,  who  was  a  grand  juror  of  the  town  of  Ellington, 
where  the  defendant  resided,  and  was  acting  as  the  attorney  of  one 
Mary  Quinn,  accused  the  defendant  of  having  made  an  assault  upon 
the  person  of  the  said  Mary,  and  threatened  him  with  a  criminal 
prosecution  unless  he  settled  with  her  for  the  injury;  that  the  defend- 
ant thereupon  admitted  that  he  had  done  wrong  in  the  matter,  and 
offered  $100  to  settle  it;  that  the  plaintiff  demanded  $300,  which  the 
defendant  was  unwilling  to  pay;  that  the  defendant  was  without 
counsel,  and  asked  to  be  allowed  till  the  following  Tuesday  to  consider 
the  matter,  and  offered  to  give  his  note  for  $300,  to  be  held  by  the 
plaintiff  till  then,  and,  if  he  did  not  then  appear,  to  be  held  by  the 
plaintiff  as  a  settlement  for  the  injury  to  the  said  Mary,  but,  if  he 
should  appear,  to  be  returned  to  him  to  be  canceled ;  that  thereupon 
the  plaintiff  wrote  the  note  in  suit,  which  the  defendant  executed  and 
delivered  to  the  plaintiff,  to  be  held  by  him  upon  the  conditions  stated ; 
and  that  the  defendant  at  the  same  time  declared  that  he  should  ap- 
pear and  demand  a  return  of  the  note.  The  defendant  also  offered 
evidence  that  on  the  following  Tuesday  he  appeared  before  the  par- 
ties and  demanded  the  return  of  the  note,  but  that  the  plaintiff  refused 
to  surrender  it. 

With  reference  to  this  evidence  the  defendant  requested  the  court 
to  charge  the  jury  "that  if  the  note  was  delivered  to  the  plaintiff  with 
the  understanding  between  him  and  the  defendant  that  it  was  to  be 
delivered  up  to  the  latter  on  his  demand  on  the  Tuesday  following, 
and  the  defendant  demanded  its  return  on  that  day,  the  plaintiff  can- 
not recover,  and  the  verdict  must  be  for  the  defendant."  The  court 
did  not  so  charge  the  jury,  but  substantially  that  if  they  should  find 

7  See  Norman  v.  Norman,  11  Ind.  28S  (1858),  where  the  defendant  pleaded 
as  an  equitable  defense  that  the  note  was  intended  as  a  memorandum  only. 


234  FORM  AND  INCEPTION.  (Part  1 

all  the  facts  claimed  by  the  defendant  to  be  proved  they  did  not  con- 
stitute a  defense  to  the  action. 

\Vc  think  the  court  erred  in  refusing  to  charge  as  requested,  and 
in  charging  as  it  did.  The  error  was  in  applying  to  the  case  the  famil- 
iar and  well-established  rule  that  parol  evidence  is  inadmissible  to 
contradict  or  vary  a  written  contract.  A  written  contract  must  be  in 
force  as  a  binding  obligation  to  make  it  subject  to  this  rule.  Such  a 
contract  cannot  become  a  binding  obligation  until  it  has  been  delivered. 
Its  delivery  may  be  absolute  or  conditional.  If  the  latter,  then  it 
does  not  become  a  binding  obligation  until  the  condition  upon  which 
its  delivery  depends  has  been  fulfilled.  If  the  payee  of  a  note  has  it 
in  his  possession  that  fact  would  be  prima  facie  evidence  that  it  had 
been  delivered ;  but  it  would  be  only  prima  facie  evidence.  The  fact 
could  be  shown  to  be  otherwise,  and  by  parol  evidence.  Such  parol 
evidence  does  not  contradict  the  note  or  seek  to  vary  its  terms.  It 
merely  goes  to  the  point  of  its  nondelivery.  The  note  in  its  terms  is 
precisely  what  both  the  maker  and  the  payee  intended  it  to  be.  No 
one  desires  to  vary  its  terms  or  to  contradict  them. 

In  the  case  of  Benton  v.  Martin,  52  N.  Y.  570,  the  court  say:  "In- 
struments not  under  seal  may  be  delivered  to  the  one  to  whom  upon 
their  face  they  are  made  payable,  or  who  by  their  terms  is  entitled  to 
some  intejjest  or  benefit  under  them,  upon  conditions  the  observance 
of  which  is  essential  to  their  validity.  And  the  annexation  of  such 
conditions  to  the  delivery  is  not  an  oral  contradiction  of  the  written 
obligation,  though  negotiable,  as  between  the  parties  to  it  or  others 
having  notice.  It  needs  a  delivery  to  make  the  obligation  operative  at 
all,  and  the  efifect  of  the  delivery  and  the  extent  of  the  operation  of 
the  instrument  may  be  limited  by  the  conditions  with  which  the  de- 
livery is  made." 

In  the  case  of  Schindler  v.  IMuhlheiser,  45  Conn.  153,  the  headnote 
is  as  follows :  "The  defendant  had  given  the  plaintiff  his  note  for  cer- 
tain real  estate  conveyed  to  him  by  an  absolute  deed  by  the  plaintiff. 
Held,  in  a  suit  on  the  note,  that  parol  evidence  was  admissible,  on 
the  part  of  the  defendant,  to  show  that  the  conveyance  was  not  in- 
tended as  a  sale,  but  was  made  by  the  plaintiff  for  a  certain  purpose 
of  his  own  and  upon  an  understanding  with  the  defendant  that  the 
land  was  afterwards  to  be  conveyed  back,  and  that  the  note  was  given 
at  the  time  under  an  agreement  that  it  was  not  to  be-  paid."  The  de- 
fense in  that  case  was  really  that  the  note  had  never  been  delivered  as 
a  note,  binding  upon  the  defendant.  The  delivery  was  merely  formal, 
and  was  so  understood  by  the  parties. 

See,  also,  Adams  v.  Gray,  8  Conn.  11,  20  Am.  Dec.  82;  Collins  v. 
Tillou.  26  Conn.  368,  68  Am.  Dec.  398;  Clarke  v.  Tappin,  32  Conn. 
56 ;  Post  V.  Gilbert,  44  Conn.  9 ;  Hubbard  v.  Ensign,  46  Conn.  585. 

We  think  the  court  erred  in  refusing  to  charge  the  jury  as  requested 
by  the  defendant. 


Ch.  3)  DELIVERY.  235 

The  view  we  have  taken  of  this  question  renders  it  unnecessary  to 
consider  the  other  questions  made  in  the  case. 

There  is  error  in  the  judgment  appealed  from;  and  it  is  reversed, 
and  a  new  trial  ordered.* 


NEW  LONDON  CREDIT  SYNDICATE,  Limited,  v.  NEALE. 
(Court  of  Appeal,  [1898].     2  Q.  B.  487.) 

Appeal  of  plaintiffs  from  the  judgment  of  Darling,  J.,  at  the  trial 
before  him  without  a  jury. 

The  action  was  upon  a  bill  of  exchange  for  £110.  payable  three 
months  after  date  by  indorsees  against  acceptor,  the  bill  having  been 
indorsed  to  the  plaintiffs  by  the  drawers  to  whose  order  it  was  made 
payable.  The  acceptance  had  been  given  to  the  drawers  by  the  de- 
fendant, who  was  the  chairman  of  and  interested  in  a  company,  in 
settlement  of  an  action  brought  by  them  against  the  company.  The 
defense  set  up  was  that,  at  the  time  when  the  bill  was  accepted,  it 
was  orally  agreed  between  the  drawers  and  the  defendant  that,  if  the 
latter  could  not  meet  it  at  maturity,  the  drawers  would  renew  it.  It 
was  admitted  by  the  plaintiffs,  who  had  given  value  for  the  bill,  that 
they  had  notice  of  the  circumstances  under  which  the  bill  was  ac- 
cepted, and  that  they  consequently  could  not  claim  to  stand  in  a  better 
position  than  the  drawers ;  but  they  contended  that  what  took  place 
between  the  drawers  and  the  acceptor  did  not  amount  to  a  contract  to 
renew  the  bill,  and  that,  if  it  did,  evidence  of  such  an  oral  agreement 
was  not  admissible  to  vary  the  effect  of  the  written  instrument.  The 
learned  judge  held  that  the  evidence  showed  that  the  negotiation  of 
the  bill  by  the  drawers  was  in  breach  of  good  faith,  and  consequently 
the  plaintiffs'  title  to  the  bill  was  defective,  and  they  could  not  main- 
tain the  action.     He  therefore  gave  judgment  for  the  defendant.^ 

A.  L.  Smith,  L.  J.  This  is  an  action  upon  a  bill  of  exchange  by 
indorsees  against  acceptor,  but  it  really  may  be  treated  as  if  it  were 
an  action  by  the  drawers ;  for  it  is  admitted  that  the  indorsees  stand 
in  no  better  position  than  the  drawers,  as  they  had  notice  of  the  facts 
upon  which  the  defendant  relies.  I  do  not  disagree  with  the  learned 
judge,  upon  the  conflicting  evidence  with  regard  to  the  conversation 
that  took  place  between  the  drawers  of  the  bill  and  the  defendant,  that 
there  was  an  agreement  by  the  former  that  they  would  not  part  with 
the  bill,  and  would  renew  it,  if  the  defendant  was  not  in  a  position  to 

8  Accord :  Hodge  v.  Smith,  130  Wis.  326,  110  N.  W.  192  (1907) ;  Swanke 
V.  Herdeman,  138  Wis.  654,  120  N.  W.  414  (1909) ;  Key  v.  Usher,  99  S.  W. 
324,  30  Ky.  Law  Rep.  667  (1907);  J.  I.  Case  Co.  v.  Barnes,  133  Ky.  321. 
117  S.  W.  418  (1909);  Viets  v.  Silver,  15  N.  D.  51,  106  N.  W.  35  (1905), 
semlile;    Dawson  v.  Isle,  (1906)  1  Cb.  D.  633,  semble. 

9  Arguments  of  counsel  are  omitted. 


236  FORM  AND  iNC'KPTiON.  (Part  1 

pay  it  at  maturity.  The  question  is  whether  that  evidence  was  ad- 
missible. The  bill  is  a  written  instrument  by  which  the  defendant 
undertakes  to  pay  illO.  at  the  end  of  three  months.  It  has  been  held, 
over  and  over  again,  that  evidence  of  a  contemporaneous  oral  agree- 
ment is  not  admissible  to  vary  the  effect  of  such  an  instrument.  If 
the  evidence  be  to  the  elTect  that  the  document  is  only  delivered  as  an 
escrow,  or  that  it  is  not  to  take  effect  as  a  contract  until  some  condi- 
tion is  fulfilled,  it  is  admissible.  But  that  is  not  this  case.  This  docu- 
ment was  signed  and  handed  over  as  a  bill  of  exchange,  but  there  was 
an  oral  agreement  that  at  maturity  it  should  be  renewed,  if  the  defend- 
ant required  it.  In  other  words,  although  the  written  document  states 
that  the  bill  is  to  be  met  upon  a  day  certain,  the  parol  evidence  is  that 
it  is  not  to  be  then  met.  Nothing  is  more  clearly  settled  than  that  evi- 
dence of  such  an  agreement  is  not  admissible.  In  Abrey  v.  Crux,  L. 
R.  5  C.  P.  37,  Wiiles,  J.,  stated  that  to  be  the  law  as  established  by 
the  cases  of  Hoare  v.  Graham  (1811)  3  Camp.  57,  and  Young  v.  Aus- 
ten. L.  R.  4  C.  P.  553.  It  was  argued  by  the  defendant's  counsel  that 
the  law  as  laid  down  in  those  cases  is  altered  by  the  Bills  of  Exchange 
Act.  1882.  I  do  not  think  that  it  was  intended  by  that  act  to  alter 
the  general  law  of  evidence  which  renders  parol  evidence  inadmissible 
for  the  purpose  of  contradicting  the  terms  of  a  written  document. 
The  defendant's  counsel  relied  on  the  terms  of  section  21,  subsec. 
2,  and  section  29,  subsecs.  1,  2,  of  the  Bills  of  Exchange  Act,'  1882.* 
He  urged  that  the  plaintififs  had  notice  of  a  defect  in  the  title  of  the 
drawers,  because  they  knew  that  the  bill  was  negotiated  in  breach  of 
faith.  But,  assuming  that  section  29  has  any  application  to  such  a 
case  as  this,  the  only  way  in  which  a  breach  of  faith  could  be  shown 
in  this  case  is  by  showing  a  breach  of  the  contemporaneous  oral  agree- 
ment, and  by  the  rules  of  evidence  that  is  inadmissible.  For  these 
reasons  I  am  of  opinion  that  the  appeal  must  be  allowed  and  judg- 
ment entered  for  the  plaintiffs. 

RiGBY.  L.  J.  I  am  of  the  same  opinion.  It  is  a  wholesome  rule  of 
law  that,  when  parties  have  put  an  agreement  into  writing,  parol  evi- 
dence is  not  admissible  to  contradict  or  vary  the  terms  of  the  written 
agreement.  There  are  certain  cases  which  may  conveniently  be  called 
"escrow"  cases  where  the  question  is  whether  the  written  agreement 
has  ever  become  an  effective  agreement,  or  whether  it  was  only  to 
have  effect  as  an  agreement  upon  some  condition  being  fulfilled  which 
has  not  been  fulfilled.    This  is  not  a  case  of  that  kind. 

Vaughax  Williams,  L.  J.  I  agree.  For  lawyers  practicing  under 
the  old  system  of  pleading  there  was  a  convenient  test  in  these  cases 
as  to  whether  the  oral  evidence  which  it  was  sought  to  give  was  ad- 
missible. If  the  evidence  were  such  as  would  support  a  plea  of  the 
general  issue  in  an  action  of  contract,  like  non  est  factum,  that  is  to 

*  The  corresponding  sections  of  the  N.  I.  L.  are  sections  IG  and  52. 


Ch.  3)  DELIVERY.  237 

say,  if  it  amounted  to  showing  that,  though  the  defendant  signed  the 
instrument,  he  signed  it  on  the  understanding  that  it  should  not  be 
an  effective  instrument  until  some  condition  was  fulfilled,  then  it  was 
admissible.  » 

Appeal  allowed.^" 


PUTNAM  V.  SULLIVAN. 

(Supreme  Judicial  Court  of  Massachusetts,  Suffolk,  1808.    4  Mass.  45,  3  Am. 

Dec.  20G.) 

Case  by  the  indorsees  against  the  indorsers  of  a  promissory  note, 
dated  December  1,  1804,  payable  to  the  defendants  or  their  order. 
The  action  was  tried  at  the  last  November  term  before  Parker,  J., 
when  a  verdict  was  given  for  the  plaintiffs  for  the  amount  of  the  note 
and  interest,  subject  to  the  opinion  of  the  court  whether  upon  the 
facts  proved,  and  which  were  to  be  reported  by  the  judge,  the  action 
could  be  maintained.  If  the  court  should  be  of  that  opinion,  judg- 
ment to  be  entered  according  to  the  verdict,  with  additional  damages 
for  interest  to  the  time  of  the  judgment;  if  the  court  should  be  of  a 
different  opinion,  a  new  trial  to  be  granted. 

Those  facts  were,  in  substance,  that  the  note  was  payable  in  90  days 
from  the  date  with  grace,  and  that  the  plaintiff's  were  innocent  in- 
dorsees, having  received  the  note  indorsed  in  blank,  and  paid  a  valu- 
able consideration  for  the  same.  The  handwriting  of  the  promisor 
and  indorsers  were  admitted,  the  latter  being  the  handwriting  of  W. 
B.  Sullivan,  a  partner  of  the  house  doing  business  under  the  firm  of 
Jno.  L.  Sullivan  &  Co.  The  note  being  lodged  in  the  Boston  Bank 
for  collection,  notice  was  left  at  the  lodgings  of  the  promisor  by  the 
messenger  of  the  bank,  on  the  28th  of  February,  1805,  and  on  the  3d 
day  of  March  following  the  said  W.  B.  S.,  one  of  the  indorsers,  was 
notified  that  the  note  was  unpaid.  It  was  also  in  evidence  that  the 
promisor  had  absconded  before  the  note  fell  due,  and  that  this  fact  was 
known  to  all  the  parties  at  the  time. 

One  of  the  defendants  being  abroad  in  Europe,  and  the  other,  about 
the  1st  of  December,  1804,  having  occasion  to  make  a  journey  from 
Boston  to  Philadelphia,  intrusted  with  an  apprentice  or  clerk  of  the 
house  a  number  of  papers  on  which  one  of  the  house  had  written  the 
name  of  the  firm  in  blank,  some  to  be  used  as  notes  indorsed  by  tne 
house,  and  others  as  notes  in  which  the  house  were  to  be  the  promis- 
ors. These  papers  were  intrusted  to  a  clerk  of  the  defendants  to  be 
used  when  money  was  to  be  advanced  on  the  sale  of  goods  by  the 

10  Compare  Hall  v.  Bank,  173  Mass.  16.  53  N.  B.  154,  44  L.  R.  A.  319,  73 
Am.  St.  Kep.  255  (1809),  where  under  facts  similar  to  those  in  the  principal 
case  the  defendant  filed  a  bill  for  specific  performance  of  the  parol  agree- 
ment. 


238  FORM  AND  INCEPTION.  (Part    1 

house  on  commission,  or  to  renew  the  notes  of  the  house  when  due 
at  the  banks.  The  clerk  was  directed  to  be  careful  of  the  blanks  left 
with  him,  and  not  to  use  any  for  the  advance  of  money  on  the  sale 
of  goods  on  commission  without  consulting  a  brother  of  the  partners. 
He  was  further  directed  to  deliver  one  of  the  blanks  to  the  promisor 
upon  the  note  sued  in  this  action,  to  enable  him  to  renew  a  note  signed 
by  him  then  in  the  bank,  of  which  the  house  were  indorsers,  and  for 
which  he  had  requested  a  blank  to  be  left.  The  promisor  called  on  the 
clerk  for  the  blank  indorsement  left  for  him,  and  one  was  delivered  to 
him.  Afterwards,  pretending  that  by  some  mistake  it  had  become  use- 
less to  him,  and  feigning  to  burn  in  the  clerk's  presence  the  name  of 
the  firm  indorsed,  he  procured  another  blank,  and  by  a  similar  preten- 
sion and  contrivance  he  obtained  a  third  and  a  fourth  blank  indorse- 
ment, the  last  of  which  was  in  fact  used  for  the  purpose  for  which 
the  house  had  directed  a  blank  indorsement  to  be  given  him.  The 
promisor  had  used  one  of  the  prior  blank  indorsements  for  making  the 
note  sued  in  this  action,  which  had  been  negotiated,  with  the  indorse- 
ment remaining  in  blank,  to  the  plaintiffs.^ ^ 

Parsons,  C.  J.  *  *  *  On  the  facts  in  this  case  we  are  to  de- 
cide who  sl.all  suffer  the  loss  of  the  money,  the  plaintiffs,  who  it  is 
agreed  are  innocent  indorsees,  or  the  defendants. 

It  is  objected  that  this  note  ought  to  be  considered  as  a  forgery  of 
the  names  of  the  indorsers,  because  a  note  was  afterwards  written 
on  the  face  of  the  paper  by  the  promisor,  not  only  without  the  direc- 
tion or  consent  of  the  defendants,  but  against  their  express  instruc- 
tion, and  therefore  that  it  was  a  false  and  fraudulent  alteration  of  a 
writing,  to  the  prejudice  of  the  indorsers. 

This  objection  would  have  great  weight  if,  when  the  indorsers  put 
the  name  of  the  firm  on  the  paper,  they  had  not  intended  that  some- 
thing should  afterwards  be  written,  to  which  the  name  should  apply 
as  an  indorsement ;  for  then  the  paper  would  have  been  delivered  over 
unaccompanied  by  any  trust  or  confidence.  If  the  clerk  had  fraud- 
ulently, and  for  his  own  benefit,  made  use  of  all  the  indorsements  for 
making  promissory  notes  to  charge  the  indorsers,  we  are  of  opinion 
that  this  use,  though  a  gross  fraud,  would  not  be  in  law  a  forgery, 
but  a  breach  of  trust.  And  for  the  same  reason,  when  one  of  these 
indorsements  was  delivered  by  the  clerk,  who  had  the  custody  of 
them,  to  the  promisor,  who  by  false  pretenses  had  obtained  it,  the 
fraudulent  use  of  it  would  not  be  a  forgery,  because  it  was  delivered 
with  the  intention  that  a  note  should  be  written  on  the  face  of  the 
paper  by  the  promisor,  for  the  purpose  of  negotiating  it  as  indorsed 
in  blank  by  the  house.  And  we  must  consider  a  delivery  by  the  clerk, 
who  was  intrusted  with  a  power  of  using  these  indorsements  (al- 
though his  discretion  was  confined),  as  a  delivery  by  one  of  the  house,. 

11  Ai'i^iiim'Uts  of  couusel  and  part  of  the  opinion  are  omitted- 


Ch.  3)  DELIVERY.  239 

whether  he  was  deceived,  as  in  the  present  case,  or  had  voluntarily 
exceeded  his  direction;  for  the  limitation  imposed  on  his  discretion 
was  not  known  to  any  but  to  himself  and  to  his  principals. 

It  is  further  objected  that,  if  the  writing  of  this  note  under  these 
circumstances  is  not  a  forgery,  yet  it  is  such  a  fraud  as  will  discharge 
the  indorsers  against  an  innocent  indorsee.  The  counsel  for  the  de- 
fendants agree  that  generally  an  indorsement  obtained  by  fraud  shall 
hold  the  indorsers  according  to  the  terms  of  it;  but  they  make  a  dis- 
tinction between  the  cases  where  the  indorser  through  fraudulent  pre- 
tenses has  been  induced  to  indorse  the  note  he  is  called  on  to  pay  and 
where  he  never  intended  to  indorse  a  note  of  that  description,  but  a- 
different  note  and  for  a  different  purpose. 

Perhaps  there  may  be  cases  in  which  this  distinction  ought  to  pre- 
vail, as  if  a  blind  man  had  a  note  falsely  and  fraudulently  read  to  him, 
and  he  indorsed  it,  supposing  it  to  be  the  note  read  to  him.  But  we 
are  satisfied  that  an  indorser  cannot  avail  himself  of  this  distinction, 
but  in  cases  where  he  is  not  chargeable  with  any  laches  or  neglect, 
or  misplaced  confidence  in  others.  Here  one  of  two  innocent  parties 
must  suffer.  The  indorsees  confided  in  the  signature  of  the  defend- 
ants, and  they  could  have  no  reason  to  suppose  that  it  had  been  im- 
properly obtained.  The  note  was  openly  offered  to  the  plaintiffs  by 
a  broker,  and  when  they  objected  on  account  of  the  absence  of  both 
the  indorsers,  they  were  answered,  on  the  information  of  the  prom- 
isor, whose  character  then  stood  fair,  that  blank  indorsements  had 
been  left  with  the  clerk,  and  that  the  indorsers  had  before  indorsed  a 
number  of  notes  for  the  same  person,  which  had  been  negotiated  by  a 
broker.  On  the  other  hand,  the  loss  has  been  occasioned  by  the  mis- 
placed confidence  of  the  indorsers  in  a  clerk  too  young  or  too  unex- 
perienced to  guard  against  the  arts  of  the  promisor.  It  is  to  be  re- 
gretted that  the  blank  indorsements  had  not  been  deposited  with  the 
brother  of  the  partners,  who  was  directed  to  be  consulted  as  to  the 
use  of  them ;   for  then  no  innocent  person  would  have  been  a  sufferer. 

From  a  view  of  all  the  facts  as  they  are  presented  to  us,  it  is  our 
opinion  that  the  indorsers  must  be  holden,  and  that  judgment  must 
be  entered  according  to  the  verdict,  with  the  additional  interest  agreed. 

In  forming  this  opinion  we  have  been  necessarily  led  to  consider 
the  effect  of  a  different  opinion  on  the  coinmercial  part  of  the  com- 
munity. How  far  it  is  common  for  merchants  to  intrust  their  clerks 
with  blank  signatures  or  indorsements  is  not  known.  But  when  mer- 
chants are  in  the  habit  of  indorsing  for  each  other  at  the  banks,  it  is 
very  common  to  put  their  names  on  blank  paper,  and  deliver  them  to 
the  party  to  be  accommodated,  for  the  express  purpose  of  obtaining  a 
renewal  of  certain  notes,  when  they  become  due.  And  if  the  party 
having  these  signatures  should  employ  them  as  names  to  other  ne- 
gotiable securities  not  contemplated,  and  the  signatures  should  for 
that  reason  be  void,  much  injury  might  result  to  innocent  indorsees, 
or  the  bank  discounts  would  be  greatly  embarrassed. 


240  FORM  AND  INCEPTION.  (Part  1 

CAULKINS  V.  WHISLER. 

(Supreme  Court  of  Iowa,  1870.     29  Iowa,  495,  4  Am.  Rep.  236.) 

Action  upon  a  promissory  note;  defense,  that  the  instrument  is  a 
forgery.  The  cause  was  submitted  to  the  court  without  a  jury.  The 
court  found  the  following  facts :  Defendant  entered  into  a  contract 
with  one  Smith  to  sell  for  him,  as  his  agent,  grain  seeders.  At 
Smith's  request,  defendant  signed  his  name  upon  a  blank  piece  of 
paper,  which  Smith  was  to  send  to  the  manufacturers  of  the  seeders, 
that  they  might  know  defendant's  signature  upon  orders  which  he 
should  make  upon  them  for  the  machines.  The  signature  was  made 
for  no  other  purpose.  The  instrument  in  suit  was  printed  over  the 
signature  of  defendant,  so  obtained  without  his  knowledge  and  con- 
sent, and  the  stamp  in  the  same  manner  attached  and  canceled.  The 
plaintiff  purchased  the  note  before  maturity,  for  a  valid  consideration, 
and  without  knowledge  of  any  matter  connected  with  its  execution. 
Upon  these  findings,  the  court  held  that  the  note  is  a  forgery  and  void, 
and  that  plaintiff  is  not  entitled  to  recover  thereon.     Plaintiff  appeals. 

Beck,  J.  A  holder  of  negotiable  paper,  acquired  before  dishonor, 
is  not  protected  against  defenses  that  make  void  the  instrument.  He 
can  have  no  claim  upon  forged  paper  against  the  person  whose  name 
is  falsely  affixed  thereto  as  the  maker,  and  who  is  without  fault  as  to 
the  forgery  and  the  taking  of  the  paper  by  the  holder.  1  Parsons, 
Bills  and  Notes,  75,  and  authorities  cited. 

Is  the  note  sued  upon  a  forged  instrument?  "The  making  or  al- 
teration of  any  writing  with  fraudulent  intent,  whereby  another  may 
be  prejudiced,  is  forgery."  State  v.  Wooderd,  20  Iowa,  542;  Revi- 
sion, §  4253.  In  order  to  constitute  the  offense  of  forgery  it  is  not 
necessary  that  the  signature  of  the  instrument  be  false.  The  instru- 
ment may  be  altered  so  that  it  is  not  the  instrument  signed  by  the 
maker,  and,  if  this  be  fraudulently  and  falsely  done,  it  is  forgery. 
So  if  words  be  added  to  change  its  effect,  with  like  intent  it  is  a  for- 
gery. In  the  case  before  us  the  instrument  was  falsely  and  fraudu- 
lently made  over  the  genuine  signature  of  defendant,  which  was  not 
obtained  for  the  purpose  of  binding  defendant  by  any  contract.  It 
is  evident  that  this  differs,  in  no  respect,  from  the  cases  mentioned, 
and  that  the  note  is  a  forgery  and  void.  See  2  Parsons,  Bills  and 
Notes,  584. 

The  case  differs  materially  in  its  facts  from  the  cases  cited  in  sup- 
port of  plaintiff's  right  to  recover.  In  those  cases  blanks  were  filled 
up  contrary  to  the  direction  of  the  maker,  or  without  his  authority. 
But  in  all  of  such  cases  the  makers  intended  to  execute  an  instrument 
that  should  be  binding  upon  them.  Blanks  were  filled  up  contrary  to 
the  authority  given  by  the  makers,  or  in  some  other  way  the  instru- 
ments were  made  so  that  they  did  not  correspond  with  the  intention 
of  the  makers ;    but  in  all  such  cases  there  were  makers  and  instru- 


Ch.   3)  DELIVERY.  241 

merits,  and  through  the  frauds  of  those  to  whom  the  instruments  were 
intrusted  they  were  thus  made  to  be  of  different  effect  than  was  de- 
signed by  the  makers.  In  these  cases  it  is  correctly  held  that,  while 
the  parties  perpetrating  the  fraud  in  some  cases  may  have  been  guilty 
of  forgery,  yet  the  makers  were  bound  upon  the  instruments,  as 
against  holders  in  good  faith  and  for  value.  The  reason  is  obvious. 
The  maker  ought  rather  to  suffer,  on  account  of  the  fraudulent  act 
of  one  to  whom  he  intrusts  his  paper,  or  who  is  made  his  agent  in 
respect  of  it,  than  an  innocent  party.  The  law  esteems  him  in  fault, 
in  thus  putting  it  in  the  power  of  another  to  perpetrate  the  fraud, 
and  requires  him  to  bear  the  loss  consequent  upon  his  negligence. 
In  the  case  under  consideration  no  fault  can  be  imputed  to  the  de- 
fendant. He  did  not  intrust  his  signature  to  the  possession  of  the 
forger  for  the  purpose  of  binding  himself  by  a  contract.  He  con- 
ferred no  power  upon  the  party  who  committed  the  crime  to  use  it 
for  any  such  purpose.  He  was  not  guilty  of  negligence  in  thus  giving 
it,  for  it  is  not  unusual,  in  order  to  identify  signatures,  and  for  other 
purposes,  for  men  thus  to  make  their  autographs.  The  defendant 
cannot  be  regarded  as  being  so  far  in  fault  in  the  transaction  that  he 
ought  to  be  required  to  bear  the  loss  resulting  from  the  crime. 

In  our  opinion  the  decision  of  the  circuit  court  is  in  accord  with  the 
law,  and  is  therefore  affirmed. 


BAXENDALE    v.  BENNETT. 

(Court  of  Appeal,  1S7S.     3  Q.   B.   D.  525.) 

Action  commenced  on  the  10th  July,  1876,  on  a  bill  of  exchange, 
dated  the  11th  of  March,  1873,  for  £50.  drawn  by  W.  Cartwright  and 
accepted  by  the  defendant,  and  of  which  the  plaintiff  was  the  holder, 
and  for  interest.  At  the  trial  before  Lopes,  J.,  without  a  jury,  at  the 
Hilary  sittings  in  Middlesex,  the  following  facts  were  proved : 

The  bill,  dated  the  11th  of  March,  1872,  on  which  the  action  was 
brought,  purported  to  be  drawn  by  one  W.  Cartwright  on  the  defend- 
ant, payable  to  order  at  three  months'  date.  It  was  indorsed  in 
blank  by  Cartwright,  and  also  by  one  H.  T.  Cameron.  The  plaintiff' 
received  the  bih  from  Cameron  on  the  3d  of  June,  1872,  and  was  the 
bona  fide  holder  of  it,  without  notice  of  fraud,  and  for  a  valuable  con- 
sideration. 

One  j.  F.  Holmes  had  asked  the  defendant  for  his  acceptance  to 
an  accommodation  bill,  and  the  defendant  had  written  his  name  across 
a  paper  which  had  an  impressed  bill  stamp  on  it,  and  had  given  it  to 
Holmes  to  fill  in  his  name,  and  then  to  use  it  for  the  purpose  of  rais- 
ing money  on  it.  Afterwards  Holmes,  not  requiring  accommodation, 
returned  the  paper  to  the  defendant  in  the  same  state  in  which  he  had. 
Sm.&  M.B.&  N.— IG 


-42  FORM   AND    INCEPTION.  (Part  1 

received  it  from  him.  The  defendant  then  put  it  into  a  drawer,  which 
was  not  locked,  of  his  writing  table  at  his  chambers,  to  which  his 
clerk,  laundress,  and  other  persons  coming  there  had  access.  He  had 
never  authorized  Cartwright  or  any  person  to  fill  up  the  paper  with  a 
drawer's  name,  and  he  believed  that  it  must  have  been  stolen  from  his 
chambers. 

On  these  facts  the  learned  judge  found  that  the  bill  was  stolen  from 
the  defendant's  chambers,  and  the  name  of  the  drawer  afterwards 
added  without  the  defendant's  authority ;  but  that  the  defendant  had 
so  negligently  dealt  with  the  acceptance  as  to  have  facilitated  the 
theft.  He  therefore  ruled,  upon  the  authority  of  Young  v.  Grote, 
4  Bing.  253.  and  Ingham  v.  Primrose,  7  C  B.  (N.  S.)  82;  28  L.  J. 
C.  P.  294,  that  the  defendant  was  liable,  and  directed  judgment  to  be 
entered  for  the  plaintiff  for  ioO.  and  costs.^^ 

Bramwell,  L.  J.  I  am  of  opinion  that  this  judgment  cannot  be 
supported.  The  defendant  is  sued  on  a  bill  alleged  to  have  been  drawn 
by  W.  Cartwright  on  and  accepted  by  him.  In  very  truth  he  never 
accepted  such  a  bill ;  and,  if  he  is  to  be  held  liable,  it  can  only  be  on 
the  ground  that  he  is  estopped  to  deny  that  he  did  so  accept  such  a 
bill.  Estoppels  are  odious,  and  the  doctrine  should  never  be  applied 
without  a  necessity  for  it.  It  never  can  be  applied  except  in  cases 
where  the  person  against  whom  it  is  used  has  so  conducted  himself, 
either  in  what  he  has  said  or  done,  or  failed  to  say  or  do,  that  he 
would,  unless  estopped,  be  saying  something  contrary  to  his  former 
conduct  in  what  he  had  said  or  done,  or  failed  to  say  or  do.  Is  that 
the  case  here?  Let  us  examine  the  facts.  The  defendant  drew  a  bill 
(or  what  would  be  a  bill  had  it  had  a  drawer's  name)  without  a  draw- 
er's name,  addressed  to  himself,  and  then  wrote  what  was  in  terms  an 
acceptance  across  it.  In  this  condition,  it,  not  being  a  bill,  was  stolen 
from  him,  filled  up  with  a  drawer's  name,  and  transferred  to  the 
plaintiff,  a  bona  fide  holder  for  value.  It  may  be  that  no  crime  was 
committed  in  the  filling  in  of  the  drawer's  name,  for  the  thief  may 
have  taken  it  to  a  person,  telling  him  it  was  given  by  the  defendant 
to  the  thief  with  authority  to  get  it  filled  in  with  a  drawer's  name  by 
any  person  he,  the  thief,  pleased.  This  may  have  been  believed,  and 
the  drawer's  name  bona  fide  put  by  such  person.  I  do  not  say  such 
person  could  have  recovered  on  the  bill.  I  am  of  opinion  he  could 
not ;  but  what  I  wish  to  point  out  is  that  the  bill  might  be  made  a 
complete  instrument  without  the  commission  of  any  crime  in  the  com- 
pletion. But  a  crime  was  committed  in  this  case  by  the  stealing  of  the 
document,  and  without  that  crime  the  bill  could  not  have  been  com- 
plete, and  no  one  could  have  been  defrauded.  Why  is  not  the  defend- 
ant at  liberty  to  show  this?  Why  is  he  estopped?  What  has  he  said 
or  done  contrary  to  the  truth,  or  which  should  cause  any  one  to  be- 
lieve the  truth  to  be  other  than  it  is?    Is  it  not  a  rule  that  every  one 

12  Ttie  arguments   of  counsel  and  parts  of   tlie  opii;ions  are  omitted. 


Ch.  3)  DELIVERY.  243 

has  a  right  to  suppose  that  a  crime  will  not  be  committed,  and  to  act 
on  that  belief?  Where  is  the  limit  if  the  defendant  is  estopped  here? 
Suppose  he  had  signed  a  blank  check,  with  no  payee,  or  date,  or 
amount,  and  it  was  stolen ;  would  he  be  liable  or  accountable,  not 
merely  to  his  banker  the  drawee  but  to  a  holder?  If  so,  suppose 
there  was  no  stamp  law,  and  a  man  simply  wrote  his  name,  and  the 
paper  was  stolen  from  him,  and  somebody  put  a  form  of  a  check  or 
bill  to  the  signature;  would  the  signer  be  liable?  I  cannot  think  so. 
But  what  about  the  authorities?  It  must  be  admitted  that  the  cases 
of  Young  V.  Grote,  4  Bing.  253,  and  Ingham  v.  Primrose,  7  C.  B.  (N. 
S.)  82,  28  L.  J.  C.  P.  294,  go  a  long  way  to  justify  this  judgment; 
but  in  all  those  cases,  and  in  all  the  others  where  the  alleged  maker 
or  acceptor  has  been  held  liable,  he  has  voluntarily  parted  with  the 
instrument.  It  has  not  been  got  from  him  by  the  commission  of  a 
crime.  This,  undoubtedly,  is  a  distinction,  and  a  real  distinction.  The 
defendant  here  has  not  voluntarily  put  into  any  one's  hands  the  means, 
or  part  of  the  means,  for  committing  a  crime. 

But  it  is  said  that  he  has  done  so  through  negligence.  I  confess  I 
think  he  has  been  negligent;  that  is  to  say,  I  think,  if  he  had  had  this 
paper  from  a  third  person,  as  a  bailee  bound  to  keep  it  with  ordinary 
care,  he  would  not  have  done  so.  But  then  this  negligence  is  not  the 
proximate  or  effective  cause  of  the  fraud.  A  crime  was  necessary  for 
its  completion.     *     *     * 

Brett,  L.  J.  In  this  case  I  agree  with  the  conclusion  at  which  my 
Brother  Bramwell  has  arrived,  but  not  with  his  reasons.  The  de- 
fendant signed  a  blank  acceptance  and  gave  it  to  a  person  who  want- 
ed money  that  he  might  get  it  discounted  ;  that  person  sent  the  blank 
acceptance  back  to  the  defendant,  who  put  it  into  a  drawer  in  his  room  ; 
the  room  was  not  a  place  of  general  resort,  and  the  drawer  into  which 
the  acceptance  was  put  was  left  unlocked ;  somebody,  not  a  servant 
of  the  defendant,  stole  it,  and  it  was  filled  up  by  a  different  person 
from  him  to  whom  the  acceptance  was  originally  given  and  who  had 
returned  it.  On  these  facts.  Lopes,  J.,  held  that  the  defendant  had 
been  guilty  of  negligence,  and  was  therefore  liable  on  the  bill  to  the 
plaintiff. 

Bramwell,  L.  J.,  says  that  the  defendant  is  not  liable  because,  if 
he  be  guilty  of  negligence,  the  negligence  is  not  the  proximate  or  ef- 
fective cause  of  the  fraud.  It  seems  to  me  that  the  defendant  never 
authorized  the  bill  to  be  filled  in  with  a  drawer's  name,  and  he  can- 
not be  sued  on  it.  I  do  not  think  it  right  to  say  that  the  defendant 
was  negligent.  The  law  as  to  the  liability  of  a  person  who  accepts  a 
bill  in  blank  is  that  he  gives  an  apparent  authority  to  the  person  to 
whom  he  issues  it  to  fill  it  up  to  the  amount  that  the  stamp  will  cov- 
er. He  does  not  strictly  authorize  him,  but  enables  him  to  fill  it  up  to 
a  greater  amount  than  was  intended.  Where  a  man  has  signed  a  blank 
acceptance,  and  has  issued  it,  and  has  authorized  the  holder  to  fill  it 
up,  he  is  liable  on  the  bill,  whatever  the  amount  may  be,  though  he 


244  FORM  AND  INCEPTION.  (Part  1 

has  given  secret  instructions  to  the  holder  as  to  the  amount  for  which 
he  shall  fill  it  up.  He  has  enabled  his  agent  to  deceive  an  innocent 
party,  and  he  is  liable.  Sometimes  it  is  said  that  the  acceptor  of  such 
a  bill  is  liable  because  bills  of  exchange  are  negotiable  instruments, 
current  in  like  manner  as  if  they  were  gold  or  bank  notes ;  but  wheth- 
er the  acceptor  of  a  blank  bill  is  liable  on  it  depends  upon  his  having 
issued  the  acceptance  intending  it  to  be  used.  No  case  has  been  de- 
cided where  the  acceptor  has  been  held  liable  if  the  instrument  has 
not  been  delivered  by  the  acceptor  to  another  person. 

In  this  case  it  is  true  that  the  defendant,  after  writing  his  name 
across  the  stamped  paper,  sent  it  to  another  person  to  be  used.  When 
he  sent  it  to  that  person,  if  he  had  filled  it  in  to  any  amount  that  the 
stamp  would  cover,  the  defendant  would  be  liable,  because  he  sent  it 
with  the  intention  that  it  should  be  acted  upon ;  but  it  was  sent  back 
to  the  defendant,  and  he  was  then  in  the  same  condition  as  if  he  had 
never  issued  the  acceptance.  The  case  is  this :  The  defendant  ac- 
cepts a  bill  and  puts  it  into  his  drawer;  it  is  as  if  he  had  never  is- 
sued it  with  the  intention  that  it  should  be  filled  up ;  it  is  as  if  after 
having  accepted  the  bill  he  had  left  it  in  his  room  for  a  moment  and 
a  thief  came  in  and  stole  it.  He  has  never  intended  that  the  bill  should 
be  filled  up  by  anybody,  and  no  person  was  his  agent  to  fill  it  up. 

Then  it  has  been  said  that  the  defendant  is  liable  because  he  has 
been  negligent;  but  was  the  defendant  negligent?  As  observed  by 
Blackburn,  J.,  in  Swan  v.  North  British  Australian  Company,  2  H. 
&  C.  175,  32  L.  J.  (Ex.)  273,  there  must  be  the  neglect  of  some  duty 
owing  to  some  person.  Here  how  can  the  defendant  be  negligent  who 
owes  no  duty  to  anybody?  Against  whom  was  the  defendant  neg- 
ligent, and  to  whom  did  he  owe  a  duty  ?  He  put  the  bill  into  a  drawer 
in  his  own  room.  To  say  that  was  a  want  of  due  care  is  impossible. 
It  was  not  negligence  for  two  reasons:  First,  he  did  not  owe  any 
duty  to  any  one ;  and.  secondly,  he  did  not  act  otherwise  than  in  a 
way  which  an  ordinary  careful  man  would  act.     *     *     * 

B.^GG.^LLAY.  L.  J.,  concurred  that  the  judgment  ought  to  be  entered 
for  the  defendant.    Judgment  for  defendant.^' 


CRUCHLEY  v.  CLARANCE. 

(Court  of  King's  Bench,  1813.    2  Maule  &  S.  90.) 

This  was  an  action  against  the  defendant  as  drawer  of  a  bill  of  ex- 
change for  £200.  The  declaration  contained  several  counts,  and  in  one 
stated  the  bill  to  have  been  made  payable  to  the  order  of  the  plaintifiF. 
and  in  another  to  the  order  of (thereby  meaning  to  the  order 

"Compare  Smith  v.  Prosser,  [1907]  2  K.  B.  735;  Moak  v.  Stevens,  45 
Misc.  Rep.  147,  91  N.  T.  Supp.  903  (1904);  Trust  Co.  v.  Conliliu,  65  Misc. 
Kep.   1,   119   X.    Y.    Supp.   367  (1909). 


Ch.  3)  DELIVERY.  245 

of  such  person  as  the  defendant  should  cause  to  be  named  and  inserted 
in  the  said  bill  as  payee),  and  then  averred  that  the  defendant  caused 
the  name  of  the  plaintiff  to  be  inserted,  etc.  At  the  trial  before  Lord 
Ellenborough,  C.  J.,  at  the  London  sittings  after  last  term,  it  appeared 
that  the  bill  had  been  drawn  by  the  defendant  in  Jamaica  upon  one 
Henry  Man,  of  London,  the  defendant  leaving  a  blank  for  the  name 
of  the  payee,  and  had  afterwards  been  negotiated  in  this  country  by 
one  Vashon,  who  indorsed  it  to  the  plaintiff  in  payment  of  an  old  debt, 
and  the  plaintiff  inserted  his  own  name  as  the  payee.  A  verdict  was 
found  for  the  plaintiff. 

Denman  moved  to  enter  a  nonsuit  or  for  a  new  trial,  on  the  ground 
that  the  plaintiff  had  no  right  to  insert  his  name  in  the  bill;  and  he 
said  it  was  distinguishable  from  Russel  v.  Langstaffe,  Doug.  513,  be- 
cause there  the  bill  was  filled  up  by  one  of  the  original  parties. 

Lord  Ellenborough,  C.  J.  As  the  defendant  has  chosen  to  send 
the  bill  into  the  world  in  this  form,  the  world  ought  not  to  be  deceiv- 
ed by  his  acts.  The  defendant  by  leaving  the  blank  undertook  to  be 
answerable,  for  it  when  filled  up  in  the  shape  of  a  bill. 

Le  Blanc,  J.  It  is  the  same  thing  as  if  the  defendant  had  made  the 
bill  payable  to  bearer. 

BaylEy,  J.  The  issuing  the  bill  in  blank  without  the  name  of  the 
payee  was  an  authority  to  a  bona  fide  holder  to  insert  the  name. 

Per  Curiam.    Rule  refused. 


MITCHELL  V.  CULVER. 

(Supreme  Court  of  New  York,   1827.     7  Cow.  .336.) 

Assumpsit  on  a  promissory  note,  second  indorsee  against  second  in- 
dorser,  tried  at  the  Ulster  circuit,  April  17,  1836,  before  Betts,  late 
Chief  Judge. 

The  note  was  made  by  Rowe,  payable  to  H.  at  60  days,  for  $200,  and 
purported  to  bear  date  November  5,  1825.  This  note,  having  a  blank 
for  the  day  of  the  month,  was  made  on  the  27th  of  November,  1825, 
and  indorsed  by  H.  and  the  defendant.  It  was  afterwards  delivered 
by  the  maker  to  the  plaintiff  in  payment  of  a  debt,  who,  by  direction  of 
the  former,  filled  in  the  "5." 

Verdict    for   the   plaintiff,    subject    to    the    opinion    of    this    court. 

Sutherland,  J.  This  case  is  not  distinguishable  in  principle  from 
that  of  Mechanics'  &  Farmers'  Bank  v.  Schuyler  (a)  (decided  at  the 

(a)  Mechanics'  &  Faemebs'   Bank  against  Schutleb  and  others. 

Assumpsit;  indorsees  against  first  four  indorsers,  joint  payees  of  a  promis- 
sory note;  ti'ied  at  the  Albany  circuit,  February  9th,  before  Duer,  Circuit 
Judge;  when  a  verdict  was  taken  for  the  plaintiff,  subject  to  the  opiaion  of 
this  court. 

Sutherland,  J.  The  note  was  indorsed  by  the  defendants  on  the  23d  of 
February,  1825 :    there  being,  at  that  time,  no  date  to  it ;   and  the  defendants, 


246  FORM  AND  INCEPTION.  (Part  1 

last  term).  The  only  difference  is  that  here  the  date  was  inserted 
with  the  knowledge  of  the  plaintiff.  But  I  do  not  perceive  that 
this  can  vary  the  case.  \\'hen  an  indorser  of  a  note  commits  it 
to  the  maker,  with  the  date  in  blank,  the  note  carries  on  the  face  of 
it  an  implied  authority  to  the  maker  to  fill  up  the  blank.  As  between 
the  indorser  and  third  persons,  the  maker,  under  such  circumstances, 
must  be  deemed  to  be  the  agent  of  the  indorser,  and  as  acting  under 
his  authority  and  with  his  approbation.  Although  it  is  not  essential 
to  the  legal  validity  of  a  note  that  it  should  be  dated,  yet  we  all  know 

knowing  that  fact,  (for  they  read  the  note  before  they  indorsed  it)  re-deliv- 
ered it  in  that  state  to  the  maker.  The  maker,  on  the  2Sth  of  February,  in- 
serted the  date  of  the  2Sth  of  .January,  1825;  and  about  the  1st  of  March, 
neirotiated  it  to  the  plaintiffs,  who  were  ignorant  of  the  circumstances  stated. 

The  question  is,  whether,  as  between  these  parties,  the  note  is  rendered  in- 
valid, in  consequence  of  its  having  been  ante-dated,  so  that  it  had  nearly  30 
days  less  to  run,  than  it  would  have  had  if  it  had  been  dated  as  of  the  day 
when  it  was  indorsed. 

An  indorsement  on  a  blanl^  note,  without  sum^  or  date,  or  time  of  payment 
•will  bind  the  ir|^rser.  for  any  sum.  payable  at  any  time,  which  the  person  to 
whbm  the  indorser  entrusts  it,  chooses  to  Insert.  It  is  a  letter  of  credit  for 
an  indefinite  sum.  Russell  v.  Langstaffe,  Doug.  514;  Violett  v.  Patton,  5 
Cranch,  151,  3  L.  Ed.  Gl ;  2  M.  &  S.  90 ;  Putnam  v.  Sullivan,  4  Mass.  54,  55, 
3  Am.  Dec.  20G.  If  there  is  an  implied  discretionary  authority  in  such  case 
to  fill  all  the  blanlcs,  it  would  seem  to  follow,  that  such  an  authority  must 
equally  exist  to  supply  one,  if  one  only  be  left.  Accordingly,  if  the  amount  be 
left  blank,  any  sum  may  be  inserted ;  if  the  time  of  payment,  it  may  be  fixed 
at  the  pleasure  of  the  holder ;  and  in  the  hands  of  a  bona  fide  indorsee,  the 
indorser  cannot  question  the  transaction,  though  the  blanks  may  have  been 
filled  in  a  manner  entirely  different  from  the  understanding  and  expectation 
of  the  indorser,  when  he  put  his  name  upon  the  note. 

It  is  said  that  the  note  in  this  case  was  perfect  without  a  date.  It  Is  true 
that  the  date  is  not  essential  to  the  validity  of  a  bill  or  note ;  for  where  they 
have  no  date,  the  time,  if  necessary,  may  be  inquired  into,  and  will  be  com- 
puted from  the  day  they  were  issued.  2  Ld.  Raym.  1076:  2  Show.  422;  Chit. 
on  Bills,  78;  3  B.  &  P.  173;  Lansing  v.  Gaine,  2  John.  303,  3  Ani.  Dec.  422; 
13  East,  5.  Nor  is  It  necessary  to  the  validity  of  a  note,  that  a  time  of  pay- 
ment should  be  expressed  in  it.  If  none  be  fixed,  it  is  payable  on  demand. 
Chit,  on  Bills.  79;  7  T.  R.  427.  But  if  a  note  is  indorsed,  i)erfect  in  every  re- 
spect but  the  time  of  payment,  and  that  Is  left  blank,  can  there  be  any  ques- 
tion of  the  authority  of  the  maker,  if  the  note  be  re-delivered  to  him,  to 
insert  any  time  of  payment  he  may  think  proi)er,  before  he  puts  it  in  circula- 
tion? Can  the  Indorser,  in  such  a  case, v protect  himself  from  liability,  on  the 
ground  of  an  alteration  of  the  note?  If  not,  upon  what  principle  can  the  in- 
sertion of  the  date,  where  that  is  left  blank,  be  considered  an  alteration?  If 
it  be  conceded,  as  it  must  be,  that  the  maker  In  this  case  had  an  implied  au- 
thority to  fill  up  the  blank  at  all,  the  indorser,  and  not  the  Innocent  Indorsee, 
must  suffer  the  consequence  of  an  abuse  of  that  authority,  if  it  has  been 
abused.  It  Is  not,  in  judgment  of  law,  an  alteration  of  the  note.  The  defend- 
ant must  have  contemplated  the  addition  of  the  date,  before  the  note  was  to 
be  passed ;  for  it  was  payable  at  the  Mechanics'  &  Farmers'  Bank.  It  is  be- 
lieved to  be  the  invariable  custom  of  banks  to  discount  no  paper  without  a 
date. 

The  cases  of  Woodworth  v.  Bank  of  America,  19  John.  391,  10  Am.  Dec.  239, 
and  .Martin  v.  Miller,  4  T.  R.  .S20,  are  very  distinguishable  from  this.  In  the 
latter  case,  the  date  of  the  bill  was  originally  inserted,  and  had  been  actually 
altered  by  the  holder,  without  the  knowledge  or  assent  of  the  acceptor.  In 
the  first  case,  the  place  of  payment  was  inserted  without  the  consent  of  the 
indorser. 

Judgment  for  the  plaintiff. 


Ch.  3)  DELIVERY.  247 

that  it  is  necessary  to  its  free  and  uninterrupted  neg^otiability.  A  note 
without  a  date  will  not  be  discounted  at  our  banks,  nor  pass  in  the 
money  market,  without  previous  inquiry.  All  the  parties,  therefore, 
to  a  note  intended  for  circulation,  must  be  presumed  to  consent  that 
the  person  to  whom  such  a  note  is  intrusted  for  the  purpose  of  raising 
money  may  fill  up  the  blank  with  a  date.  The  evidence  does  not  show 
that  the  plaintiff  paid  less  for  the  note  than  its  face. 
Judgment  for  the  plaintiff. 


AWDE  V.  DIXON. 
(Court  of  Exchequer,   1851.     6  Exch.  869.) 

Assumpsit  by  payee  against  maker  of  a  promissory  note. 

At  the  trial,  before  Cress  well,  J.,  at  the  last  York  spring  assizes,  it 
appeared  that  the  defendant's  brother,  Richard  Dixon,  being  desirous 
of  borrowing  ilOO.  on  the  security  of  a  promissory  note,  applied  to  the 
defendant  to  become  one  of  his  sureties,  which  he  agreed  to  do,  on  the 
representation  of  his  brother  that  one  Robinson  would  become  his  co- 
surety, and  that  the  defendant  should  not  be  responsible  unless  Robin- 
son joined  in  the  note.  On  the  faith  of  this  representation,  the  defend- 
ant signed  the  following  blank  instrument,  leaving  a  space  for  Rob- 
inson's as  the  first  signature:  " December,  1848.    On  demand, 

we  do  hereby  jointly  and  severally  promise  to  pay  to  Mr.  ,  or 

order,  ilOO.,  as  witness  our  hands.  William  Dixon."  Robinson  re- 
fused to  sign  the  instrument,  and  Richard  Dixon  took  it  in  its  imperfect 
state  to  the  plaintiff ;  and  upon  R.  Dixon's  representation  that  he  had 
authority  to  deal  with  it  the  plaintiff  advanced  him  money  upon  it,  and 
the  blanks  were  filled  up  by  inserting  "26"  before  "December,"  and 
the  plaintiff's  name  as  payee.  The  learned  judge  directed  a  verdict  for 
the  plaintiff,  reserving  leave  for  the  defendant  to  move  to  enter  a  ver- 
dict for  him. 

A  rule  nisi  was  obtained  accordingly.** 

Parke,  B.  It  is  unnecessary  to  say  whether  this  instrument  is  a 
forgery  or  not;  but  there  is  certainly  ground  for  contending  that  the 
making  of  it  complete  contrary  to  the  directions  of  the  defendant  ren- 
ders it  a  false  instrument  as  against  him.  I  do  not  gainsay  the  posi- 
tion that  a  person  who  puts  his  name  to  a  blank  paper  impliedly  author- 
izes the  filling  of  it  up  to  the  amount  that  the  stamp  will  cover.  But 
this  is  a  different  case.  Here  the  instrument,  to  which  the  defendant's 
name  is  attached,  is  delivered  to  his  brother,  with  power  to  make  it  a 
complete  instrument  on  one  condition  only ;  that  is,  provided  Robinson 
would  be  a  joint  surety  with  him.  This,  therefore,  is  an  instance  of  a 
limited  authority,  where,  in  case  of  a  refusal  by  Robinson  to  join,  there 

14  iiie  statement  of  facts  is  abridged,  and  the  arguments  of  counsel  are 
omitted. 


248  FOKM  AND  INCEPTION.  (Part  1 

is  a  countermand.  Robinson  refused  to  join,  and  consequently  the  de- 
fendant's brother  had  no  authority  to  make  use  of  the  instrument.  A 
party  who  takes  such  an  incomplete  instrument  cannot  recover  upon  it, 
unless  the  person  from  whom  he  receives  it  had  a  real  authority  to  deal 
with  it.  There  was  no  such  authority  in  this  case,  and  unless  the  cir- 
cumstances show  that  the  defendant  conducted  himself  in  such  a  way 
as  to  lead  the  plaint! fl  to  believe  that  the  defendant's  brother  had  au- 
thority, he  can  take  no  better  title  than  the  defendant's  brother  could 
give.  The  maxim  of  law  is,  "Nemo  plus  juris  in  ahum  transferre  po- 
test quam  ipse  habet."  It  is  a  fallacy  to  say  that  the  plaintiff  is  a  bona 
fide  holder  for  value ;  he  has  taken  a  piece  of  blank  paper,  not  a  prom- 
issory note.  He  could  only  take  it  as  a  note  under  the  authority  of  the 
defendant's  brother,  and  he  had  no  authority.  Consequently  the  in- 
strument is  void  as  against  the  defendant. 

Alukrsox  and  Platt,  BB.,  concurred. 

Rule  absolute. 


BOSTON  STEEL  &  IRON  CO.  v.  STEUER. 

(Supreme   Judicial   Court  of   Massachusetts,    SuEfolli,    1903.     183   Mass.   140, 
G6  N.  E.  646,  97  Am.   St.   Rep.  426.) 

Contract  for  $1,823.25  for  work  done  and  materials  furnished  for  a 
building  of  the  defendant  numbered  811  on  Beacon  street  in  Boston. 
Writ  dated  April  11,  1899. 

At  the  trial  in  the  superior  court  before  Bishop,  J.,  without  a  jury, 
the  judge  excluded  certain  evidence  oft'ered  by  the  defendant  and  re- 
fused to  make  certain  rulings  requested  by  the  defendant.  He  found 
for  the  plaintiff  in  the  sum  of  $2,0-13.86,  and  the  defendant  alleged  ex- 
ceptions. 

LoRixG,  J.  The  only  question  in  issue  between  the  parties  in  this 
case  is  the  right  of  the  defendant  to  be  credited  with  two  sums,  of 
$200  and  $100,  respectively,  under  the  following  circumstances : 

On  December  31,  1898,  the  defendant's  husband  owed  the  plaintiff 
$1,781.30,  for  ironwork  furnished  by  it  to  him  in  the  construction  of  a 
house,  No.  819  Beacon  street.  On  being  pressed  for  payment,  the  de- 
fendant's husband,  on  January  21,  1899,  delivered  to  the  plaintiff  the 
defendant's  check  for  $200,  payable  to  the  plaintiff.  It  is  stated  in  the 
bill  of  exceptions  that  on  February  2,  1899,  "he  paid  the  plaintiff  the 
further  sum  of  $100  in  a  check  made  by  said  Jennie  D.  Steuer."  But 
it  appears  from  the  auditor's  report,  which  was  before  the  court  and 
is  referred  to  in  the  bill  of  exceptions,  that  the  plaintiff's  manager's 
name  was  Newcomb,  and  that  his  story  was  that  the  check  for  $400 
"was  brought  to  him  at  his  office  on  Devonshire  street  by  Mr.  Steuer 
in  response  to  further  demands  for  money,  and  that  it  was  made  out 
in  blank  and  filled  up  by  himself.  Mr.  Steuer  being  unwilling  that  it 


Ch.  3)  DELIVERY.  249 

should  be  made  for  more  than  $200,  while  Mr.  Newcomb  insisted  that 
it  should  be  for  the  larger  amount,  and  so  made  it,  with  Mr.  Steuer's 
consent,  and  applied  it  to  his  debt."  The  defendant's  story  was  "that 
she  gave  the  check  to  Mr.  Newcomb  at  her  house." 

In  addition  to  the  iron  furnished  the  defendant's  husband  for  819 
Beacon  street,  the  defendant's  husband  had  ordered  two  iron  columns 
and  a  base  plate  from  the  plaintiff  for  another  house.  No.  811  Beacon 
street,  which  the  plaintiff  supposed  was  Steuer's  until  his  manager  was 
told  on  March  10th  that  it  belonged  to  defendant's  wife.  These  two  col- 
umns and  base  plate  were  delivered  on  December  22,  1898,  and  at  the 
rate  charged  in  the  bill  of  items  were  worth  $150.35.  From  December 
to  Alarch  there  were  negotiations  between  the  defendant's  husband  and 
the  plaintiff  for  a  contract  by  which  all  the  ironwork  for  811  Beacon 
street  should  be  furnished  by  the  plaintiff  for  a  fixed  sum,  payments 
on  account  to  be  made  as  each  floor  was  finished ;  and  on  or  about 
March  1,  1899,  the  plaintiff's  manager  submitted  to  the  defendant  a 
written  contract  to  this  eff'ect.  On  March  10th  this  was  returned  by 
the  defendant's  husband  with  the  statement  already  referred  to,  that 
811  Beacon  street  belonged  to  his  wife,  and  that  the  contract  should 
be  made  with  her.  No  written  contract  was  ever  made  between  the 
plaintiff  and  the  defendant,  but  the  plaintiff  went  forward  and  deliver- 
ed the  ironwork  for  two  of  the  six  stories  of  the  house,  part  being  de- 
livered before  March  10th  and  part  after  that  date.  The  last  was  de- 
livered on  March  18th,  when  the  plaintiff  stopped  because  it  had  not 
been  paid  for  what  it  had  done.  Thereupon  this  action  was  brought  to 
recover  the  reasonable  value  of  the  materials  furnished  and  work  done. 

At  the  trial  the  defendant  contended  "that  the  amount  of  said  pay- 
ments should  be  credited  to  her  in  this  action,  on  the  ground  that  they 
were  payments  required  by  the  plaintiff  to  be  made  in  advance  on  ac- 
count of  her  said  building  numbered  811  Beacon  street,  and  that  the 
checks  were  given  to  her  said  husband,  as  her  agent,  to  make  such  pay- 
ments," and  "offered  evidence  of  her  instructions  to  her  husband  as  to 
the  use  and  application  of  said  checks,  not  made  in  the  presence  of  the 
plaintiff  or  anyone  representing  him,  and  claimed  that  the  same  should 
be  admitted  in  evidence.  The  court  declined  to  admit  the  same,  and 
the  defendant  duly  excepted  to  the  exclusion."  The  other  exceptions 
taken  at  the  trial  have  been  waived,  and  the  question  raised  by  this  ex- 
ception is  the  only  matter  now  before  us. 

The  plaintiff  has  argued  that  it  did  not  appear  but  that  these  instruc- 
tions were  given  in  a  private  conversation  between  husband  and  wife. 
But  on  a  fair  construction  of  the  bill  of  exceptions  we  do  not  think 
that  the  evidence  can  be  taken  to  haye  been  excluded  on  that  ground. 
It  is  stated  there  that  the  "defendant  offered  evidence  of  her  instruc- 
tions to  her  husband  as  to  the  use  and  application  of  said  checks,  not 
made  in  the  presence  of  the  plaintiff  or  anyone  representing  him." 
This  must  be  taken  to  be  a  statement  of  the  ground  of  the  objection, 
and  the  ruling  must  be  taken  to  be  a  ruling  that  competent  evidence 


250  FORM  ANn  ixcKPTioN.  (Part  t 

was  offered  and  was  excluded  because  not  made  in  the  presence  of  the 
plaintiff  or  of  some  one  representing  it. 

The  judge  before  whom  the  case  was  tried  without  a  jury  found 
"that  neither  of  said  payments  was  required  by  the  plaintiff  to  be  made 
in  advance  on  account  of  her  said  building  numbered  811  Beacon  street, 
and  that  neither  of  them  was  made  according  to  any  agreement  for 
payment  to  be  made  on  account  of  said  811  Beacon  street,  and  that  no 
floor  in  said  building  was  completed  at  the  time  either  of  said  pay- 
ments was  made,  and  that  said  payments  were  made  by  said  Bernard 
Steuer  on  account  of  his  building  numbered  819  Beacon  street,  and 
were  received  by  the  plaintiff  on  account  therefor." 

This  finding  makes  the  evidence  excluded  immaterial  so  far  as  the 
check  for  $200  is  concerned.  If  this  evidence  had  been  admitted,  the 
defendant's  case  on  the  $200  check  would  have  been  this:  A  check 
payable  to  the  plaintiff  is  handed  by  the  drawer  to  her  husband,  to  be 
delivered  by  him  to  the  plaintiff  in  payment  of  a  debt  to  become  due 
from  the  drawer  of  the  check  to  the  payee,  and  is  fraudulently  handed 
by  the  husband  to  the  payee  of  the  check,  in  payment  of  a  debt  due 
from  him  to  the  payee,  and  is  accepted  by  the  payee  in  good  faith  in 
payment  of  that  debt. 

In  such  a  case  the  payee  of  the  check  is  a  bona  fide  purchaser  of  the 
check  for  value,  without  notice,  and  the  drawer  could  not  set  up  her 
husband's  fraud  in  defense  of  the  check,  nor  maintain  an  action  for 
money  had  and  received  after  payment  of  it  on  discovering  the  fraud. 

The  fact  that  the  plaintiff  is  the  payee  of  a  negotiable  security  does 
not  prevent  him  from  becoming  a  bona  fide  purchaser  of  it  at  common 
law,  with  all  the  rights  incident  to  a  purchaser  for  value  thereof  with- 
out notice.  That  was  decided  in  Watson  v.  Russell,  3  B.  &  S.  34,  and 
affirmed  in  the  Exchequer  Chamber  in  the  same  case,  5  B.  &  S.  968. 
To  the  same  effect  is  Poirier  v.  Morris,  2  El.  &  Bl.  89,  and  Nelson  v. 
Cowing,  6  Hill  (N.  Y.)  336,  339.  Munroe  v.  Bordier,  8  C.  B.  862,  and 
Armstrong  v.  American  Exchange  Bank,  133  U.  S.  433,  453,  10  Sup. 
Ct.  450,  33  L.  Ed.  747,  seem  to  go  on  this  ground.  The  case  of  Fair- 
banks V.  Snow.  145  Mass.  153,  13  N.  E.  596,  1  Am.  St.  Rep.  446,  might 
have  been  decided  on  this  ground,  but  was  disposed  of  on  common-law 
principles. 

That  payment  of  the  pre-existing  debt  makes  the  holder  a  purchaser 
for  value  in  this  commonwealth  was  settled  law  before  the  negotiable 
instruments  act  was  enacted.  Blanchard  v.  Stevens,  3  Cush.  162.  50 
Am.  Dec.  723 ;  Stoddard  v.  Kimball,  6  Cush.  469.  Goodwin  v.  Mas- 
sachusetts Loan  &  Trust  Co.,  152  Mass.  189,  199,  25  N.  E.  100 ;  Na- 
tional Revere  Bank  v.  Morse,  163  Mass.  383,  40  N.  E.  180 ;  Holden 
V.  Phcenix  Rattan  Co.,  168  Mass.  570,  47  N.  E.  241. 

The  checks  in  question  in  the  case  at  bar  were  given  after  the  nego- 
tiable instruments  act  (St.  1898,  c.  533;  Rev.  Laws,  c.  73)  went  into 
effect,  and  are  governed  by  its  provisions.  The  plaintiff  is  a  holder 
in  due  course  of  the  $200  check,  within  Rev.  Laws,  c.  73,  §  69.     This 


Ch.  3)  DELIVERY.  251 

section  is  taken  from  section  29  of  the  English  bills  of  exchange  act  of 
1882,  and  Watson  v.  Russell  is  cited  in  Chalmers,  Bills  of  Exchange 
(5th  Ed.)  89,  as  an  example  of  a  person  who  is  a  holder  in  due  course 
within  that  section.  It  was  stated  by  Lord  Russell  in  Lewis  v.  Clay,  67 
L.  J.  Q.  B.  (N.  S.)  224,  that  a  payee  of  a  promissory  note  cannot  be 
a  holder  in  due  course  within  section  29  of  the  English  bills  of  ex- 
change act  of  1882.  In  Hardman  v.  Wheeler,  [1902]  1  K.  B.  361,  372, 
it  was  pointed  out  that  this  statement  of  Lord  Russell  was  obiter,  and 
it  was  also  pointed  out  that  in  Herdman  v.  Wheeler,  as  in  Lewis  v. 
Clay,  it  was  not  necessary  to  pass  on  that  point.  The  case  of  Watson 
V.  Russell,  3  B.  &  S.  34 ;  S.  C.  5  B.  &  S.  968,  does  not  seem  to  have 
been  brought  to  the  attention  of  the  court  in  either  of  these  cases.  And 
in  neither  case  does  the  court  seem  to  have  taken  into  consideration  the 
practice  of  a  check  being  procured  drawn  by  another  to  be  used  m  pay- 
ing a  debt  due  from  the  person  procuring  the  check  to  the  person  to 
whom  the  debtor  has  had  the  check  made  payable.  The  practice  is  rec- 
ognized in  the  case  of  foreign  bills  of  exchange,  and  the  person  pro- 
curing the  bill  is  known  technically  as  the  "remitter"  of  it.  See  Mun- 
roe  V.  Bordier,  8  C.  B.  862,  where  it  was  held  that  the  payee  of  a  for- 
eign bill,  who  took  it  from  the  remitter  of  it  for  value,  was  a  bona  fide 
purchaser  for  value.  It  was  this  practice  which  was  applied  in  Watson 
v.  Russell,  3  B.  &  S.  34,  in  case  of  a  check.  In  our  opinion,  a  check 
received  by  the  payee  named  in  it,  in  payment  of  a  debt  due  from  the 
remitter  of  the  check,  is  received  by  a  holder  in  due  course  within  sec- 
tion 69  of  the  negotiable  instruments  act  (St.  1898,  c.  533  ;  Rev.  Laws, 
c.  73),  and  that  is  so  even  if  we  should  follow  the  decision  made  in 
Hardman  v.  Wheeler,  [1902]  1  K.  B.  361,  and  hold  that  a  payee  never 
can  be  a  holder  in  due  course  to  whom  the  bill  has  been  "negotiated," 
within  the  last  clause  of  section  31  of  our  act  (Rev.  Laws,  c.  73),  which 
is  taken  from  section  20  of  the  English  bills  of  exchange  act  of  1882 
(45  &  46  Vict.  c.  61).  The  rule  that  payment  of  a  pre-existing  debt 
makes  the  holder  a  holder  for  value  was  adopted  in  Rev.  Laws,  c,  73, 
§42. 

But  so  far  as  the  check  for  $400  is  concerned,  we  are  of  opinion  that 
the  evidence  should  have  been  admitted.  If  the  defendant's  story  were 
found  to  be  true,  namely,  that  she  handed  the  check  to  the  plaintiff's 
manager  at  her  house,  this  check  would  stand  on  the  same  footing  as 
the  other.  But  the  story  of  the  plaintiff's  manager  was  that  the  check 
was  brought  to  him  by  the  defendant's  husband,  signed  in  blank  by 
the  defendant,  and  that  it  was  filled  up  by  him  for  the  sum  of  $400, 
with  the  husband's  consent.  We  assume,  in  favor  of  the  plaintiff,  that 
this  is  to  be  interpreted  to  mean  that  the  only  blank  in  the  check,  when 
it  was  brought  to  the  plaintiff's  manager  by  the  defendant's  husband, 
was  in  the  amount  for  which  it  was  to  be  drawn. 

It  had  been  held  in  England,  before  the  bills  of  exchange  act  in  1882, 
that  such  a  piece  of  paper  is  not  a  check;  that  one  who  buys  it  buys 
an  incomplete  instrument  and  his  rights  depend  upon  the  real  authori- 


252  FORM  AND  INCEPTION,  (Part  1 

ty  which  the  signer  had  in  fact  given  in  the  matter.  Awde  v.  Dixon, 
G  Exch.  869.  See,  also,  Hatch  v.  Searles,  2  Sm.  &  G.  147 ;  Hogarth 
V.  Latham,  3  Q.  B.  D.  6-13;  Watkin  v.  Lamb,  85  L.  T.  (N.  S.)  483; 
France  v.  Clark,  26  Ch.  D.  257,  262.  And  see  Ledwich  v.  McKim, 
53  N.  Y.  307.  Such  an  incomplete  instrument  is  prima  facie  authority 
to  fill  in  the  blank.  Crutchly  v.  Mann,  5  Taunt.  529 ;  Swan  v.  North 
British  Australasian  Co.,  2  H.  &  C.  175,  184.  But  this  prima  facie 
authority,  as  we  have  said,  may  be  met  by  evidence  of  what  authority 
was  in  fact  given,  as  was  done  in  Awde  v.  Dixon,  6  Exch.  869.  If 
the  blanks  are  filled  up  before  the  instrument  is  negotiated,  it  does  not 
lie  in  the  maker's  mouth  to  set  up  that  it  was  incomplete  when  delivered 
by  him.  In  such  a  case,  a  plaintiff  who  buys  for  value  without  notice 
gets  the  rights  of  a  bona  fide  purchaser  for  value  of  a  negotiable  instru- 
ment ;  and  the  fact  that  there  was  no  authority  for  filling  up  the  blanks 
as  they  were  filled  up,  or  the  fact  that  the  paper  was  otherwise  wrong- 
fully dealt  with,  is  no  defense.  Schultz  v.  Astley,  2  Bing.  N.  C.  544 ; 
Foster  V.  Mackinnon,  L.  R.  4  C.  P.  704,  712. 

In  this  commonwealth  it  was  held,  on  the  other  hand,  that  a  note 
with  a  blank  for  the  payee's  name  was  a  promissory  note,  and  not  an 
incomplete  paper,  which  might  be  made  into  a  promissory  note.  Ives 
V.  Farmers'  Bank,  2  Allen,  236.  And  in  Frank  v.  Lihenfeld,  33  Grat. 
(Va.)  377,  it  was  held  that  the  purchaser  in  good  faith  of  a  note  in 
printed  form,  indorsed  by  the  defendant,  where  the  date,  payee's  name, 
and  amount  had  been  left  blank,  had  an  absolute  right  to  fill  in  the 
amount  advanced  thereon  and  to  fill  up  the  other  blanks.  It  also  has 
been  held  here,  as  it  has  been  held  in  England,  that  such  a  blank,  in 
the  absence  of  other  evidence,  might  be  filled  in  by  a  bona  fide  pur- 
chaser (see  Androscoggin  Bank  v.  Kimball,  10  Cush.  373);  and  that  a 
bona  fide  purchaser  of  such  a  paper,  which  is  filled  before  it  is  nego- 
tiated, has  the  rights  of  a  purchaser  for  value  without  notice  (see 
Whitmore  v.  Nickerson,  125  Mass.  496,  28  Am.  Rep.  257 ;  Binney  v. 
Globe  National  Bank,  150  Mass.  574,  23  N.  E.  380,  6  L.  R".  A.  379). 
See,  also,  in  this  connection,  Herdman  v.  Wheeler,  [1902]  1  K.  B.  361. 

It  is  not  necessary  to  consider  how  a  blank  check  would  be  dealt  with 
in  Massachusetts  at  common  law,  where  the  amount  in  place  of  the 
name  or  date  is  lacking.  The  negotiable  instruments  act  (Rev.  Laws, 
c.  73,  §  31)  adopted  the  English  law  on  this  point,  and  it  follows  that, 
if  Newcomb's  story  is  to  be  believed,  the  blank  check  brought  to  him 
must  be  treated  as  an  incomplete  instrument  and  not  as  a  check. 

The  defendant  further  contends  that  it  was  inadmissible  to  show 
the  real  authority  given  to  the  husband  in  the  absence  of  the  plaintiff, 
and  cites  in  support  of  that  contention  Markey  v.  Mutual  Benefit  Ins. 
Co.,  103  Mass.  78,  93,  and  Byrne  v.  Massasoit  Packing  Co.,  137  Mass. 
313.  These  are  cases  where  the  act  done  was  within  the  ostensible 
scope  of  the  authority  given  an  agent,  and  for  that  reason  the  real  au- 
thority could  not  be  invoked.  The  only  act  relied  on  as  giving  osten- 
sible authority  to  the  husband  in  the  case  at  bar  was  putting  him  in 


Ch.   3)  DELIVERY.  253 

possession  of  the  blank  check.  There  was  no  more  ostensible  authority 
here  than  there  was  in  Awde  v.  Dixon,  6  Exch.  869,  Hogarth  v. 
Latham,  3  Q.  B.  D.  643,  or  Watkin  v.  Lamb,  85  L.  T.  (N.  S.)  483.  An 
incomplete  check  gives  an  authority  to  fill  it  up  which  is  only  a  prima 
facie  authority.  It  does  not  import  an  ostensible  authority  to  fill  it  up, 
which  is  absolute. 

The  plaintiff's  rights  under  the  blank  check  for  $400,  and  to  the 
money  received  for  it,  depend  upon  the  authority  actually  given  by 
the  defendant  when  she  signed  it,  and  the  evidence  offered  should  have 
been  admitted  in  respect  of  the  credit  claimed  for  the  $400  paid  under 
the  blank  check. 

The  entry  must  be :     Exceptions  sustained.^" 

15  As  to  the  $400  check:  Accord:  Guerrant  v.  Guerrant,  7  Va.  "Law  Reg. 
639  (1902). 

As  to  the  $200  check:  Accord:  Thorpe  v.  White,  188  Mass.  333,  74  N. 
E.  592  (1905).  Contra:  Hathaway  v.  Delaware  County,  185  N.  Y.  368, 
78  N.  E.  153.  13  L.  R.  A.  (N.  S.)  273,  113  Am.  St.  Rep.  909  (1906) ;  Lewis  v. 
Clay,  67  L.  J.  Q.  B.  224  (1898),  semble. 

Compare  Herdman  v.  Wheeler,  [1902]  1  K.  B.  361 ;  Lloyd's  Bank  v.  Cook, 
[1907]  1  K.  B.  794 ;  Vander  Ploeg  v  Van  Zunk,  135  Iowa,  3.50,  112  N.  W.  807, 
13  L.  R.  A.  (N.  S.)  490,  124  Am.  St  Rep.  275  (1907).  See,  also.  Smith  v.  Pros- 
ser,  [1907]  2  K.  B.  735. 


254  FORM  AND  INCEPTION.  (Part  1 

CHAPTER  IV 
CONSIDERATION^ 


2   BLACKSTONE,  COMM.  445,  446. 

A  consideration  of  some  sort  or  other  is  so  absolutely  necessary  to 
the  formation  of  a  contract,  that  a  nudum  pactum,  or  agreement  to  do 
or  pay  anything  on  one  side,  without  compensation  on  the  other,  is 
totally  void  in  law;  and  a  man  cannot  be  compelled  to  perform  it. 
■*  *  *  [But]  if  a  man  enters  into  a  voluntary  bond,  or  gives  a  prom- 
issory note,  he  shall  not  be  allowed  to  aver  the  want  of  consideration 
in  order  to  evade  payment ;  for  every  bond,  from  the  solemnity  of  the 
instrument,  and  every  note  from  the  subscription  of  the  drawer,  carries 
with  it  an  internal  evidence  of  a  good  consideration.* 


STARR  V.  STARR. 
(Supreme  Court  of  Ohio,  1858.     9  Ohio  St.  74.) 

Error  to  the  court  of  common  pleas  of  Athens  county.  Reversed 
in  the  district  court. 

On  the  8th  day  of  October,  1857,  the  plaintiff  filed  in  the  court  of 
common  pleas  of  Athens  county  her  petition  against  the  defendant, 

1  For  cases  as  to  what  constitutes  such  a  parting  with  value  as  to  make 
a  holder  one  in  due  course,  see  part  II,  chapter  II,  section  1. 

2  "Now  we  do  not  admit  that,  when  one  voluntarily  makes  a  written  promise 
to  another  to  pay  a  sum  of  money,  the  promise  can  be  avoided  merely  by  prov- 
ing there  was  no  legal  and  valuable  con.'sideration  subsisting  at  the  time,  any 
more  than,  if  he  actually  paid  over  the  amount  of  such  note,  he  can  re- 
cover it  back  again,  because  he  repents  of  his  generosity.  ♦  •  •  We 
are  satisfied  that  none  of  the  decisions  respecting  the  avoidance  of  notes  or 
other  written  promises  for  want  of  consideration  are  impeached  by  our  de- 
cision in  this  case.  A  careful  examination  will  discover  that  in  all  those 
cases  the  ground  taken  in  defense  is,  not  that  there  was  originally  no  con- 
sideration, contrary  to  the  express  admission  of  the  promisor,  but  that  the 
consideration  had  failed,  or  that  it  rested  in  mistake  or  misapprehension; 
what  I  he  parties  supi)osed  to  be  a  consideration  turning  out  in  fact  to  be  none. 
It  was  on  this  principle  that  the  case  of  Boutell  et  al.  v.  Cowden,  Adm'r,  9 
Mass.  2~A,  was  decided.  In  those  cases  the  promisor  is  always  permitted, 
against  t±ie  party  with  whom  he  contracted,  to  show  the  mistake,  or  the  fail- 
ure of  what  was  sujjposed  to  be  substantial.  This  does  not  contradict  his  own 
acknowledgment  of  value  received,  but  sets  up  an  equitable  claim  of  discharge, 
upon  the  ground  that  both  parties  were  deceived  in  the  contract  Fraud,  il- 
legality, and  imposition  are  also  proper  defenses  against  actions  to  enforce 
such  promises,  depending  upon  other  principles."  Bowers  v.  Hurd,  10  Mass. 
427.  429,  430  (1S13),  overruled  in  Hill  v.  Buckminster,  5  Pick.  (Mass.)  393 
(1S27),  and  Parish  v.  Stone,  14  Pick.  (Mass.)  198,  25  Am.  Dec.  378  (1833). 


Ch.   4:)  CONSIDERATION.  255 

stating  that  Philip  M.  Starr,  in  his  Hfetime,  made  and  delivered  to 
plaintiff  his  certain  promissory  note  in  writing  for  the  payment,  to 
plaintiff  or  bearer,  of  $5,000  on  demand;  that  said  Philip  M.  Starr, 
after  the  delivery  of  the  note,  departed  this  life,  leaving  it  unpaid ;  and 
that  demand  had  been  made  of  the  defendant,  as  his  executor,  for  the 
allowance  or  payment  of  the  note,  and  that  he  refused  to  do  either. 
Whereupon  judgment  is  asked  for  the  amount  of  the  note  and  interest. 

To  this  petition  the  defendant  answered:  (1)  That  his  said  tes- 
tator, Philip  M.  Starr,  never  made  the  note  in  the  petition  mentioned, 
and  never  assumed  and  promised  as  therein  stated.  (2)  That,  if  said 
testator  did  make  said  note,  the  same  was  made  without  any  consider- 
ation, or  value  whatever,  moving  from  the  plaintiff  to  said  testator. 

At  the  May  term,  1858,  of  said  court,  the  cause  was  submitted  to 
the  court,  and  the  court  found  "that  the  said  promissory  note  was 
executed  and  delivered  by  the  said  testator,  as  the  said  plaintiff  hath 
in  her  said  petition  averred.  And  the  court  further  find  that  the  said 
note  was  given  by  the  said  testator  a  short  time  before  his  death  to  the 
said  plaintiff,  who  was  the  daughter  of  said  testator,  as  an  advancement 
and  gift  by  the  said  testator  to  the  said  plaintiff,  and  as  some  provision 
for  her  out  of  his  said  estate,  and  without  any  other  or  dift'erent  con- 
sideration whatever.  And  the  court,  being  of  opinion  that,  by  law^ 
natural  love  and  affection,  and  a  desire  on  the  part  of  the  testator  to 
provide  for  and  advance  the  said  plaintiff,  are  not  a  good  and  sufficient 
consideration  to  enable  the  plaintiff  to  recover  on  said  note,  do  find  that 
said  note  was  without  consideration,  as  said  defendant  hath  in  his  said 
answer  averred."  Thereupon  judgment  was  rendered  against  the 
plaintiff  for  costs,  and  she  excepted  to  the  ruling  and  judgment.  To 
reverse  this  judgment,  the  plaintiff  filed  a  petition  in  error  in  the  dis- 
trict court,  insisting  that  the  court  of  common  pleas  erred :  (1)  In 
ruling  "that,  by  law,  natural  love  and  affection,  and  a  desire  on  the 
part  of  the  testator  to  provide  for  and  advance  the  said  plaintiff,  are 
not  a  good  and'  sufficient  consideration  to  enable  the  said  plaintiff  to 
recover  on  said  note."  (2)  In  finding  that  the  note  was  without  con- 
sideration. (3)  In  rendering  judgment  against  the  plaintiff,  when  it 
should  have  been  for  her. 

The  questions  thus  presented  were  reserved  in  the  district  court  for 
decision  by  the  supreme  court. 

Per  Curiam.  The  judgment  of  the  court  of  common  pleas  must 
be  affirmed,  upon  the  principles  settled  in  the  case  of  Hamor  v.  Moore's 
Adm'rs,  8  Ohio  St.  239. 

The  note  in  the  case  before  the  court  was  a  gift,  and  its  delivery  was 
the  delivery  of  a  promise  only,  and  not  of  the  thing  promised.  The 
promise  being  unfulfilled  at  the  death  of  the  maker  of  the  note,  the 
gift  failed.  And  as  the  promise  was  without  consideration,  and  could 
not  have  been  enforced  against  the  maker  in  his  lifetime,  it  cannot  be 
against  his  executor. 

Judgment  affirmed. 


256  FORM  AND  INCEPTION.  (Part  1 

EASTON  V.  PRATCHETT. 
(CJourt  of  E^xchequer,  1S35.     1  Cromp.,  M.  &  R.  798.) 

Assumpsit  on  a  bill  of  exchange  drawn  by  the  defendant  in  his  owtj 
favor  upon  Peter  Maddocks.  and  indorsed  by  the  defendant  to  the 
plaintiff.  Plea,  that  the  defendant  indorsed  said  bill  to  the  plaintiff 
without  consideration,  and  that  the  defendant  has  not  at  any  time  re- 
ceived any  value  or  consideration  for  or  in  respect  of  said  indorse- 
ment. Replication  that  the  defendant  received  from  the  plaintiff  a 
good  and  sufficient  consideration  for  and  in  respect  of  said  indorse- 
ment concluding  to  the  country.  The  jury  found  a  verdict  for  the 
defendant.  A  rule  nisi  to  enter  judgment  non  obstante  veredicto  for 
the  plaintiff  was  obtained.' 

Lord  Abinger,  C.  B.  *  *  ♦  It  is  clear  that  on  this  issue  both 
parties  were  at  liberty  to  go  into  evidence  as  to  the  consideration  for 
the  indorsement  of  the  bill.  It  appears,  in  point  of  fact,  that  they  did 
so;  for  evidence  was  given  upon  it  on  both  sides,  and  the  jury  have 
found  for  the  defendant.  It  is  therefore  established  by  the  verdict 
that  the  bill  was  indorsed  without  consideration ;  but  it  has  been  ar- 
gued that  this  plea  is  bad,  because  in  its  language  it  does  not  neces- 
sarily exclude  that  species  of  consideration  which  does  not  lie  in 
tangible  possession,  but  is  something  of  a  different  nature,  such  as 
the  forbearing  to  sue,  or  a  guaranty  of  another  person's  debt,  which 
are  not  pecvmiary  considerations  capable  of  possession,  and  it  is  said 
that  such  considerations  cannot  properly  be  said  to  be  had  or  received 
by  the  defendant.  We  are  of  opinion,  however,  that  this  objection 
cannot  be  sustained.  Whatever  be  the  nature  of  the  consideration, 
if  it  is  actually  obtained,  the  party  may  both  in  legal  and  common 
language  be  said  to  have  had  and  received  it.  If  a  man  is  to  have 
credit,  and  it  is  given  to  him,  he  has  that  for  which  he  stipulates.  So, 
if  a  bill  is  given  for  forbearance,  the  party  may  be  said  to  have  the 
consideration,  because  he  actually  possesses  the  benefit  of  that  for- 
bearance. This  appears  to  us  to  be  a  sufficient  answer  to  this  objec- 
tion. But  it  is  further  contended  that  the  plea  is  bad,  because  it  does 
not  exclude  the  case  of  the  bill  having  been  delivered  to  the  plaintiff 
by  way  of  gift;  that  is,  that  an  indorsement  may  be  without  consid- 
eration, yet  if  it  be  intended  to  be  a  gift,  it  will  be  binding.  Suppos- 
ing it  to  be  true  that  such  gift  is  binding,  in  one  sense  indeed  the  in- 
dorsement may  be  said  to  be  without  consideration,  as  it  is  without 
pecuniary  consideration ;  but  if  it  can  be  the  subject  of  an  action, 
it  can  only  be  on  the  ground  of  there  being  some  consideration,  as  of 
favor  or  affection,  or  the  desire  to  promote  the  interests  of  another. 
Without  any  violence  to  language,  the  terms  used  in  this  plea  may 
so  be  construed,  and  that  would  be  a  sufficient  answer  to  this  objec- 

8  The  statement  is  abridged,  and  the  argument  of  counsel  and  part  of  the 
opinion  omitted. 


Ch.  4)  CONSIDERATION.  257 

tion ;  but  I  own  that  I  go  further.  If  a  man  give  money  as  a  gratu- 
ity, it  cannot  be  recovered  back,  because  the  act  is  complete,  yet  a 
man  who  promises  to  give  money  cannot  be  sued  on  such  promise ; 
and  if  so,  I  do  not  see  how  a  promise  in  writing,  not  under  seal,  can 
have  any  binding  effect.  The  law  makes  no  difference  between  such 
a  promise  and  a  verbal  one.  There  is  the  same  distinction  as  to  a 
bill  of  exchange.  If  a  party  gives  to  another  a  negotiable  instrument, 
on  which  other  parties  are  liable,  the  man  who  makes  the  gift  cannot 
recover  the  bill  back,  and  the  man  to  whom  the  bill  is  given  may  re- 
cover against  the  other  parties  on  the  bill  ;*  but  it  is  a  very  different 
question  whether  the  giver  binds  himself  by  the  indorsement,  so  as 
to  make  himself  liable  thereupon  to  the  person  to  whom  he  gives  it. 
There  is  no  decision  that  he  does,  and  there  is  a  strong  authority  the 
other  way,  and  the  prevailing  opinion  in  the  profession  is  that  a  parol 
promise  of  a  gift,  whether  verbal  or  in  writing,  will  not  be  binding. 
It  appears,  therefore,  that  the  supposition  of  a  gift,  which  has  been 
made  for  the  purpose  of  this  argument,  would  not  support  the  action. 
We  are  of  opinion,  however,  that  the  plea  must  be  taken  to  negative 
the  existence  of  any  such  consideration,  even  supposing  that  it  would 
be  sufficient.  Upon  the  whole,  we  think  that  the  plea  must  now  be 
considered  as  alleging  that  no  consideration  existed,  and  that  after 
verdict  it  cannot  be  disturbed. 
Rule  discharged. 


THOMPSON  V.  CLUBLEY. 

(Court  of  Exchequer,  1S36.     1  Mees.  &  W.  212.) 

Assumpsit,  by  the  indorsee  against  the  acceptor  of  a  bill  of  ex- 
change for  £200.  drawn  by  one  H.  R.,  payable  to  his  own  order,  and 
by  him  indorsed  to  the  plaintiff. 

Plea:  That  the  bill  of  exchange  was  wholly  made  by  H.  R.,  at 
the  request  and  for  and  by  way  of  accommodation  of  and  for  the 
plaintiff,  and  was  accepted  by  the  defendant,  at  the  request  of  H.  R., 
for  and  by  way  of  like  accommodation  of  and  for  the  plaintiff,  and 
that  at  the  time  of  making  and  accepting  the  said  bill  of  exchange  it 
was  expressly  agreed,  by  and  between  the  said  parties,  that  if  the  said 
bill  of  exchange  should  happen  to  be  outstanding  at  the  time  when  it 
became  due,  it  should  be  taken  up  and  paid  by  the  plaintiff,  and  that 
no  claim  or  demand  should  at  any  time  be  made  against  the  defend- 
ant or  H.  R.,  upon  or  in  respect  of  it — concluding  with  a  verification. 

Replication  :  That  before  and  at  the  time  of  the  commencement 
of  the  suit  the  plaintiff  was,  and  still  is.  the  holder  of  the  said  bill  of 
exchange  for  good  and  sufficient  consideration,  in  respect  of  his  be- 

*  Accord:    Milnes  v.  Dawson,  5  Excli.  948  (1850). 
Sif.&  M.B.&  N.— 17 


258  FouM  AND  INCEPTION.  (Part  1 

ing-  the  holder  thereof;  without  this,  that  the  said  bill  was  either 
made  or  accepted  by  way  of  accommodation  of  or  for  the  plaintiff, 
or  that  it  was  agreed  by  or  between  the  parties,  in  manner  and  form 
as  the  defendant  has  above  in  the  same  plea  in  that  behalf  alleged — 
concluding  to  the  country. 

The  case  came  on  for  trial  at  the  sittings  after  Easter  term,  before 
Lord  Abinger,  C.  B.,  when  the  defendant,  in  support  of  his  plea, 
called  H.  R.,  who  stated  that  in  the  spring  of  1833  he  had  occasion  to 
raise  money,  and  having  applied  to  an  attorney  to  assist  him,  it  was 
arranged  between  him  and  the  plaintiff  that  the  witness  should  give 
him  the  bill  on  which  the  present  action  was  brought,  but  which  should 
be  taken  up  by  the  plaintiff,  and  that  witness  should  receive  bills  of 
like  value  from  the  plaintiff,  for  which  witness  was  to  provide,  and 
that  the  defendant  had  not  received  any  value  for  his  acceptance.  It 
was  objected,  on  the  part  of  the  plaintiff,  that  this  evidence  was  in- 
admissible, as  it  went  to  contradict  the  written  contract  of  accept- 
ance, which  purported  to  be  an  absolute  engagement  to  pay  the  bill ; 
whereas  it  was  proposed  to  show  that  the  acceptor  was  not  to  pay  it, 
but  that  the  plaintiff,  who  was  the  indorsee,  was  to  take  it  up,  and  not 
to  sue  the  acceptor,  the  effect  of  which  was  to  make  an  entirely  dif- 
ferent contract.  Foster  v.  Jolly,  1  C,  M.  &  R.  709,  was  relied  upon 
as  in  point,  but  the  objection  was  overruled.  It  was  then  contended 
that  the  exchange  of  bills  between  the  plaintiff  and  H.  R.,  the  drawer 
and  indorser,  was  sufficient  consideration  to  entitle  the  plaintiff  to 
sue  the  acceptor  of  the  present  bill.  The  learned  judge,  however,  said 
that,  in  his  opinion,  this  bill  had  really  been  taken  by  the  plaintiff  on 
a  special  contract  by  him  not  to  sue  the  defendant,  and  as  that  was 
proved  by  the  evidence,  the  plea  was  made  out.  Whereupon  the  plain- 
tiff's counsel  elected  to  be  nonsuited,  the  learned  judge  giving  him 
leave  to  move  to  enter  a  verdict  for  the  amount  of  the  bill,  if  the  court 
should  be  of  opinion  that  the  plaintiff  was  entitled  to  recover. 

G.  Henderson  now  moved  accordingly,  on  the  grounds  taken  at  the 
trial. 

Sed  Per  Curiam.  This  defense  was  clearly  admissible,  inas- 
much as  it  showed  that  the  acceptance  was  in  truth  for  the  accommo- 
dation of  the  plaintiff,  and  that  all  the  parties  put  their  names  to  the  bill 
without  consideration.  With  regard  to  the  evidence  being  inconsist- 
ent with  the  terms  of  the  instrument,  we  are  of  opinion  that  the 
agreement  as  to  payment  was  collateral,  and  not  part  of  the  original 
contract.  It  was  a  collateral  agreement,  that  the  plaintiff  would  not 
enforce  the  contract  upon  the  bill. 

Rule  refused. 


Ch.  4)  CONSIDERATION.  259 

CO^IMERCIAL  BANK  OF  LAKE  ERIE  v.  NORTON  &  FOX. 
(Supreme  Court  of  New  York,  1841.    1  HUl,  501.) 

Assumpsit,  tried  at  the  Erie  circuit,  before  Gridley,  Chief  Judge, 
August  29,  1840.  The  plaintiffs  sought  to  recover  as  indorsees  of 
two  bills  of  exchange  drawn  by  Gillespie,  Joice  &  Co.,  on  E.  Norton 
&  Co.,  payable  to  Gillespie  &  Woodruff,  at  sixty  days  after  date.  The 
firm  of  E.  Norton  &  Co.  was  composed  of  said  Norton  and  Simeon 
Fox,  two  of  the  defendants,  who  alone  defended  the  suit. 

The  acceptance  on  each  of  the  bills  was  in  this  form,  "E.  Norton  & 
Co.,  per  A.  G.  Cochrane,"  and  was  in  Cochrane's  handwriting. 

The  bills  were  discounted  on  the  day  of  the  date,  by  the  plaintiffs 
for  the  drawers,  and  were  afterwards  accepted  for  the  drawers'  ac- 
commodation ;  the  defendants  Norton  and  Fox  having  no  funds  of 
the  drawers,  but  the  latter  being  then  largely  indebted  to  them. 

Verdict  for  the  plaintiff.  The  defendant  moved  for  a  new  trial  on 
a  bill  of  exceptions.^ 

CowEN,  J.  *  *  *  gy|.  ^]^g  point  most  confidently  pressed 
against  the  plaintiffs  is  that,  the  drawers  having  had  no  funds  in  the 
defendants'  hands,  the  latter  are  entitled  to  the  same  defense  as  if 
the  drawers  themselves  were  plaintiffs.  Put  thus  broadly,  it  is  ad- 
mitted to  be  a  point  directly  against  the  almost  entire  current  of  Brit- 
ish authority.  Kerrison  v.  Cooke,  3  Camp.  362 ;  Raggett  v.  Axmore, 
4  Taunt.  730 ;  Fentum  v.  Pocock,  5  Taunt.  192 ;  Carstairs  v.  Rolles- 
ton,  5  Taunt.  551 ;  Harrison  v.  Courtauld,  3  Barn.  &  Ad.  36 ;  Nich- 
ols v.  Norris,  3  Barn.  &  Ad.  41,  note.  The  cases  in  3  Camp,  and 
Taunt,  were  cited  and  recognized  as  sound  law  in  Murray  v.  Judah, 
6  Cow.  492.  And  they  all  hold  that  the  acceptor  of  an  accommoda- 
tion bill  must,  in  respect  to  the  holder,  be  considered  as  the  principal ; 
and  some  of  them  say  that  he  cannot  divest  himself  of  that  character, 
even  though  the  holder  took  it  from  the  person  to  whom  it  was  lent, 
with  knowledge  that  it  was  accommodation  paper.  In  such  case,  ac- 
cordingly, though  the  holder  release,  or  give  time  to  the  drawer  or 
indorser  who  borrowed  the  bill,  that  does  not  discharge  the  acceptor. 
No  doubt,  the  want  of  bona  fides  in  the  holder  will  let  in  a  defense 
that  the  bill  was  accepted  without  consideration.  But  is  there  any 
want  of  good  faith  in  advancing  money  and  taking  a  bill  from  the 
borrower,  with  knowledge  generally  that  it  was  accepted  for  his  ac- 
commodation? There  certainly  is  not,  unless  it  be  known  that  it  was 
made  for  some  purpose  different  from  that  for  which  it  is  used. 
Grant  v.  EHicott,  7  Wend.  227.« 

B  Part  of  the  case  relating  to  a  question  of  agency  Is  omitted. 

6  Accord:  Black  v.  Bank,  96  Md.  309.  54  Atl.  88  (1903);  Packard  v.  Wind- 
holz.  88  App.  Div.  365,  84  N.  Y.  Supp.  666  (1903);  White  v.  Savage,  48  Or.  ';04, 
87  Pac.  1O40  (1906) ;  Willard  v.  Ctook.  21  App.  D.  C.  237  (1903).  Compare  In 
re  Hopper-Morgan  Co.  (D.  C.)  156  Fed.  525  (1907). 


2G0  FORM  AND  iNCErxioN.  (Part  1 

But  the  question  does  not  arise  here.  In  this  case  the  money  was 
advanced  to,  and  the  bills  taken  from,  the  men  to  whom  they  were 
lent,  without  notice  that  the  defendants  were  destitute  of  effects  be- 
loni^nng-  to  the  drawers,  much  less  that  they  would  continue  destitute. 

The  bills,  however,  were  not  yet  accepted  when  the  plaintiffs  took 
and  discounted  them.  This  raises  the  objection  that  the  latter  dis- 
counted the  bills  on  the  credit  of  the  drawers  and  indorsers  alone, 
and  relieves  the  defendants  to  a  certain  extent  from  the  doctrine  of 
estoppel.  They  did  not  induce  the  plaintiffs  to  loan  money  by  previ- 
ously putting  their  names  on  the  paper;  and  the  question  is  whether 
there  be  any  other  principle  on  which  they  are  liable.  I  think  there 
clearly  is.  The  acceptance  of  a  bill  of  exchange  to  secure  the  debt  of 
a  third  person  is  more  than  a  mere  special  guaranty.  The  latter  must 
show  a  consideration  on  its  face.  The  acceptance  of  a  bill  imports  a 
consideration;  and  though  there  was  none  in  this  case,  as  between 
the  drawers  and  the  defendants,  yet  it  was  not  enough  to  stop  with 
showing  that.  The  defendants  should,  at  least,  have  shown  beside 
that  the  bills  were  suffered  to  lie  and  to  mature  before  they  were  pre- 
sented for  acceptance.  They  were  drawn  at  60  days  after  date  and 
discounted  on  the  day  of  their  date,  and,  by  acceptance  presently,  a 
delay  to  collect  of  the  drawers  would  necessarily  ensue.  Till  the  con- 
trary is  shown  it  must  be  intended  that  the  acceptance  was  with  a  view 
to  such  forbearance,  and  in  fact  worked  that  consequence. 

This  leaves  the  case  open  to  the  presumption  that  the  acceptances 
were  in  consideration  of  the  forbearance.  It  is  not  enough  to  defeat 
a  note  or  bill  that  it  appear  on  its  face  to  have  been  made  or  accept- 
ed as  security  for  a  precedent  debt  of  a  third  person.  Popplewell  v. 
Wilson,  1  Str.  264.  It  will  still  be  intended  that  something  collateral 
to  the  debt,  and  something  adequate,  formed  the  consideration ;  and 
the  maker  or  acceptor  must  negative  every  possible  intendment.  This 
was  held  in  Ridout  v.  Bristow,  1  Tyrw.  84,  1  Crompt.  &  Jerv.  231, 
and  stated  also  in  Chit,  on  Bills,  80,  a  (Am.  Ed.  of  1839)  note  (g). 
The  subject  is  fully  considered  there,  in  the  point  of  view  now  men- 
tioned. It  is  not  to  be  disguised  that  a  naked  precedent  debt  of  an- 
other is  not  per  se  such  a  consideration  as  will  sustain  a  promise  or 
acceptance.  The  books  on  Guaranties  all  show  that  it  is  not,  as  well 
as  the  treatises  on  Promissory  Notes  and  Bills.  Yet  nothing  is  more 
common  than  to  rely  on  the  note  of  A.  taken  as  a  security  for  the 
debt  of  B.  It  is  like  a  special  guaranty  stating  value  received,  which 
words,  I  take  it,  cannot  be  contradicted  so  as  to  destroy  the  guar- 
anty. See  McCrea  v.  Purmort.  16  Wend.  471,  472,  30  Am.  Dec.  103. 
Accepting  a  bill  or  making  a  note  is  the  same  thing  in  legal  effect; 
and  it  was  held,  in  the  case  just  cited  from  the  Exchequer  Reports, 
that  the  words  "value  received"  could  not  be  met  and  overcome  by 
parol.  Vide,  also,  Woodbridge  v.  Spooner,  3  Barn.  &  Aid.  233,  1  Chit. 
Rep.  661.    You  can  no  more  contradict  the  legal  effect  of  the  words 


Ch.  4)  considp: RATION.  261 

in  a  note  than  its  direct  expression.  Thompson  v.  Ketcham,  8  John. 
189,  5  Am.  Dec.  332. 

Besides,  the  case  is,  I  think,  open  to  another  intendment.  When  a 
man  borrows  money  and  draws  on  his  friend,  who  accepts,  it  should 
be  intended  that  the  acceptor  authorized  him  originally  to  borrow  on 
the  terms  that  he  would  accept,  which  is  equivalent  to  a  request  of 
the  loan  on  the  part  of  the  acceptor. 

New  trial  denied. 


JARVIS  V.  WILSON. 
(Supreme  Court  of  Errors  of  Counecticut,  1878.    46  Conn.  90,  33  Am.  Rep.  18.) 
See  ante,  p.  29,  for  a  report  of  the  case. 


BAKER  V.  WALKER. 

(Court  of  Exchequer,  1845.     14  Mees.  &  W.  465.) 

Debt.  The  first  count  of  the  declaration  stated,  that  the  defendant 
was  indebted  to  the  plaintiff  in  the  sums  of  £13.  2s.  6d.  and  £7.  13s., 
upon  a  judgment  recovered  against  the  defendant.  The  second  alleged 
that,  on  the  21st  of  March,  1844,  the  defendant  made  his  promissory 
note,  and  thereby  promised  to  pay  the  plaintiff  £36.  5s.  three  months 
after  the  date  thereof. 

Plea  to  the  second  count,  as  far  as  the  same  relates  to  the  sum  of 
£20.  15s.  6d.,  parcel  of  the  said  sum  of  £26.  5s.,  that  the  said  promis- 
sory note  was  made  and  delivered  by  him  the  defendant  to  the  plaintiff 
for  and  on  account  of  a  certain  judgment  debt  of  £20.  15s.  6d.,  recov- 
ered by  the  plaintiff  against  the  defendant,  and  that,  except  as  afore- 
said, there  never  was  any  consideration  or  value  for  the  making  or  de- 
livery of  the  said  note  to  the  plaintiff. 

Replication,  de  injuria. 

Special  demurrer,  assigning  for  causes  that  the  general  replication 
de  injuria  is  inapplicable  to  this  case,  inasmuch  as  the  plea  to  which 
it  is  pleaded  involves  matter  of  record,  which  is  not  triable  by  the 
country. 

Joinder  in  demurrer. 

The  point  marked  for  argument  on  the  part  of  the  plaintiff  was, 
that  the  plea  was  bad,  as  it  showed  on  the  face  of  it  a  good  and  suffi- 
cient consideration  for  making  the  promissory  note.'^ 

Parke,  B.  I  am  of  opinion  that  the  plea  is  bad,  for  it  shows  there 
was  a  debt  in  existence  on  account  of  which  the  note  was  made,  and 
that  is  sufiicient  to  make  the  note  good.     It  is  like  the  case  of  a  note 

7  The  arguments  of  counsel  are  omitted. 


2G2  rouM  AND  iNCKi'TioN.  (Part  1 

given  for  a  debt  of  a  third  party,  which  has  been  held  to  be  a  sufficient 
consideration.  It  was  so  hjld  in  Popplewcll  v.  Wilson,  1  Strange,  26-i, 
and  that  principle  has  been  acted  upon  in  many  other  cases.  A  prom- 
issory note,  although  not  a  specialty,  resembles  a  specialty,  and  at  all 
events  it  is  a  security.  Where  a  man  who  has  a  judgment  debt  takes 
from  his  debtor  a  promissory  note  for  the  amount  payable  at  a  certain 
time,  it  must  be  inferred  that  he  thereby  enters  into  an  agreement  to 
suspend  his  remedy  for  that  period,  and  if  so,  that  is  a  good  consid- 
eration for  the  giving  of  the  note.  Here,  there  being  a  judgment  debt, 
a  promissory  note  is  given  for  the  amount  of  it,  and  that  is  evidence 
of  an  agreement  to  suspend  the  judgment  until  the  note  is  due,  which 
is  a  sufl'.cient  consideration  to  support  an  action  on  the  note.  This  dis- 
tinguishes the  case  from  Serle  v.  Waterworth,  4  M.  &  W.  9.  The 
judgnient  in  that  case  was  reversed  on  error,  in  Nelson  v.  Serle,  4  M. 
&  W.  795,  but  the  allegation  that  "there  never  was  any  other  consider- 
ation for  the  note,"  had  been  omitted  by  mistake  in  the  briefs  of  the 
case  in  the  court  below,  and  the  latter  court  gave  judgment  on  the  as- 
sumption that  there  was  no  such  averment.  I  am  therefore  of  opinion 
that  the  plea  is  bad,  and  that  the  plaintiff  is  entitled  to  judgment. 

Aldhrson,  Rolpe,  and  Platt,  BB.,  concurred. 

Judgment  for  the  plaintiff.^ 


BANK  OF  TROY  v.  TOPPING  et  al. 
(Supreme  Court  of  New  York,  1S32.    9  ^Yend.  273.) 

This  was  an  action  of  assumpsit,  tried  at  the  Rensselaer  circuit  in 
June,  1830,  before  the  Plon.  James  Vanderpoel,  one  of  the  circuit 
judges. 

The  plaintiffs  declared  as  the  endorsers  of  a  promissory  note,  given 
by  the  defendants  to  Keating  Rawson  for  $4,000,  bearing  date  2nd 
July,  1829,  payable  sixty  days  after  date.  On  the  trial  the  note  was 
produced ;  it  was  signed  thus :  "Margaret  Topping,  administratrix ; 
John  Holme,  administrator  of  the  estate  of  John  Topping,  dec'd :" 
and  there  were  three  endorsements  upon  it,  to  wit,  $2,734.95,  as  re- 
ceived of  Phillip  Viele,  surrogate  of  the  county  of  Rensselaer,  on  1st 
February,  1830,  $200  as  received  of  John  Holme  on  16th  February, 
1830,  and  $200  also  received  of  John  Holme  on  10th  April,  1830.  The 
making  and  endorsement  of  the  note  were  admitted,  and  the  plaintiff 
rested.  The  defendants  then  offered  to  prove  that  John  Topping  died 
intestate  in  September,  1828;  that  the  defendants  took  out  letters  of 
administration  on  his  estate ;  that  at  the  time  of  the  death  of  the  in- 
testate, the  plaintiffs  held  a  note  drawn  by  him  and  endorsed  by  Keat- 
ing Rawson  for  $5,000,  payable  at  sixty  days;  that  the  note  now 
produced  is  the  last  of  five  notes  given  by  the  defendants  as  renewals 

8  See  Crawford  Bank  v.  Stagemann,  137  Iowa,  13,  114  N.  W.  549  (1908). 


Ch.  4)  CONSIDERATION.  263 

from  time  to  time  of  the  note  held  by  the  plaintififs  against  the  in- 
testate at  the  time  of  his  death,  all  of  which  were  signed  in  the  same 
manner  as  that  now  produced,  and  all  endorsed  by  Keating  Rawson, 
the  same  endorser  who  was  on  the  note  held  by  the  plaintiffs  against 
the  intestate  at  the  time  of  his  death ;  that  the  defendants  having  in 
due  course  of  administration  exhausted  the  personal  estate  of  the  in- 
testate, applied  to  and  obtained  from  the  surrogate  of  the  county  of 
Rensselaer  an  order  to  sell  all  the  real  estate  of  the  intestate;  that 
such  real  estate  was  sold,  and  that  the  plaintiffs  received  $2,734.95, 
endorsed  on  the  note,  from  the  surrogate  of  Rensselaer,  as  their  por- 
tion or  dividend  of  the  fund  produced  by  such  sale;  which  evidence 
was  objected  to  and  rejected  by  the  judge,  and  the  plaintiffs  had  a 
verdict  for  $939.96,  the  balance  of  the  note,  after  deducting  the  en- 
dorsements thereon.  The  defendants  having  excepted  to  the  decision 
of  the  judge,  now  moved  for  a  new  trial. 

H.  P.  Hunt,  for  defendants.  The  note  of  the  defendants  was  given 
for  the  debt  of  their  intestate;  and  offering  to  prove  that  they  had 
no  assets,  they  were  not  liable,  although  the  promise  was  in  writing, 
for  there  was  no  consideration  for  the  promise.  Although  the  note 
is  payable  at  sixty  days,  the  court  will  not  thence  infer  that  forbear- 
ance was  the  consideration,  but  rather,  as  the  notes  were  uniformly 
given  by  the  defendants  in  their  representative  character,  that  it  was 
an  arrangement  for  the  benefit  of  the  plaintiffs,  by  means  of  which 
they  receive  a  discount  every  two  months. 

J.  P.  Cushman,  for  plaintiffs.  Forbearance  to  sue  is  a  good  and  suf- 
ficient consideration  for  a  note  given  by  administrators  to  pay  the 
debt  of  their  intestate.  Here  forbearance  was  extended  for  the  period 
of  a  year  after  the  date  of  the  intestate,  and  the  note  now  in  suit  it- 
self shews  a  delay  in  the  collection  of  the  debt  sixty  days.  The  con- 
sideration need  not  be  averred  in  the  declaration;  it  is  enough  that 
it,  as  well  as  the  fact  that  the  promise  was  in  writing,  be  shewn  on 
the  trial. 

Savage,  C.  J.  Toller,  in  his  Treatise  on  the  Laws  of  Executors  and 
Administrators,  p.  464,  says  an  executor  may  make  himself  personally 
liable  by  his  promise  to  pay  a  debt  of  the  testator,  or  answer  damages 
out  of  his  own  estate ;  but  such  promise  must  be  in  writing,  and  sup- 
ported by  a  sufficient  consideration ;  there  must  be  either  assets  in  his 
hands  or  forbearance  by  the  creditor  to  constitute  a  consideration.  An 
admission  of  assets  may  be  implied  by  the  nature  of  the  promise — as 
if  it  be  accompanied  with  a  declaration  that  the  money  is  ready,  &c. 
But  in  case  there  are  no  assets,  a  promise  by  an  executor  to  pay  his 
testator's  debt  is  nudum  pactum.  Paying  interest  on  a  bond  is  no  ad- 
mission of  sufficient  assets  to  pay  the  principal,  nor  is  mere  submission 
to  arbitration;  though  a  submission  of  the  question  of  assets  in  his 
hands  and  an  award  against  him  would  be  conclusive  against  him  in 
that  litigation,  but  not  with  any  other  creditor.  This  is  a  brief  sum- 
mary of  the  English  cases. 


2G4  FOKM  AND  INCEPTION.  (Part  ] 

The  leading  case  on  this  subject  is  Rann  v.  Hughes,  7  Brown's  P. 
C.  556.  7  T.  R.  35U,  note.  The  declaration  stated  an  indebtedness 
by  the  defendant's  intestate,  his  death,  leaving  sufficient  assets,  the 
granting  administration  to  the  defendant,  the  liability  of  the  defend- 
ant, and  in  consideration  thereof,  his  promise  to  pay.  The  defend- 
ant i)Ieaded  the  general  issue,  plene  administravit,  and  plene  adminis- 
travit  praeter.  On  the  trial,  the  first  issue  was  found  for  the  plain- 
tiff and  the  others  for  the  defendant.  After  verdict,  it  must  be  taken 
for  granted  that  the  promise  was  proved  to  be  in  writing.  That  case 
was  therefore  the  same  in  principle  as  this.  In  the  King's  Bench,  judg- 
ment was  given  for  the  plaintiff,  but  that  judgment  was  reversed  in 
the  Exchequer  Chamber,  and  the  latter  judgment  affirmed  in  the  House 
of  Lords.  A  question  was  there  submitted  to  the  judges,  whether  a 
sufficient  consideration  appeared  in  the  declaration.  Ch.  Baron  Skin- 
ner delivered  the  opinion  of  the  judges  at  length,  in  which,  among  oth- 
er things,  he  stated  that  every  man  by  the  law  of  nature  is  bound  to  ful- 
fil his  engagements ;  but  the  law  of  England  affords  no  remedy  to  com- 
pel performance  of  an  agreement  without  sufficient  consideration.  The 
fact  that  the  promise  is  in  writing  does  not  supersede  the  necessity 
of  proving  a  consideration.  If  a  person  indebted  in  one  right,  in  con- 
sideration of  forbearance  for  a  particular  time,  promise  to  pay  in  an- 
other right,  that  forbearance  will  constitute  a  sufficient  considera- 
tion; but  if  one  promise  to  pay  upon  request  what  he  was  liable  to 
pay  upon  request  in  another  right,  no  advantage  or  convenience  is 
gained  by  the  promissor  to  constitute  a  consideration  for  such  prom- 
ise. In  the  case  of  Trevivian  v.  Hewell,  Cro.  Eliz.  91,  the  point  de- 
cided is,  that  if  an  executor  having  sufficient  assets  promises  to  pay, 
the  fact  of  his  having  sufficient  assets  is  sufficient  consideration  for 
the  promise.  The  cases  of  Atkins  v.  Hill  and  Hawks  v.  Saunders. 
Cowp.  284,  289,  both  support  the  doctrine  that  a  promise  by  an  ex- 
ecutor to  pay  a  legacy,  founded  upon  the  fact  of  his  having  assets, 
is  a  valid  promise.  Such,  I  apprehend,  is  the  doctrine  of  all  the  cases. 
In  an  action  against  him  in  the  character  of  executor,  to  recover  a  de- 
mand out  of  the  testator's  estate,  a  promise  by  the  executor  is  a  mere 
nudum  pactum  if  there  be  no  assets.  1  Saund.  210,  n.  2  Comyn  on 
Contr.  431,  concludes  an  examination  of  the  cases  on  this  point,  by 
saying  that  though  the  executor  promise  upon  suffi(?ient  consideration, 
yet  by  the  statute  of  frauds,  the  promise,  to  be  valid,  must  be  in  writ- 
ing; but  a  bare  promise  to  pay  by  an  executor  does  not  make  him 
liable  to  pay  out  of  his  own  estate,  but  he  is  chargeable  only  as  ex- 
ecutor and  to  the  extent  of  assets  in  his  hands,  as  he  would  have  been 
if  no  such  promise  had  been  made;  and  it  makes  no  dift'erence  that 
such  promise  is  in  writing.  The  cases  which  have  been  referred  to 
shew,  1.  That  every  promise  require  a  sufficient  consideration  to  sup- 
port it ;  2.  That  the  promise  of  an  executor  to  pay  absolutely  and  to 
bind  him  personally,  not  only  requires  a  consideration,  but  the  prom- 
ise, to  be  binding,  since  the  statute  of   frauds,  must  be  in  writing; 


Ch.  4)  CONSIDERATION,  265 

3.  That  sufficient  assets  in  the  hands  of  an  executor  constitute  a  suf- 
ficient consideration  for  such  promise;  and  4.  That  forbearance  to 
sue  is  also  a  sufficient  consideration.  Assuming  these  principles  to 
constitute  the  law  of  this  case,  had  the  plaintiiTs  any  right  to  recover? 
The  defendants  had  given  a  promissory  note,  which,  since  the  statute 
of  Anne,  imports  a  consideration  so  far  as  to  relieve  the  plaintiff  from 
stating  any  consideration  in  his  declaration,  or  proVing  any  in  the 
first  instance ;  but  it  is  well  settled,  as  between  the  parties  to  a  note, 
that  the  consideration  may  be  inquired  into,  and  if  the  defendant  shews 
a  want  of  consideration,  the  plaintifif  cannot  recover. 

In  the  case  of  Ten  Eyck  v.  Vanderpoel,  8  Johns.  (N.  Y.)  120,  the 
defendant,  as  administrator,  promised  to  pay  the  amount  of  the  note 
for  value  received,  by  J.  B.  and  his  heirs ;  it  was  held  on  demurrer  that 
there  was  no  consideration  for  the  promise.  And  in  Schoonmaker  v. 
Roosa,  17  Johns.  (N.  Y.)  304,  it  is  expressly  adjudged,  that  between 
the  original  parties  the  consideration  of  a  promissory  note  may  be 
inquired  into ;  and  if  there  is  a  want  of  consideration,  the  note  can- 
not be  enforced  at  law.  In  this  case  the  defendants  offered  to  prove 
that  they  had  no  assets  except  what  had  been  applied,  and  therefore 
there  was  no  consideration  for  their  promise  beyond  the  amount  which 
had  been  paid.  In  the  case  last  cited  it  was  also  decided  by  this  court 
that  a  promise  by  an  executor  to  pay  is  not  binding,  unless  he  has  as- 
sets, and  that  a  note  given  by  executors  by  way  of  submission  to  arbi- 
tration, was  not  binding,  unless  there  were  assets  in  the  executor's 
hands.  When  a  submission  has  been  made  by  bond,  the  executor  is 
liable,  not  only  because  a  seal  imports  a  consideration,  for  a  promis- 
sory note  imports  a  consideration  also,  but  also  because  when  a  per- 
son has  executed  an  instrument  under  seal,  he  shall  not  be  permitted 
to  disprove  the  consideration.  Both  the  bond  and  note  import  as- 
sets, and  of  course  a  sufficient  consideration ;  the  consideration  of  the 
bond  cannot  be  explained ;  that  of  the  note  may,  as  between  the  orig- 
inal parties  and  all  parties  having  notice  of  the  consideration.  The 
defendants  in  this  case  having  shewn,  or  what  is  the  same  thing  on 
this  motion,  offered  to  shew,  that  they  had  fully  administered,  and 
had  no  assets  in  their  hands,  there  was  no  consideration  for  their  prom- 
ise; "for  such  promises,"  says  Lord  Hardwicke,  "must  be  understood 
with  reference  to  assets,  otherwise  men  might  be  drawn  in."  I  Ves. 
Sr.  126.  From  the  offer  in  this  case  it  is  apparent  that  the  plaintiffs 
do  not  stand  in  a  situation  to  exclude  the  question  of  consideration ; 
they  are  endorsees  of  the  note,  but  the  note  being  endorsed  for  the 
accommodation  of  Topping  originally,  and  the  debt  being  his,  the 
transaction  was  between  the  plaintiffs  and  Topping;  they  paid  no 
value  for  the  note  to  Rawson,  the  endorser. 

The  question  of  forbearance  does  not  properly  arise  on  this  record. 
No  such  consideration  was  shown,  and  the  court  cannot  infer  it  from 
the  fact  that  the  note  is  payable  sixty  days  after  date. 

It  was  contended,  upon  the  argument,  that  this  was  like  the  case  of 


2GG  FORM  AND  INCEPTION.  (Part  1 

a  guardian  who  gave  a  note  for  his  ward,  and  was  holden  personally 
responsible,  on  the  ground  that  the  debt  of  the  ward  was  discharged 
by  the  guardian's  note.  The  case  of  Thatcher  v.  Dinsmore,  5  Mass. 
301,  4  Am.  Dec.  61,  was  cited  to  support  the  proposition.  In  that  case 
the  defendant  as  guardian  to  A.  L.,  an  insane  person,  promised  to 
pay  the  plaintiff  a  certain  sum  of  money.  The  notes  were  given  for 
just  debts  of  the  ward,  and  the  defendant  was  his  guardian.  After 
the  notes  were  payable,  and  before  suit  was  brought,  A.  L.  was  re- 
stored to  his  reason,  and  the  defendant  discharged  from  his  guardian- 
ship. There  was  a  verdict  for  the  plaintiff,  subject  to  the  opinion  of 
the  court.  That  opinion  was  pronounced  by  Chief  Justice  Parsons. 
It  had  been  objected  on  the  argument  that  there  was  no  considera- 
tion for  the  promise;  in  answer  to  which,  the  learned  judge  says  that 
the  notes  were  given  for  a  debt  which  the  defendant  was  bound  to 
pay,  if  he  had  assets,  which  it  was  not  denied  he  had ;  that  a  note  for 
value  received  was  a  promise  for  a  legal  consideration,  though  as  be- 
tween the  original  parties  the  promissor  might  shew  that  none  was  re- 
ceived. And  he  says  it  has  long  been  settled  as  law  in  that  state,  that 
a  negotiable  note  given  for  a  simple  contract  debt  extinguishes  such 
debt.  He  therefore  argued  that  the  defendant  was  liable,  as  by  his 
note  the  plaintiff's  debt  against  the  ward  was  discharged.  That  case 
is  no  authority  here,  because  the  reasons  are  not  applicable.  A  prom- 
issory note  given  in  this  state  for  a  simple  contract  debt  does  not  ab- 
solutely discharge  such  debt ;  the  creditor  may  still  prosecute  upon  the 
original  consideration,  and  may  recover  upon  producing  and  cancel- 
ing the  note.  In  that  case  also  it  appears  that  the  defendant  had  as- 
sets. In  the  case  now  under  consideration  the  plaintiff"  lost  nothing 
by  taking  the  defendant's  notes  for  the  note  of  their  intestate;  they 
might  at  any  time  have  prosecuted  the  defendants  as  administrators 
for  the  money  lent  to  their  intestate,  and  recovered  judgrnent,  and  thus 
have  obtained  any  preference  which  the  law  would  then  have  given 
them. 

On  the  whole  case,  therefore,  I  am  of  opinion  that  the  facts  offered 
in  evidence  were  a  bar  to  a  recovery  against  the  defendants  in  their 
individual  capacity,  and  that  a  new  trial  should  be  granted.f 


THOMPSON  V.  GRAY. 

(Supreme  Judicial   Court  of   Maine,   1874.   63  yie.  228.) 

Assumpsit  upon  a  note  given  by  the  defendant  to  the  plaintiff  for 
$190,  dated  August  17,  1872.  A  brief  statement  was  pleaded  with 
the  general  issue,  admitting  the  signature  to  the  note,  but  saying  that 

t  Accord:  Widjrer  v.  Baxter,  100  Mass.  130.  7G  N.  E.  509,  3  L.  R.  A.  (N.  S.) 
436  (190<)) ;  Gansevoort  Bank  v.  Gilday.  53  Misc.  Rep.  107.  104  N.  Y.  Supp. 
271  (1907).  See  Batternian  v.  Butcher.  95  App.  Div.  213,  88  N.  Y.  Supp.  685 
(1904) ;    Crofts  v.  Beale,  11  C.  B.  172  (1851). 


Ch.  4)  CONSIDERATION.  2(57 

it  was  without  any  valid  legal  consideration;  that,  at  the  time  of  its 
execution,  Mrs.  Gray  was  in  a  feeble  and  impaired  condition  of  body 
and  mind,  and  was  mentally  incompetent  to  transact  business  with  in- 
telligence, understanding  rationally  what  she  was  doing;  and  that  the 
plaintiff  procured  her  signature  by  artifice,  deception  and  fraud. 

The  note  was  given  to  take  up  one  of  her  husband,  maturing  in  the 
bank,  for  necessaries  supplied  to  their  family  by  the  plaintiff. 

There  is  no  occasion  to  rehearse  the  testimony  as  to  the  issues  of  fact 
presented,  since  no  legal  questions  arose  upon  that  branch  of  the  case.® 

Walton,  J.  The  promissory  note  of  a  married  woman  given  for 
the  antecedent  debt  of  her  husband  is  not  void  for  want  of  consider- 
ation if  it  is  made  payable  at  a  future  day.  Such  a  note  necessarily 
operates  as  a  suspension  of  the  right  of  the  creditor  to  enforce  payment 
of  his  debt  till  the  note  matures ;  and  it  is  a  rule  of  law,  too  well  settled 
to  require  the  citation  of  authorities  in  support  of  it,  that  such  a  sus- 
pension of  the  right  of  the  creditor  to  enforce  payment  of  his  debt  is  a 
suflicient  consideration  for  the  promise  of  a  third  person  to  pay  it.  It 
is  not  necessary  that  there  should  be  an  express  agreement  for  delay. 
The  taking  of  a  new  security  payable  at  a  future  day,  by  operation  of 
law,  and  without  any  special  agreement  to  that  effect,  imposes  upon 
the  creditor  the  duty  of  waiting  for  his  pay  till  the  new  security  ma- 
tures. Andrews  v.  Marrett,  58  Me.  539,  and  authorities  there  cited ; 
Eisner  v.  Keller,  3  Daly  (N.  Y.)  485. 

The  objection,  therefore,  that  the  note  in  suit  was  given  without 
consideration  is  not  sustained. 

Nor  are  we  satisfied  that,  at  the  time  of  the  giving  of  the  note  in  suit, 
the  defendant  did  not  have  an  intelligent  understanding  of  what  she 
was  doing.  Nor  are  we  satisfied  that  there  was  any  such  fraud  or 
imposition  practiced  upon  her  as  ought  to  avoid  the  note.  She  prob- 
ably felt  that  if  there  was  no  legal  obligation  resting  upon  her  to  pay 
the  debt,  still,  inasmuch  as  it  was  incurred  for  necessaries  supplied 
her  and  her  children  as  well  as  her  husband,  and  she  alone  had  the 
means  to  pay  it,  that  there  was  a  moral  obligation  resting  upon  her 
which  she  was  not  at  liberty  to  throw  off ;  and  the  fact  that  she  was 
willing  to  give  her  personal  obligation  to  pay  for  such  necessaries  is 
not  to  our  minds  evidence  of  insanity  or  imposition. 

Judgment  for  the  plaintiff.^** 

8  Arguments  of  counsel  are  omitted. 

10  Accord:  York  v.  Pearson,  63  Me.  587  (1874);  Fulton  v.  Loughlin,  118 
Ind.  28r.,  20  N.  E.  796  (1888)  ;  Murphey  v.  lUiuols  Bank,  57  Neb.  519,  77  N.  W. 
1102  (1899);  Balfour  v.  Insurance  Co.,  3  C.  B.  (N.  S.)  300  (1857). 

In  Murphey  v.  Illinois  Bank,  supra,  the  court  said:  "The  effect  of  this 
evidence  is  that  Murphey  executed  the  note  in  suit  as  an  accommodation  for 
Warren  &  Co.  We  do  not  think  he  executed  the  note  without  consideration. 
The  promise  of  Warren  &  Co.  to  repay  him  what  he  should  pay  the  bank  was 
a  sufficient  consideration  to  support  his  promise  to  the  bank,  and  the  fact 
that  Warren  &  Co.  failed  to  keep  their  promise  to  indemnify  did  not  release 
Murphey  from  his  promise  to  the  bank." 

If  there  is  a  consideration  sufficient  to  support  the  maker's  or  indorser's  ob- 


268  FORM   AND    IN-CETTION.  (Part   1 


MARTENS-TURNER  CO.  v.  MACKINTOSH. 

(Supreme  Court,  Appellate  Division,  First  Department,  1S97.     17  App.  Div. 
419,  45  N.  Y.  Supp.  275.) 

Ingram  AM,  J.  The  action  was  brought  to  recover  upon  two  causes 
of  action.  The  first  was  a  cause  of  action  for  goods  sold  and  de- 
livered ;  and  the  second  for  goods  sold  and  delivered  upon  a  credit, 
alleging  that  the  credit  was  obtained  by  false  representations. 

The  answer  of  the  defendant  admitted  the  sale  and  delivery  of  the 
goods  set  forth  in  the  first  cause  of  action,  alleging  the  commencement 
of  the  action  on  the  24th  day  of  December,  1894,  and  that,  at  the 
time  the  said  action  was  commenced,  nothing  was  due  from  the  de- 
fendant to  the  plaintiff,  except  the  amount  due  on  a  note  of  $323.11, 
and  further  alleging  that  the  defendant  had  given  to  the  plaintiff  prom- 
issory notes  for  the  goods  sold  and  delivered  in  the  cause  of  action  set 
up  in  the  complaint ;  that  the  plaintiff  had  accepted  the  said  notes,  such 
notes  being  given  in  payment,  and  not  otherwise,  of  the  entire  amount 
which  was  due  and  owing  from  the  defendant  to  the  plaintiff;  and  that 
said  notes  were  not  due  at  the  time  of  the  commencement  of  the  action, 
except  the  note  for  $323.11  and  denied  the  allegations  of  the  second 
cause  of  action  as  to  the  fraud  alleged. 

Upon  motion  judgment  was  entered  in  favor  of  the  plaintiff  for  the 
amount  of  the  promissory  note  admitted  to  be  due,  and  upon  the  trial 
the  court,  on  motion  of  the  plaintiff,  directed  a  judgment  for  the  bal- 
ance of  the  amount  claimed  to  be  due,  on  the  ground  that  the  giving  by 
the  defendant  and  the  acceptance  by  the  plaintiff  of  a  promissory  note 
for  the  amount  of  the  sale  of  such  goods  was  not  an  extension  of  the 
time  of  payment,  but  that,  notwithstanding  the  giving  and  acceptance 

ligation,  viewed  as  a  simple  promise  In  writing — e.  g.,  an  actual  promise  to 
forbear  to  sue  upon  the  debt,  whether  that  of  the  promisor  or  a  third  party, 
for  which  the  note  was  given,  or  a  forbearance  at  the  request  of  the  maker  or 
indorser  CSIansfield  v.  Corbin.  2  Cush.  151  [1848];  Russell  v.  Bassett,  79  Conn. 
700.  66  Atl.  ">.",!  Il!>07].  See  Strong  v.  Sheffield,  post.  p.  271),  or  an  extinguish- 
ment of  the  promisor's  or  third  partv's  prior  indebtedness  (Union  Rank  v. 
.Tefferson,  101  Wis.  452.  77  N.  W.  889  [1899];  Peti-ie  v.  Miller,  57  App.  Div. 
17.  67  N.  Y.  Supp.  1(>42  [19011.  affirmed  17.3  N.  Y.  596.  65  N.  E.  1121  [190.3]; 
rigelow  Co.  V.  Automatic  Co.,  56  Misc.  Rep.  389.  107  N.  Y.  Supp.  894  [1907]),  or 
the  making  of  advances  to  the  promisor  or  a  third  party  upon  the  instrument 
as  collateral  security  (Black  v.  Bank,  96  Md.  399,  .^4  Atl.  88  [1903];  Metropoli- 
tan Co.  v.  Springer  [Sup.]  90  N.  Y.  Supp.  376  [1904] ;  Mersick  v.  Alderman. 
77  Conn.  634.  60  Atl.  100  [190.-1).  or  the  surrender  of  collateral  security  at  the 
request  of  the  promisor  (Allentown  Bank  v.  Clay  Co.,  217  Pa.  128,  66  Atl.  252 
[1907]),  or  the  giving  of  a  note  to  the  promisor  (Milius  v.  Kauffmaun,  104  App. 
Div.  442,  93  N.  Y.  Supp.  669  [1905])— it  has  always  been  held  that  the  maker 
or  indorser  is  liable  on  the  instrument. 

A  bill  or  note,  given  in  payment  of  a  debt  barred  by  the  statute  of  limita- 
xions,  or  by  a  discharge  in  bankruptcy,  or  voidable  on  the  ground  of  infancy 
or  insanity,  is  enforced  on  the  same  theory  as  a  parol  promise.  ?ilul]  v.  Van 
Trees,  50  Cal.  547  (1S75) ;  Wislizeuus  v.  O'Fallon,  91  Mo.  184,  3  S.  W.  837  (1SS6) ; 
Bank  v.  Sneed,  97  Tenn.  120,  36  S.  W.  716,  .34  L.  R.  A.  274.  .56  Am.  St.  Rep.  788 
<1S1K5).  And  see  Eastwood  v.  Keuyon.  11  Ad.  &  E.  438  (1840).  Coinpare 
TVidger  v.  Baxter,  190  Mass.  130,  76  N.  E.  509,  3  L.  R.  A.  (N.  S.)  436  (1906). 


Ch.   4)  CONSIDERATION.  269 

of  the  notes  in  payment  of  the  indebtedness,  which  notes  were  not  due 
at  the  time  of  the  commencement  of  the  action,  the  plaintiff  could  at 
any  time  maintain  an  action  to  recover  the  price  of  the  goods  sold  and 
delivered. 

The  counsel  for  the  respondent  refers  to  but  one  authority  as  jus- 
tifying the  decision  of  the  court  below,  viz.,  Graham  v.  Negus,  55  Hun, 
440,  8  N.  Y.  Supp.  679.  That  case  is  opposed  to  a  long  line  of  au- 
thorities in  this  state  (including  decisions  of  the  Court  of  Appeals  upon 
the  exact  point),  in  England  and  many  of  the  other  states.  The  rule 
is  stated  in  18  Am.  &  Eng.  Enc.  Eaw,  p.  177,  as  follows :  "The  taking 
of  a  note  for  a  debt,  whether  such  note  is  negotiable  or  not,  operates 
to  suspend  the  right  of  the  creditor  to  sue  on  the  original  cause  of 
action  until  after  the  maturity  of  the  note ;"  and  the  cases  to  which 
reference  is  made  in  the  note  amply  sustain  this  proposition.  It  was 
expressly  applied  by  the  Court  of  Appeals  in  this  state  in  the  cases  of 
Happy  v.  Mosher,  48  N.  Y.  313,  and  Hubbard  v.  Gurney,  64  N.  Y. 
457.  Whether,  upon  this  allegation  in  the  answer,  the  acceptance  of 
the  note  was  an  extinguishment  under  the  original  obligation  to  pay  for 
the  goods  sold  and  delivered,  it  is  not  necessary  to  determine.  At  least 
the  acceptance  of  the  notes  was  a  suspension  of  the  right  to  sue  for  the 
amount  due  upon  the  original  cause  of  action  for  goods  sold  and  de- 
livered. 

The  consideration  for  this  suspension  of  the  right  to  enforce  the  ob- 
ligation is  apparent.  By  the  execution  of  the  promissory  note  the 
debtor  places  in  the  hands  of  the  creditor  an  obligation  which  imposes 
upon  him  a  much  more  onerous  obligation  than  that  upon  the  mere 
agreement  to  pay  money.  By  it  the  creditor  has  the  right  to  transfer 
by  mere  indorsement  and  delivery  the  obligation  of  the  debtor,  which, 
in  the  hands  of  the  indorsee  for  value  before  maturity,  imposes  upon 
the  maker  of  the  note  an  obligation  to  pay,  regardless  of  any  equities 
which  exist  between  himself  and  his  original  creditor.  That  rhis  right 
of  transfer  to  such  a  third  party  gives  to  the  creditor  an  important  ad- 
vantage, and  imposes  upon  the  debtor  an  increased  liability,  is  ap- 
parent, and  is  certainly  an  ample  consideration  for  an  agreement,  im- 
pHed  by  the  delivery  of  the  note,  that  at  least  the  right  to  enforce  the 
original  obligation  should  be  suspended  until  a  failure  to  pay  the  note 
when  due.  That  this  must  be  so  is  apparent  from  the  fact  that  such  a 
right  to  transfer  the  note  by  indorsement  exists.  Upon  such  transfer 
the  right  to  sue  upon  the  original  cause  of.  action  would  be  suspended, 
not  only  until  the  note  was  due,  but  until  the  note  so  delivered  had 
again  become  the  property  of  the  original  debtor.  To  hold  that,  not- 
withstanding the  giving  and  acceptance  by  the  original  creditor  of  a 
note  for  the  amount  of  the  indebtedness,  such  original  creditor  could 
at  once  commence  an  action  to  collect  the  original  indebtedness,  would 
expose  such  a  debtor  to  a  twofold  liability  in  case  of  the  transfer  of  the 
note,  and  would  be  to  allow  a  violation  of  a  clearly  implied  agreement 
for  which  there  was  ample  consideration.     We  think  it  quite  clear  that. 


270  FORM  AND  INCEPTION.  (Part  ] 

both  upon  principle  and  authority,  the  giving  and  acceptance  by  the 
creditor  of  a  note  for  an  existing  indebtethiess  at  least  suspends  the 
right  of  the  creditor  to  sue  on  such  indebtedness  until  after  the  ma- 
turity of  the  note,  and  that  the  direction  of  the  verdict  was  erroneous. 
It  follows  that  the  judgment  appealed  from  must  be  reversed,  and 
a  new  trial  ordered,  with  costs  to  the  appellant  to  abide  the  event. 


SISON  V.  KIDMAN. 
(Court  of  Common  Pleas,  1S42.     3  Man.  &  G.  810.) 

Debt  by  the  payee  against  one  of  two  makers  of  a  joint  and  sev- 
eral note  for  il5.,  payable  on  demand. 

The  defendant  pleaded  that  the  note  in  the  declaration  mentioned 
was  and  is  a  promissory  note  made  by  the  defendant  and  one  Watt ; 
but  that  neither  before  nor  at  the  time  of  making  the  said  note  was 
the  defendant  liable  to  the  plaintiff  for  the  said  sum  of  £15. ;  and  that 
the  said  note  was  made  and  signed  by  the  defendant  at  the  request  of 
the  said  Watt,  and  for  the  security  to  the  plaintiff  of  the  said  sum  of 
£15.,  then  due  and  owing  from  the  said  Watt  to  the  plaintiff,  of  which 
the  plaintiff  then  had  notice*;  and  that  the  defendant  never  had  any 
value  or  consideration  for  the  said  note. 

Replication,  that  the  defendant  had  value  and  consideration  for  the 
said  note,  to  wit,  of  the  amount  of  the  said  note. 

General  demurrer  and  joinder. ^^ 

TiXDAL,  C.  J.  When  the  defendant  signed  this  note  he  entered 
into  a  new  and  original  contract;  he  took  the  debt  upon  himself.  It 
abundantly  appears  upon  the  plea  that  the  note  was  made  for  a  good 
consideration.  I  think  that  Evans  v.  Jones,  5  M.  &  W.  295,  disposes 
of  all  argument  upon  the  subject. 

Erskine,  J.  I  also  think  that  there  is  no  doubt  in  this  case.  A  good 
consideration  for  the  note  appears  on  the  defendant's  plea ;  then  the 
case  is  that  of  a  man  who  agrees  to  pay  a  certain  sum  on  a  good  con- 
sideration. 

Maule,  J.     The  case  is  wholly  free  from  doubt. 

Judgment  for  the  plaintiff. ^^ 

11  Arsuments  of  counsel  are  omitted. 

i=Fut  see  Courtnev  v.  Doyle.  10  Allen  (^fass.)  122  (18G5).  Ellis  v.  Clark. 
110  Mass.  389.  14  Am.  Rep.  600  (1872).  Hood  v.  Robbins.  98  Ala.  484,  13  South. 
574  (1893),  and  Remington  v.  Detroit  Co..  101  Wis.  307,  77  N.  W.  178  (1898), 
in  which  cases  the  accommodation  party  signed  after  the  delivery  of  the 
instrument. 


Ch.   4)  CONSIDERATION.  271 

STRONG  V.  SHEFFlEIvD.  ^ 

(Court  of  Appeals  of  New  York,  1895.     144  N.  T.  392,  39  N.  E.  330.) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme  Court 
in  the  Second  Judicial  Department,  entered  upon  an  order  made  De- 
cember 12,  1892,  which  reversed  a  judgment  in  favor  of  defendant, 
entered  upon  a  verdict,  and  also  affirmed  an  order  denying  a  motion 
for  a  new  trial. 

This  was  an  action  upon  a  promissory  note.  The  facts,  so  far  as 
material,  are  stated  in  the  opinion.^'' 

Andrews,  C.  J.  The  contract  between  a  maker  or  indorser  of  a 
promissory  note  and  the  payee  forms  no  exception  to  the  general 
rule  that  a  promise,  not  supported  by  a  consideration,  is  nudum  pac- 
tum. The  law  governing  commercial  paper,  which  precludes  an  in- 
quiry into  the  consideration  as  against  bona  fide  holders  for  value  be- 
fore maturity  has  no  application  where  the  suit  is  between  the  orig- 
inal parties  to  the  instrument.  It  is  undisputed  that  the  demand  note 
upon  which  the  action  was  brought  was  made  by  the  husband  of  the 
defendant  and  indorsed  by  her  at  his  request,  and  delivered  to  the 
plaintiff,  the  payee,  as  security  for  an  antecedent  debt  owing  by  the 
husband  to  the  plaintiff.  The  debt  of  the  husband  was  past  due  at 
the  time,  and  the  only  consideration  for  the  wife's  indorsement,  which 
is  or  can  be  claimed,  is  that  as  part  of  the  transaction  there  was  an 
agreement  by  the  plaintiff  when  the  note  was  given  to  forbear  the 
collection  of  the  debt,  or  a  request  for  forbearance,  which  was  fol- 
lowed by  forbearance  for  a  period  of  about  two  years  subsequent  to 
the  giving  of  the  note.  There  is  no  doubt  that  an  agreement  by  the 
creditor  to  forbear  the  collection  of  a  debt  presently  due  is  a  good  con- 
sideration for  an  absolute  or  conditional  promise  of  a  third  person  to 
pay  the  debt,  or  for  any  obligation  he  may  assume  in  respect  thereto. 

Nor  is  it  essential  that  the  creditor  should  bind  himself  at  the  time 
to  forbear  collection  or  to  give  time.  If  he  is  requested  by  his  debtor 
to  extend  the  time,  and  a  third  person  undertakes,  in  consideration  of 
forbearance  being  given,  to  become  liable  as  surety  or  otherwise,  and 
the  creditor  does  in  fact  forbear  in  reliance  upon  the  undertaking,  al- 
though he  enters  into  no  enforceable  agreement  to  do  so,  his  acqui- 
escence in  the  request,  and  an  actual  forbearance  in  consequence  there- 
of for  a  reasonable  time,  furnishes  a  good  consideration  for  the  col- 
lateral undertaking.  In  other  words,  a  request  followed  by  perform- 
ance is  sufficient,  and  mutual  promises  at  the  time  are  not  essential, 
unless  it  was  the  understanding  that  the  promisor  was  not  to  be  bound, 
except  on  condition  that  the  other  party  entered  into  an  immediate 
and  reciprocal  obligation  to  do  the  thing  requested.  Morton  v.  Burn, 
7  Adol.  &  E.  19;  Wilby  v.  Elgee,  L.  R.  10  C.  P.  497;  King  v.  Upton, 

1 3  Arguments  of   counsel   are  omitted. 


272  FORM  AND  INCEPTION.  (Part  1 

4  Greenl.  (Me.)  387,  16  Am.  Dec.  2G6 ;  Leake.  Cont.  p.  54;  Reynold 
y.  Padelford,  2  Am.  Lead.  Cas.  p.  9G  et  scq.  and  cases  cited. 

The  general  rule  is  clearly,  and  in  the  main  accurately,  stated  in  the 
note  to  Forth  v.  Stanton,  1  Saund.  210,  note  b.  The  learned  reporter 
says :  "And  in  all  cases  of  forbearance  to  sue  such  forbearance  must 
be  either  absolute  or  for  a  definite  time  or  for  a  reasonable  time;  for- 
bearance for  a  little,  or  for  some  time,  is  not  sufficient."  The  only 
qualification  to  be  made  is  that,  in  the  absence  of  a  specified  time,  a 
reasonable  time  is  held  to  be  intended.  Oldershaw  v.  King,  2  Hurl. 
&  N.  517;   Calkins  v.  Chandler,  36  Mich.  320,  24  Am.  Rep.  593. 

The  note  in  question  did  not  in  law  extend  the  payment  of  the  debt- 
It  was  payable  on  demand,  and  although,  being  payable  with  interest. 
it  was  in  form  consistent  with  an  intention  that  payment  should  not 
be  immediately  demanded,  yet  there  was  nothing  on  its  face  to  pre- 
vent an  immediate  suit  on  the  note  against  the  maker  or  to  recover 
the  original  debt.  Merritt  v.  Todd.  23  N.  Y.  28,  80  Am.  Dec.  243 ; 
Shutts  V.  Fingar,  100  N.  Y.  539,  3  N.  E.  588,  53  Am.  Rep.  231. 

In  the  present  case  the  agreement  made  is  not  left  to  inference,  nor 
was  it  a  case  of  request  to  forbear,  followed  by  forbearance,  in  pur- 
suance of  the  request,  without  any  promise  on  the  part  of  the  cred- 
itor at  the  time.  The  plaintiff  testified  that  there  was  an  express 
agreement  on  his  part  to  the  effect  that  he  would  not  pay  the  note 
away,  nor  put  it  in  any  bank  for  collection,  but  (using  the  words  of 
the  plaintiff) :  "I  will  hold  it  until  such  time  as  I  want  my  money. 
I  will  make  a  demand  on  you  for  it."  And  again:  "No,  I  will  keep 
it  until  such  time  as  I  want  it."  Upon  this  alleged  agreement  the  de- 
fendant indorsed  the  note.  It  would  have  been  no  violation  of  the 
plaintiff's  promise  if,  immediately  on  receiving  the  note,  he  had  com- 
menced suit  upon  it.  Such  a  suit  would  have  been  an  assertion  that 
he  wanted  the  money  and  would  have  fulfilled  the  condition  of  for- 
bearance. The  debtor  and  the  defendant,  when  they  became  parties 
to  the  note,  may  have  had  the  hope  or  expectation  that  forbearance 
would  follow,  and  there  was  forbearance  in  fact.  But  there  was  no 
agreement  to  forbear  for  a  fixed  time,  or  for  a  reasonable  time,  but 
an  agreement  to  forbear  for  such  time  as  the  plaintiff  should  elect. 
The  consideration  is  to  be  tested  by  the  agreement,  and  not  by  what 
was  done  under  it.  It  was  a  case  of  mutual  promises,  and  so  intended. 
We  think  the  evidence  failed  to  disclose  any  consideration  for  the  de- 
fendant's indorsement,  and  that  the  trial  court  erred  in  refusing  so  to 
rule. 

The  order  of  the  General  Term  reversing  the  judgment  should  be 
affirmed,  and  judgment  absolute  directed  for  the  defendant  on  the 
stipulation,  with  costs  in  all  courts.^* 

i<  Accord:  Hover  v.  Magley,  48  Misc.  Rep.  430,  96  N.  Y.  Snpp.  925  (1905). 
But  a  nejintiable  instrument  payable  on  demand,  sisned  by  the  debtor  and  de- 
livered by  him  to  his  creditor  on  account  of  the  debt,  is  enforceable  by  the 
payee  against  the  debtor.    Stevens  v.  Park,  73  111.  3S7  (1874). 


Ch.  4)  CONSIDERATION.  273 

GROCERS'  BANK  OF  CITY  OF  NEW  YORK  v.  PENFIELD 

et  al. 

(Court  of  Appeals  of  New  York.  1877.     69  N.  Y.  502.  25  Am.  Rep.  231.) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme  Court 
in  the  First  Judicial  Department,  reversing  a  judgment  in  favor  of 
defendants,  entered  upon  the  report  of  a  referee  (reported  below,  7 
Hun,  279). 

This  action  was  upon  two  promissory  notes,  on  which  defendants 
Penfield  and  Stone  were  makers,  which  were  made  payable  to  de- 
fendant Truax,  and  by  him  indorsed  and  transferred  to  plaintiff. 

The  referee  found,  in  substance,  that  the  notes  were  executed  by 
the  makers  without  any  consideration,  were  accommodation  notes,  and 
were  received  by  plaintiff  solely  as  collateral  security  for  a  precedent 
debt,  without  any  agreement  to  extend  the  time  of  payment  of  the 
debt,  and  thereupon  held  that  plaintiff  was  not  a  bona  fide  holder,  and 
directed  judgment  dismissing  the  complaint  as  to  said  makers.^^ 

Rapallo,  J.  We  think  that  the  order  in  this  case  must  be  affirmed 
on  the  ground  stated  by  Brady,  J.,  in  his  opinion  delivered  at  General 
Term.  Whatever  confusion  may  have  existed  upon  the  point,  we 
think  that  we  may  now  safely  say,  in  the  language  of  Professor  Par- 
sons (1  Parsons  on  Notes  and  Bills,  296),  that  it  is  universally  con- 
ceded that  the  holder  of  an  accommodation  note,  without  restriction 
as  to  the  mode  of  using  it,  may  transfer  it  either  in  payment  or  as 
collateral  security  for  an  antecedent  debt,  and  the  maker  will  have 
no  defense.  See,  also,  Story  on  Bills.  §  192,  note  m,  and  Story  on 
Notes,  §  195,  and  authorities  cited.  The  existing  debt  is  a  sufficient 
consideration  for  the  transfer,  and  no  new  consideration  need  be 
shown.  It  is  only  where  the  note  has  been  diverted  from  the  purpose 
for  which  it  was  intrusted  to  the  payee,  or  some  other  equity  exists 
in  favor  of  the  maker,  that  it  is  necessary  that  the  holder  should  have 
parted  with  value  on  the  faith  of  the  note,  in  order  to  cut  off  such 
equity  of  the  maker.  Cole  v.  Saulpaugh,  48  Barb.  104 ;  Bank  of  Rut- 
land V.  Buck,  5  Wend.  66 ;    Lathrop  v.  Morris,  5  Sandf .  7. 

It  has  been  held  by  high  authority  that  an  antecedent  debt  is  suffi- 
cient even  in  the  case  of  a  note  fraudulently  diverted  to  constitute 
the  holder  a  bona  fide  holder  for  value  without  any  extension  of  time 
or  surrender  of  securities  or  other  new  consideration.  Swift  v.  Ty- 
son, 16  Pet.  1.  10  L.  Ed.  865.  But  in  this  state  that  doctrine  does  not 
prevail.  Stalker  v.  McDonald,  6  Hill,  93.  40  Am.  Dec.  389.  The 
leading  authorities  upon  the  subject  are  reviewed  in  the  case  of  Mait- 
land  v.  Citizens'  Bank,  40  Md.  540,  17  Am.  Rep.  620.  Whatever  dif- 
ference of  opinion  may  have  existed,  as  to  the  case  of  a  note  diverted. 

15  Arguments  of  counsel  omitted. 
Sm.&  M.B.&  N.— IS 


274  FORM  AND  iNCKPTioN.  (Part  1 

or  fraudulently  put  in  circulation,  it  must  be  regarded  as  settled  that 
an  indorsee  of  a  negotiable  note  made  for  the  accommodation  of  the 
indorser,  but  without  restriction  as  to  its  use,  taking  the  note  in  good 
faith  as  collateral  security  for  an  antecedent  debt,  and  without  other 
consideration,  is  entitled  to  the  position  of  a  holder  for  value,  and 
not  affected  by  the  defense  of  want  of  consideration  to  the  maker. 

We  should  not  have  deemed  it  necessary  to  discuss  the  point  so 
much  at  length,  but  for  the  reason  that  it  does  not  appear  ever  to  have 
been  previously  expressly  adjudicated  in  this  court. 

The  order  should  be  affirmed,  and  judgment  absolute,  etc.  All 
concur." 


LOMBARD  et  al.  v.  BRYNE  et  al. 

(Supreme  Judicial  Court  of  Massachusetts,  Suftolli,  1907.  194  Mass.  236,  80 

N.  B.  4S9.) 

Contract  on  a  promissory  note  against  James  L.  Bryne  as  maker  and 
Samuel  H.  Hellen  as  indorser.  Writ  dated  August  24,  1905.  The 
note,  of  which  a  copy  was  annexed  to  the  declaration,  was  as  follows : 
'•$1,000.  Boston,  Mass.,  May  22,  1905. 

"Three  months  after  date  I  promise  to  pay  to  the  order  of  S.  & 
R.  J.  Lombard  one  thousand  dollars  at  any  Boston  bank  with  interest. 

"James  L.  Bryne, 

"Value  received,  55  Bowdoin  Ave. 

"No.     Due ." 

Indorsed:     "S.  H.  Hellen." 

The  answer  of  the  defendant  Hellen  contained  a  general  denial,  and, 
among  other  matters,  alleged  that  this  defendant's  indorsement  was 
made  without  any  consideration. 

In  the  superior  court  the  case  was  tried  before  Bell,  J.  It  appeared 
that  the  plaintiffs  had  sold  goods  to  Bryne  to  the  amount  of  several 
thousand  dollars,  and  that  Bryne  in  part  payment  therefor  had  given 
to  the  plaintiff's  two  promissory  notes  for  the  sum  of  $1,000  each,  one 
of  which  matured  before  the  other ;  that  at  the  maturity  of  the  earlier 
note  a  note  similar  to  the  one  in  suit  was  made  by  Bryne  payable  to 
the  order  of  the  plaintiffs  and  was  indorsed  by  the  defendant  Hellen, 
and  that  the  note  in  suit  was  given  at  the  maturity  of  the  last-mentioned 
note  in  renewal  of  it. 

It  was  contended  by  the  plaintiff's,  and  evidence  was  introduced  by 
them  tending  to  prove,  that  the  note  in  suit,  as  well  as  the  note  in  re- 
newal of  which  it  was  given,  was  indorsed  by  the  defendant  Hellen  for 
the  accommodation  of  Bryne,  and  it  was  contended  by  the  defendant 

i«  Accord:  English  v.  Schlesinger,  .55  Misc.  Rep.  584,  105  N.  Y.  Supp.  9S9 
0907) :  In  re  nopper-M<ns;an  Co.  (D.  C.)  1">4  Fed.  249  (1907);  Milins  v.  Kautf- 
niann,  104  Api).  Div.  442.  93  N.  Y.  Supp.  0G9  (19')o).  Compare  In  re  Hopper- 
Morgan  Co.  (D.  C.)  156  Fed.  525  (1907). 


Ch.  4)  CONSIDERATION.  275 

Hellen,  and  evidence  was  introduced  by  him  tending-  to  prove,  that  the 
indorsements  were  solely  for  the  accommodation  of  the  plaintiffs. 

The  judge,  after  stating  to  the  jury  that,  if  the  indorsement  of  the 
defendant  Hellen  was  made  for  the  accommodation  of  the  plaintiffs, 
defendant  would  not  be  liable  to  them,  and  that  if,  on  the  other  hand, 
the  indorsement  was  made  for  the  accommodation  of  Bryne,  or  to  help 
him  to  get  a  renewal,  the  defendant  Hellen  would  be  liable  to  the  plain- 
tiff's, further  instructed  them  that  the  note  itself  prima  facie  showed 
a  liability  on  the  part  of  the  defendant  Hellen  to  the  plaintiffs,  and  that 
to  overcome  this  prima  facie  liability  the  burden  of  proof  was  upon 
the  defendant  Hellen  to  establish  the  fact  that  he  indorsed  the  note  in 
suit  for  the  accommodation  of  the  plaintiffs. 

The  jury  returned  a  verdict  for  the  plaintiffs  against  the  defendant 
Hellen  in  the  sum  of  $1,001.66 ;  and  the  defendant  Hellen  alleged  ex- 
ceptions. 

Knowlton,  C.  J.  The  question  at  the  trial  was  whether,  as  between 
the  plaintiff's  and  the  defendant  Hellen,  there  was  a  consideration  for 
Hellen's  signature  upon  the  note.  The  production  of  the  note  made  a 
prima  facie  case  on  this  point,  in  favor  of  the  plaintiffs.  The  defend- 
ant sought  to  meet  it  by  showing  that  the  presumption  which  ordinarily 
would  arise  from  the  form  of  the  note  was  not  well  founded,  and  that 
there  was  no  consideration  for  his  signing,  inasmuch  as  he  affixed  his 
signature  merely  for  the  accommodation  of  the  plaintiffs.  On  the 
question  whether  there  was  a  consideration  for  the  note,  the  burden 
of  proof  was  on  the  plaintiffs  throughout  the  trial.  The  evidence  of- 
fered by  the  defendant  was  on  that  issue,  and  was  intended  to  meet  and 
answer  the  contentions  of  the  plaintiffs.  H,  on  the  whole  evidence, 
the  matter  in  dispute  was  left  in  an  even  balance,  the  plaintiffs  would 
fail. 

This  is  not  like  a  case  where  the  defendant  seeks  to  avoid  the  effect 
of  prima  facie  evidence  by  the  proof  of  an  independent  fact  outside  of 
the  issue,  whereby  he  is  relieved  from  liability.  In  such  a  case  the 
defendant  has  the  burden  of  proving  the  fact,  and  if  he  fails,  the 
original  prima  facie  case  prevails. 

The  present  case  cannot  be  distinguished  in  principle  from  Perley  v. 
Perley,  144  Mass.  104,  10  N.  E.  726.  See  Delano  v.  Bartlett,  6  Cush. 
864;  Broult  v.  Hanson,  158  Mass.  17,  32  N.  E.  900;  Temple  v.  Phelps,. 
193  Mass.  297,  79  N.  E.  4S2. 

The  jury  should  have  been  instructed  that,  on  the  whole  evidence, 
the  burden  was  on  the  plaintiffs  to  prove  that  the  defendant  Hellen'i 
indorsement  was  for  a  valuable  consideration. 

Exceptions  sustained. ^^ 

IT  See  Bringman  v.  Von  Glahn,  71  App.  Div.  537,  75  N.  T.  Supp.  845  (1002).. 


PART  II 

NEGOTIATION 


CHAPTER  I 
TRANSFER 


SECTION  1.— WHO  MAY  TRANSFER 


STONE  V.  RAWLINSON  et  al. 
(Court  of  Coiuinon  Pleas,  1745.     Willes,  559.) 

This  was  an  action  on  a  promissory  note  for  fifty  guineas  made  by 
the  defendants  dated  the  11th  of  May,  1730,  and  payable  to  James 
Watson  or  order ;  and  the  declaration  stated  that  Watson  died  on  the 
1st  of  April,  1734,  intestate,  upon  whose  death  administration  of  his 
goods  and  chattels  was  granted  to  Ann  Webb,  who  indorsed  the  note 
to  the  plaintiff. 

To  this  declaration  the  defendants  demurred.^ 

Willes,  Lord  Chief  Justice.  *  *  *  The  third  point,  therefore, 
and  the  only  one  which  remains  to  be  considered,  is  whether  the  exec- 
utor or  administrator  of  a  person,  to  whom  or  to  whose  order  a  prom- 
issory note  is  made  payable,  can  assign  over  such  note  so  as  to  enable 
the  indorsee  to  bring  an  action  upon  it  in  his  own  name.  And  as  it 
was  insisted  on  the  one  hand  that  though  this  has  been  frequently  done 
by  persons  concerned  in  trade  yet  it  had  never  been  controverted  be- 
fore, so  it  was  admitted  on  both  sides  that  there  has  never  been  any 
judicial  determination  upon  this  point  either  one  way  or  the  other. 
And  though  several  cases  were  cited  as  bearing  some  resemblance  to 
this,  I  think  that  none  of  them  were  at  all  material  in  this  case,  except 
the  case  of  Moore  and  Manning  in  Comyns,  311,  312,  of  which  I 
shall  take  notice  presently. 

As  this  is  a  matter  which  greatly  concerns  the  trade  and  commerce  of 
the  nation,  and  as  it  has  never  been  judicially  determined  before,  we 
thought  ourselves  at  liberty  and  that  it  was  the  properest  method  we 

1  The  statemeut  of  facts  is  abridgod.  and  a  portion  of  tlie  opinion  omitted. 

(276) 


Ch.  1;  TRANSFER.  277 

could  take  to  inquire  of  traders  and  merchants  of  undoubted  credit 
what  has  been  the  practice  in  this  case  ever  since  the  act  of  the  third 
and  fourth  of  Queen  Anne,  and  how  the  act  has  been  understood  by 
them.  We  have  done  so,  and  they  all  agree  that  it  has  been  the  con- 
stant practice  for  executors  and  administrators  to  indorse  such  notes 
and  inland  bills  of  exchange;  and  that  promissory  notes  when  so  as- 
signed have  always  been  considered  to  be  as  much  within  the  statute, 
and  that  they  may  be  put  in  suit  by  the  indorsees  in  the  same  manner 
as  if  they  had  been  indorsed  by  the  testator  or  intestate.  As  therefore 
we  are  fully  satisfied  that  this  has  been  the  constant  practice,  and  that 
the  law  has  been  always  so  understood  amongst  traders,  and  as  the 
courts  of  law  have  always  in  mercantile  affairs  endeavored  to  adapt  the 
rules  of  law  to  the  course  and  method  of  trade  in  order  to  promote 
trade  and  commerce  instead  of  doing  it  any  hurt,  so  we  are  determined 
in  the  present  case  to  make  this  indorsement  valid  according  to  the 
practice,  if  we  can  by  any  means  make  it  consistent  with  the  words  of 
the  act  and  agreeable  to  the  rules  of  law.  And  we  think  it  is  easy  to 
do  both. 

The  words  of  the  act,  when  considered,  will  I  think  plainly  warrant 
it,  I  mean  the  following  words  in  the  first  section  of  the  act,  "that  any 
person,  to  whom  a  promissory  note  that  is  payable  to  any  person  or  his 
order  is  indorsed  or  assigned,  or  the  money  therein  mentioned  ordered 
to  be  paid  by  indorsement  thereon,  shall  and  may  maintain  an  action 
for  such  sum  of  money  either  against  the  person  signing  such  note,  or 
against  any  of  the  persons  who  indorsed  the  same,  in  like  manner  as 
in  cases  of  inland  bills  of  exchange."  What  was  the  practice  before 
and  since  as  to  inland  bills  of  exchange  we  can  only  learn  from  the  re- 
port of  merchants,  and  they  unanimously  agree  that  they  were  alway> 
looked  upon  to  be  so  assignable  by  executors  and  administrators  as  t« 
enable  the  assignee  to  bring  an  action  in  his  own  name.  And  I  think 
this  construction  agreeable  to  the  plam  intent  of  the  act,  which  is  that 
whereas  the  assignee  of  such  notes  before  had  certainly  an  equitable 
interest,  which  would  enable  him  to  bring  an  action  in  the  name  of  the 
assignor,  such  equitable  interest  by  the  statute  was  converted  into  a 
legal  interest,  so  as  to  enable  the  assignee  to  bring  an  action  in  his  own 
name.  It  must  be  admitted  that  the  whole  interest  to  the  testator  or 
intestate  in  such  notes  vests  in  the  executor  or  administrator ;  and  that 
before  the  statute  the  executor  or  administrator  might  have  assigned 
all  his  right  in  such  notes  so  as  to  convey  an  equitable  interest  to  an- 
other, and  to  enable  him  to  sue  in  the  name  of  the  executor  or  admin- 
istrator. In  King  and  Others,  Executors  of  Stevenson,  v.  Thorn,  1  D. 
&  E.  487,  it  was  holden  that  if  the  payee  of  a  bill  of  exchange  indorse 
it  to  A.  and  B.  as  executors  of  C,  they  may  declare  as  such  in  an  ac- 
tion on  the  bill.  If  therefore  by  the  statute  such  equitable  interest  is 
converted  into  a  legal  one,  it  follows  that  since  the  statute  such  as- 
signee may  sue  in  his  own  name.  And  I  think  that  the  case  of  More 
and  Manning,  5  Geo.  I.,  in  this  court  and  reported  in  Comyns,  311,  312, 


278  NEGOTIATION.  (Part  2 

which  was  the  only  case  that  was  cited,  which  seems  to  bear  any  re- 
semblance to  this,  plainly  warrants  this  construction.  A  promissory 
note  drawn  by  Manning  was  made  payable  to  Statham  or  his  order; 
Statham  assii^mcd  it  to  A.  and  A.  to  the  plaintiff ;  on  a  demurrer  to  the 
declaration,  the  exception  was  that  the  assignment  was  only  to  A.  not 
saying  to  him  or  order,  and  therefore  he  could  not  assign  it  to  the 
plaintiff.  And  to  this  the  Chief  Justice  at  first  inclined  ;  but  afterwards 
it  was  resolved  by  the  whole  court  that  it  was  good.  For  if  the  orig- 
inal note  were  assignable,  it  will  always  remain  so ;  and  whoever  has 
the  whole  interest  in  the  note  may  assign  it  as  he  pleases. 

On  the  strength  of  this  case  I  think  I  may  make  a  syllogi?m,  which 
will  be  conclusive  in  the  present  case.  Whoever  has  the  absolute  prop- 
erty in  a  bill  rryade  payable  to  one  or  his  order  may  assign  it  as  he 
pleases  within  (he  provision  of  the  statute,  and  sucli  assignee  may  main- 
tain an  action  in  his  own  name ;  the  executor  or  administrator  of  a  per- 
son, to  whom  such  bill  is  made  payable,  has  the  absolute  property  in  it, 
and  therefore  he  may  assign  it  to  whomsoever  he  pleases,  and  such 
assignee  may  maintain  an  action  in  his  own  name ;  which  is  the  only 
question  that  remains  to  be  determined  in  the  present  case. 

And  we  being  all  of  that  opinion,  judgment  must  be  for  the  plaintiff.^ 


BOLLES  V.  STEARNS. 
(Supreme  Judicial  Court  of  Massachusetts,  Middlesex,  1853.     11  Cush.  320.) 

The  auditor  submitted  to  the  court  whether  the  defendant  was  en- 
titled to  an  item  in  set-off  of  $-i3.92,  a  balance  claimed  by  him  on  a  note 
of  the  following  tenor:  "Littleton,  May  15,  1845.  $100.  For  value 
received,  I  promise  to  pay  John  P.  Reed,  or  order,  one  hundred  dol- 
/lars,  on  demand  with  interest.  Daniel  Bolles."  The  following  in- 
dorsement was  upon  said  note:  "May  23,  1816.  Received  $74.17 
of  the  within.  Joseph  P.  Reed."  And  it  was  also  indorsed  by  him  in 
that  name  in  blank.  There  was,  when  said  note  was  given,  a  person 
living  in  the  same  town  with  Joseph  P.  Reed,  whose  name  was  John  P. 
Reed ;  but  it  was  proved  that  the  note  was  in  fact  given  by  said  Bolles 
to  Joseph  P.  Reed,  for  money  lent  him  by  said  Reed ;  that  $74.17  was 
paid  by  Bolles  upon  it,  and  the  note  was  by  Joseph  P.  Reed  indorsed 
to  the  defendant  within  two  years  from  its  date,  for  its  then  value  paid 
by  him. 

Upon  these  facts,  judgment  was  entered  in  the  court  of  common 
pleas  allowing  the  set-off.     The  plaintiff  appealed  to  this  court. ^ 

Metcalf,  j,  *  *  *  The  court  are  also  of  opinion  that  the  note 
given  by  the  plaintiff,  payable  to  John  P.  Reed,  or  order,  and  indorsed 

2  Affirmed  on  writ  of  error  in  the  Court  of  King's  Beuch  (M.  20  Geo.  II).    2 
Str.  12G0,  3  Wilson  1,  2  Burr.  1225. 
8  Part  of  the  case  is  omitted. 


Cll.  1)  TRANSFER.  279 

to  the  defendant  by  Joseph  P.  Reed,  cannot  be  allowed  to  the  defendant 
by  way  of  set-off.  That  note,  though  given  for  money  lent  to  the 
plaintiff  by  Joseph  P.  Reed,  was  made  payable,  not  to  him,  but  to  John 
P.  Reed,  a  person  in  esse.  Now  it  is  certain  that  the  legal  interest  in 
that  note  was  not  transferred  to  the  defendant  by  Joseph  P.  Reed's 
indorsing  his  name  on  it.  He  was  not  the  payee  nor  the  legal  repre- 
sentative of  the  payee.  And  a  transfer  by  indorsement  can  be  made  in 
the  first  instance  only  by  the  payee,  or  by  some  one  claiming  in  his 
right,  as  his  executor,  administrator,  or  assignee  in  bankruptcy  or  in- 
solvency. Kyd  on  Bills  (1st  Am.  Ed.)  106,  107.  If  there  had  been 
no  such  person  as  John  P.  Reed,  perhaps  the  note  might  have  been 
regarded  as  payable  to  bearer,  and  might  have  been  passed  to  the  de- 
fendant by  deHvery,  as  if  it  had  in  terms  been  made  payable  to  bearer. 
Of  this,  however,  we  give  no  opinion.  But  as  the  note  was  made  pay- 
able, not  to  a  fictitious  person,  but  to  a  person  in  being,  the  indorse- 
ment of  a  third  person  transferred  no  legal  title  to  it. 

If  the  indorsement  and  delivery  of  this  note  to  the  defendant  by 
Joseph  P.  Reed  could  be  regarded  as  an  equitable  assignment  of  it, 
still  the  defendant  would  not  be  entitled  to  set  it  off  against  the  plain- 
tiff's claim  on  him,  because  it  is  not  shown  that  notice  of  such  as- 
signment was  given  to  the  plaintiff  before  this  action  was  commenced. 
Rev.  St.  c.  96,\  5_    *    *    * 

Set-off  disallowed.* 


ESTABROOK  V.  SMITH. 

(Supreme  Judicial  Court  of  Massachusetts,  Worcester,  1S56.     6  Gray,  570.  GG 

Am.  Dec.  443.) 

Action  of  contract  upon  a  promissory  note,  made  by  the  defendant, 
payable  to  "Estabrook  &  Richmond,  or  order,"  and  indorsed  by  Rich- 
mond in  his  own  name,  for  the  purpose  of  transferring  his  interest 
therein  to  his  copartner,  Estabrook,  the  plaintiff.  The  parties  sub- 
mitted to  the  decision  of  the  court  the  question  whether  this  indorse- 
ment was  sufficient  to  enable  the  plaintiff  to  maintain  an  action  there- 
on in  his  own  name.^ 

Dewey,  J.  We  take  the  rule  to  be  uncontroverted  that  a  promis- 
sory note  payable  "to  A.  B.,  or  order,"  cannot  be  transferred,  so  as 
to  give  a  right  of  action  in  the  name  of  a  holder,  not  the  original  par- 
ty, without  an  indorsement  by  the  payee.  The  application  of  this  prin- 
ciple seems  to  be  decisive  against  the  right  of  the  plaintiff  alone  to 
maintain  this  action.  The  action  is  brought  by  Estabrook  upon  a  note 
made  to  a  copartnership,  Estabrook  &  Richmond,  promising  them, 
by  the  name  of  their  copartnership,  to  pay  them  or  order  a  certain 
sum  of  money.     That  this  action  cannot  be  maintained  by  the  plain 

■*  But  see,  contra,  Patterson  v.  Graves,  5  Blaclcf.  (Ind.)  593  (1841). 
B  The  arguments  of  counsel  are  omitted. 


280  NEGOTIATION.  (Part  2 

tiff,  as  payee  of  the  note,  is  obvious ;  as  that  would  at  once  present  a 
case  where  there  was  an  omission  to  join  all  the  payees  as  plaintiffs, 
%vhich  would  be  fatal  to  the  action.  The  only  question,  therefore,  is 
whether  this  note  is  legally  indorsed,  so  as  to  enable  the  plaintiff  to 
maintain  the  action  as  indorsee? 

The  payees  of  the  note  are  Estabrook  &  Richmond,  who  compose 
a  partnership.  An  indorsement  of  the  note  by  the  payees  would  there- 
fore be  an  indorsement  by  Estabrook  &  Richmond,  and  this  would 
correspond  with  the  form  of  the  note,  and  transfer  the  same  to  their 
indorsee.  One  partner  might  properly  transfer  the  note  by  indorse- 
ment, but  he  must  do  it  by  indorsing  the  partnership  name.  Any- 
thing less  than  this  seems  to  be  an  irregularity,  and  a  departure  from 
the  legitimate  mode  of  transfer  of  a  negotiable  note  or  bill,  payable 
to  the  order  of  a  copartnership. 

It  is  not  contended  that  the  indorsement  by  Richmond  alone  would 
have  been  sufficient  to  authorize  an  action  in  the  name  of  a  third  per- 
son as  indorsee ;  but  it  is  urged  that  such  indorsement  is  sufficient  to 
authorize  an  action  by  the  other  partner,  Estabrook,  as  indorsee.  The 
position  taken  is  that  Richmond,  by  his  indorsement,  has  parted  with 
all  his  interest,  and  so  vested  the  entire  note  in  Estabrook.  This  may 
be  all  true  as  between  Richmond  and  Estabrook,  and  might  be  quite 
sufficient  to  settle,  as  between  them,  to  whose  use  this  money  was  to 
be  held  when  collected.  But  the  question  still  recurs  as  to  the  effect 
of  such  an  indorsement  as  against  the  maker  of  the  note,  and  wheth- 
er it  creates  the  legal  relation  of  indorsee.  As  already  remarked,  the 
present  action,  if  maintainable  at  all,  is  maintainable  by  Estabrook  as 
indorsee  of  the  note.  To  constitute  a  legal  indorsement,  the  payees. 
Estabrook  &  Richmond,  must  be  the  indorsers.  But  no  such  indorse- 
ment has  ever  been  made.  No  one  has  professed  to  indorse  the  note 
in  the  partnership  name.  The  only  indorsement  is  that  of  Richmond 
individually ;  and  although  it  might  be  quite  competent  for  the  payees, 
Estabrook  &  Richmond,  in  their  partnership  name,  to  have  indorsed 
it  to  Estabrook,  yet  they   have  not  done  so. 

We  have  found  no  authority  for  maintaining  an  action  by  an  in- 
dorsee under  such  circumstances.  The  case  of  Goddard  v.  Lyman.  14 
Pick.  268,  which  seems  to  be  the  most  favorable  case  cited  to  sustain 
the  position  taken  by  the  plaintiff,  was  widely  different  from  the  pres- 
ent case.  In  that  case,  although  the  original  indorsement  was  by  two 
only  of  three  payees,  and  made  to  the  oth.er  payee  and  a  third  person, 
yet  it  was  subsequently  indorsed  by  the  third  payee,  and  came  to  the 
hands  of  the  plaintiff,  who  instituted  the  suit  with  the  indorsement  of 
all  the  payees.  That  case,  upon  its  facts,  does  not  therefore  furnish 
any  precedent  for  this  case,  although  some  of  the  remarks,  as  found 
in  the  opinion  of  the  court,  might  seem  to  indicate  a  broader  doctrine 
than  the  case  required. 

The  plaintiff  then  had  leave  to  amend,  on  terms,  by  joining  the  oth- 
er partner,  and  had  judgment  for  the  amount  of  the  note. 


Ch.  1)  TRANSFER.  281 


KAUFMAN  V.  STATE  SAVINGS  BANK. 

(Supreme  Court  of  Michigan,  1908.     151  Mich.  65,  114  N.  W.  863,  18  L.  R.  A. 
[N.  S.]  630,  123  Am.  St.  Rep.  259.) 

Action  by  Adelaide  Kaufman  against  the  State  Savings  Bank. 
Judgment  for  plaintiff,  and  defendant  brings  error.     Affirmed. 

Montgomery,  T.  This  action  is  brought  for  the  wrongful  taking 
possession  and  conversion  of  a  check  and  draft,  each  being  made  pay- 
able to  the  order  of  the  plaintiff  and  Bernard  S.  Kaufman,  her  hus- 
band. The  transactions  which  resulted  in  the  giving  of  each  of  these 
items  of  commercial  paper  were  in  all  substantial  respects  identical. 
The  plaintiff  was  the  owner  of  some  furniture  in  the  Sibley  Apart- 
ments, so  called,  in  the  city  of  Detroit,  which  were  covered  by  two 
policies  of  insurance,  one  in  the  Aachen  &  Munich  Fire  Insurance 
Company,  and  the  other  in  the  American  Insurance  Company  of  Bos- 
ton. For  some  reason,  which  does  not  clearly  appear,  the  policies  were 
made  payable  to  Bernard  S.  Kaufman  notwithstanding  the  ownership 
of  the  goods  in  the  plaintiff.  A  fire  having  occurred,  Bernard  S.  Kauf- 
man assigned  the  policies  to  plaintiff,  and  deposited  the  policies  with 
the  respective  companies.  The  agent  of  the  first-named  company 
made  a  draft  on  the  general  manager  for  the  amount  of  the  insur- 
ance, payable  to  the  order  of  Bernard  S.  Kaufman  and  Adelaide  Kauf- 
man. The  second-named  company,  through  its  agent,  made  a  check 
payable  in  the  same  manner  to  the  order  of  Bernard  S.  Kaufman  and 
Adelaide  Kaufman.  These  two  pieces  of  paper  were  indorsed  to  de- 
fendant by  Bernard  S.  Kaufman  in  his  own  name,  and  also  in  the 
name  of  plaintiff.  The  latter  indorsement  was  wholly  without  author- 
ity, the  draft  issued  by  the  first  company  being  purchased  outright  on 
these  indorsements,  the  check  from  the  second  company  being  re- 
ceived for  collection  on  the  like  forged  indorsement.  Defendant  on 
receiving  the  fund  turned  it  over  to  Bernard  Kaufman.  The  circuit 
judge  directed  a  verdict  for  plaintiff,  and  defendant  brings  error. 

It  is  claimed  that  no  title  to  the  paper  ever  vested  in  the  plaintiff  for 
the  reason  that  there  was  no  delivery  of  the  same  to  her.  The  as- 
signment of  the  insurance  to  her  was  for  her  benefit  and  interest,  and 
her  assent  to  the  assignment  and  acceptance  of  it  would  be  presumed. 
Thatcher  v.  St.  Andrew's  Church,  37  Mich.  261;  Bangs  v.  Browne. 
149  Mich.  478,  112  N.  W.  1107.  The  fact  that  this  check  and  draft 
were  made  payable  to  the  two,  rendered  it,  if  plaintiff's  contention  be 
correct,  as  secure  as  it  would  have  been  had  it  been  payable  to  the 
plaintiff  alone,  and  we  see  no  reason  why  plaintiff  is  not  in  a  position 
to  avail  herself  of  the  draft  and  check,  if  she  sees  fit,  by  affirming  her 
husband's  receipt  of  the  same,  to  do  so. 

The  meritorious  question  in  the  case  is  whether  the  defendant,  hav- 
ing purchased  this  draft  on  the  indorsement  of  one  of  two  joint  pay- 
ees, and  having  assumed  to  collect  the  check  on  an  indorsement  which 


282  NEGOTIATION.  (Part  2 

turns  out  to  have  been  a  forged  indorsement  of  plaintiff's  name,  is  in 
position  to  assert  title  as  against  the  true  owner,  or  whether,  on  the 
other  hand,  having  received  the  money  upon  the  check  and  draft,  the 
defendant  is  accountable  to  the  true  owner  for  the  amount  of  money 
received.  The  defendant  relies  upon  the  case  of  Harding  v.  Parshall, 
06  111.  219,  and  other  cases,  to  establish  the  rule  that  a  debt  to  two 
jointly  may  be  paid  to  either,  and,  this  being  so,  it  is  urged  that  the 
owner  of  commercial  paper  is  entitled  to  demand  and  receive  pay- 
ment even  in  the  absence  of  any  indorsement  at  all,  and  it  is  sought 
to  reason  from  this  that  the  indorsement  of  Bernard  S.  Kaufmnn  of 
plaintiff's  name  had  no  other  eft"ect  than  to  enable  Kaufman  himself  to 
receive  payment  through  the  instrumentality  of  the  defendant. 

It  is  a  sufficient  answer  to  this  view  to  say  that  such  was  not  the 
transaction.  What  did  happen  was  that  Bernard  S.  Kaufman,  hav- 
ing in  possession  these  two  pieces  of  commercial  paper,  each  of  which 
represented  money  due  to  plaintiff  individually,  sold  one  piece  of  pa- 
per to  the  defendant,  and  put  it  in  the  power  of  defendant  to  recov- 
er from  the  payor  the  pay  on  the  other  piece  on  -  forged  indorsement. 
This  as  between  plaintiff  and  Bernard  S.  Kaufman  was  a  conversion 
of  the  property,  and  unless  he  was  authorized  to  pass  title  to  the  de- 
fendant, or  vest  it  with  an  agency  to  receive  the  money  on  her  paper, 
it  was  likewise  as  between  the  defendant  and  the  plaintiff  a  conver- 
sion of  the  property.  In  the  same  jurisdiction  in  which  Harding  v, 
Parshall  was  decided  it  was  held  by  Chief  Justice  Scofield,  in  Ry- 
hiner  v.  Feickert,  92  111.  305,  34  Am.  Rep.  130,  following  and  citing 
with  approval  1  Daniel,  Negotiable  Instruments,  684,  that,  if  several 
persons  not  partners  are  payees  or  indorsees  of  a  bill  or  note,  it  must 
be  indorsed  by  all  of  them.  Either  one  of  the  joint  payees  may  au- 
thorize the  other  to  indorse  for  him,  and  an  assignment  of  his  inter- 
est in  the  paper  from  one  to  the  ot':er  carries  with  it  such  authority ; 
but  there  is  no  presumption  of  law  that  one  may  indorse  for  the  oth- 
er. The  same  rule  was  laid  down  in  Wood  v.  Wood,  16  N.  J.  Law, 
428,  and  we  have  been  unable  to  find  any  case  which  makes  for  the 
contrary  rule. 

This  is  not  the  case  of  receiving  payment  from  the  maker  by  one 
of  two  joint  payees.  It  is  an  attempt  to  transfer  title  in  one  case  and 
create  an  agency  in  the  other ;  and,  as  we  have  seen,  this  cannot  be 
done  except  by  indorsement  of  all  to  whose  order  the  instrument  is 
made  payable.  It  will,  of  course,  be  understood  that  this  is  subject 
to  the  rule  that  under  the  implied  authority  of  one  partner  he  may 
indorse  for  his  copartner.     But  that  is  not  the  case  here. 

The  judgment  will  be  affirmed. 


Ch.  1)  TKANSFKR.  283 


SECTION  2.— FORM  OF  INDORSEMENl 


ANONYMOUS. 

(Court  of  Qaeeu's  Beuch,  1703.     3  Salk.  70.) 

A  bill  of  exchange  was  drawn  on  W.  R.  for  £40.  payable  to  O.  W. 
or  order;  W.  R.  accepts  the  bill,  and  afterwards  O.  W.,  the  drawer,  in- 
dorses part  of  it  to  the  plaintiff,  who  brought  an  action  against  the  ac- 
ceptor. Adjudged  that  it  would  not  lie,  because,  by  his  accepting  the 
bill,  he  made  himself  liable  only  to  one  action  for  the  whole,  and  not 
to  several  actions  for  part  of  the  money. 


lirU^^^    6-i.J*^     ^  «i^ 


EAST  V.  ESSINGTON. 

(Court  of  Queen's  Beuch,  1703.     7  Mod.  86.) 

An  action  by  the  indorsee  of  a  bill  of  exchange  against  the  drawer, 
declaring  upon  the  custom  of  merchants,  and  that  A.,  to  whom  the 
bill  was  made,  indorsavit  super  billam  pra;d.  content,  billse  praed,  to 
him  the  plaintiff  solvend. 

And  here  it  was  agreed  by  the  court  that  "indorsement"  is  a  term 
known  in  law,  and  signifies  a  writing  on  the  back  of  a  paper  or  parch- 
ment containing  another  writing. 

To  this  declaration  two  exceptions  were  taken  in  arrest  of  judgment: 

First.  That  the  words  of  the  indorsement  were  not  significative 
enough  to  pass  the  property  of  the  bill  to  the  plaintiff,  according  to  the 
custom  of  merchants. 

The  second  exception  was :  That  it  appears  there  were  three  bills 
for  the  same  sum,  and  that  whereon  the  action  is  brought  was  the  first, 
and  says,  "my  second  or  third  not  paid,  pay  this  my  first." 

But  Per  Curiam.  However  that  matter  would  have  been  on  de- 
murrer, it  will  be  well  after  verdict;  for  if  the  second  or  third  were 
paid,  there  had  been  no  promise  at  all,  for  the  promise  is  conditional 
to  pay  this,  if  the  second  or  third  be  not  paid;  therefore  if  the  second 
or  third  were  paid,  the  jury  could  not  find  for  the  plaintiff.     *     *     *  e 

Holt,  Chief  Justice.  If  a  man  write  on  the  back  of  a  bill  of 
exchange,  "This  is  to  be  paid  to  J.  S.,"  or,  "The  contents  of  this  bill 
to  be  paid  to  J.  S.,"  and  set  his  hand  to  it,  it  will  be  a  good  indorse- 
ment. 

Judgment  for  plaintiff. 

8  I'aiL  of  the  case  is  omitted. 


284  NEGOTIATION.  (Part  2 

BANK  OF  WILMINGTON  v.  HOUSTON. 
(Superior  Court  of  Delaware,  1S3;1.     1  liar.  225). 

Case.  Picas,  non  assumpsit,  payment,  discount  and  the  act  of  lim- 
itations. 

The  plaintiffs  declared  against  Houston  as  the  indorser  of  three 
several  promissory  notes  dated  the  8th  of  March.  1833.  drawn  by 
Joseph  Roberts  in  favor  of  Margaret  Booth,  Peter  B.  Dulany  and 
Evan  H.  Thomas  respectively,  and  amounting  together  to  $1,400,  and 
indorsed  by  these  persons  respectively,  to  the  plaintiff.  Similar  notes 
had  been  drawn  by  Roberts  in  favor  of  the  same  persons  for  the  same 
amounts  dated  30th  June,  which  had  been  indorsed  by  the  payees  and 
also  by  this  defendant.  These  were  renewed  on  the  8th  of  March,  by 
the  notes  declared  on  in  this  action,  which  were  indorsed  as  aforesaid 
by  the  payees  respectively,  but  not  actually  indorsed  by  Plouston,  ex- 
cept through  the  medium  of  the  following  agreement,  which  was  of- 
fered in  evidence  with  the  notes  to  charge  him  as  an  indorser: 

"Prom'y  notes. 

Jos.  Roberts  to  Marj^aret  Booth  for  $G00;    dated  30  June,  '31,  at  60  days. 
Same       to  Peter  B.  Dulany  for  ?G00; 
Same        to  E.  H.  Thomas  for  $400; 

"To  Jos.  P.  Woollaston,  Cashier  of  the  Bank  of  W.  &  Brandywine : 
"Sir:  As  I  live  at  a  distance  from  the  bank,  and  being  an  indorser 
on  the  above  mentioned  notes  in  your  bank,  I  wish  to  inform  the  board 
of  directors,  through  you.  that  in  case  it  should  be  found  convenient 
or  expedient  to  renew  said  notes  for  the  whole  sum  or  any  part  there- 
of, I  would  not  wish  the  drawer  to  be  put  to  the  trouble  of  finding 
another  indorser,  but  the  directors  aforesaid  may  hereby  consider  me 
as  bound  in  any  or  every  renewal  of  said  notes  for  the  whole  amount 
or  any  part  thereof  whenever  the  same  may  fall  due  as  much  so  as 
if  I  were  personally  present,  and  my  sign  manual  indorsed  on  the 
said  notes,  it  being  understood  that  the  several  indorsers,  to  wit,  Mar- 
garet Booth,  Peter  B.  Dulany  and  Evan  H.  Thomas,  are  also  to  re- 
new their  indorsements  on  the  several  notes.     Dated  July  18,  1831. 

"[Signed]     Geo.  Houston. 
"Witness :    J.  Wales." 

Under  this  agreement  the  notes  were  several  times  renewed,  the 
last  renewal  being  on  the  8th  March,  1832,  when  the  notes  were  given 
on  which  the  present  suit  is  founded.  The  declaration  was  against 
Houston  as  an  indorser  and  not  on  the  guaranty. 

Plaintiff  offered  the  notes  in  evidence.     Objected  to.'' 
Clayton,  C.  J.    This  action  is  against  Houston  as  an  indorser,  and 
the  notes  offered  in  evidence  do  not  themselves  show  any  connection 
or  liability  of  the  defendant.     It  appears  by  other  evidence  that  three 

7  Tart  of  the  case  Is  omitted. 


Ch.  1)  TRANSFER.  285 

notes  were  drawn  by  Jos.  Roberts  in  favor  of  certain  persons  and 
indorsed  by  them,  and  also  by  Houston  to  the  bank.  Houston  after- 
wards made  an  agreement  with  the  bank  in  relation  to  the  renewal 
of  these  notes.  This  is  an  undertaking  to  indorse,  or  an  agreement 
to  hold  himself  responsible  as  an  indorser;  in  either  case  he  is  liable, 
but  liable  on  the  agreement.  The  action  should  have  been  on  this 
agreement,  specially  setting  it  out;  it  might  have  been  done  in  this 
case  by  adding  a  count  to  that  effect.  It  has  been  contended  that  this 
was  an  authority  given  to  the  bank  to  indorse  these  notes  for  the  de- 
fendant. We  admit  that  this  authority  may  be  made  out  by  infer- 
ence— by  the  course  of  trade,  as  where  a  wife  was  accustomed  to  in- 
dorse for  her  husband — but  here  is  a  written  agreement  and  we  can- 
not go  beyond  it.  It  gives  no  such  authority.  The  party  agrees  to 
be  bound  as  much  as  if  he  had  indorsed  the  notes,  but  he  does  not  in- 
dorse them  nor  authorize  another  to  indorse  for  him.  He  is  not  then 
an  indorser,  though  liable  as  much  as  an  indorser;  but  how  liable? 
Not  on  the  notes,  for  this  would  make  him  an  actual  indorser,  but  on 
the  agreement.  A  distinction  is  taken  in  the  books  between  the  ac- 
ceptance of  a  bill  drawn  and  one  to  be  drawn ;  in  the  former  case  it 
may  be  by  collateral  writing,  but  in  the  latter,  not.  Here,  this  agree- 
ment is  in  relation  to  notes  to  be  drawn  in  future ;  and  the  case  is 
stronger  than  that  of  an  acceptor,  for  the  indorser  is  quasi  a  new 
drawer.  We  are  therefore  of  opinion  that  the  evidence  offered  is  in- 
admissible in  this  action.  *  *  * 
The  plaintiff  suffered  a  nonsuit.* 


HAINES  V.  DUBOIS. 

(Supreme  Court  of  New  Jersey,  1863.    30  N.  J.  Law.  259.) 

On  rule  to  show  cause,  etc,  The  issue  in  this  case  was  tried  at  the 
Salem  circuit,  and  a  verdict  rendered  for  the  plaintiff.  The  defend- 
ant seeks  to  have  the  verdict  set  aside,  and  a  new  trial  granted,  be- 
cause he  was  not  an  indorser  of  the  note  sued  on,  and  if  an  indorser 
he  had  no  sufficient  notice  of  nonpayment.^ 

Whelpley,  C.  J.  The  only  question  made  upon  the  argument  was 
whether  Dubois,  who  was  sued  as  indorser  of  a  note,  was  duly  noti- 
fied of  its  dishonor. 

The  note  was  made  by  John  W.  Wright,  payable  to  the  order  of 
Dubois,  to  secure  a  debt  which  he  owed  to  one  Thomas  Newell.  He 
agreed  to  give  security  for  the  delay  of  eight  months,  the  time  the 
note  had  to  run,  and  took  the  note  so  made  away  with  him,  and 
brought  it  back  with  the  name  of  Dubois  written  under  that  of  Wright, 
the  maker.     It  did  not  appear  upon  the  trial  that  Dubois  refused  to 

8  Compare  Andrews  v.  Whitehead  (Tex.  Civ.  App.)  60  S.  W.  800  (1901). 
8  The  opinions  of  Ogden  and  Van  Dyke,  JJ.,  are  omitted. 


■286  NEGOTIATION.  (Pait  2 

indorse  tlie  note,  but  was  willing  to  be  a  joint  maker.  No  evidence 
was  g-iven  to  show  why  he  did  not  indorse  his  name,  as  usual,  on  the 
back,  instead  of  writing  it,  as  he  did,  on  the  face.  Dubois  was  sworn 
upon  the  trial,  and  did  not  pretend  that  he  did  not  intend  to  indorse 
the  note.  He  knew  that  the  note  was  payable  to  his  order,  and  could 
not  be  negotiated  without  his  indorsement,  and  with  this  knowledge 
put  his  name  upon  it.     It  was  a  sufficient  indorsement. 

If  the  payee  write  his  name  on  any  part  of  the  note  with  the  in- 
tention of  indorsing  it,  it  is  a  sufficient  indorsement.  An  indorsement, 
as  the  word  imports,  is  usually  put  upon  the  back  of  a  note ;  that  is 
the  regular  mode,  but  the  place  where  written  is  by  no  means  essen- 
tial.    Partridge  v.  Davis,  20  Vt.  499-503. 

In  Rex  V.  Biggs,  3  P.  Wms.  419— i2S,  it  was  held,  under  a  statute 
making  it  a  felony  to  alter  or  erase  an  indorsement  on  a  bill  or  bank 
note,  that  a  defendant,  who  had  erased  with  lemon  juice  a  receipt  for 
part  payment  written  on  the  face  of  a  bank  note,  was  properly  con- 
victed under  the  act  for  erasing  an  indorsement. 

This  is  much  like  the  question  of  how  the  indorser's  name  must  be 
written.  It  has  been  held  that  a  writing  in  pencil  is  sufficient ;  so  an 
indorsement  by  initials,  and  even  by  figures  has  been  held  good. 
Brown  v.  Butchers'  Bank.  6  Hill  (N.  Y.)  413,  41  Am.  Dec.  755,  and 
cases  there  cited;  Merchants'  Bank  v.  Spicer,  6  Wend.  (N.  Y.)  445. 
The  true  rule  is  stated  by  Nelson,  C.  J.,  in  the  case  cited  from  6  Hill. 
443,  that  a  person  may  become  bound  by  any  mark  or  designation  he 
thinks  proper  to  adopt,  provided  he  uses  it  as  a  substitute  for  his 
name,  and  he  intends  to  bind  himself.  For  the  same  reason,  the  place 
where  the  name,  or  mark,  or  designation  is  put  is  not  material,  if  the 
signer  intended  it  as  an  indorsement. 

The  notary,  misled  by  the  place  in  which  he  found  Dubois'  signa- 
ture, sent  notice  to  him  as  the  maker  of  the  note.  This  notice  Du- 
bois, on  the  trial,  admitted  he  had  received,  and  did  not  deny  that  he 
was  fully  apprised  by  it  that  the  note  was  duly  presented  for  pay- 
ment at  the  Salem  Bank,  where  it  was  payable,  payment  demanded 
of  the  maker,  and  refused.  A  short  time  before  the  note  became  due 
he  called  upon  the  plaintiff,  to  whom  Newell  transferred  it  when 
made,  asked  to  see  it,  saw  it,  and  remarked  that  it  was  correct. 

He  was  not  indorser  upon  any  other  note  at  the  time  with  which 
this  might  have  been  confounded.  In  short,  the  case  leaves  no  room 
for  doubt  that  he  was  fully  apprised  by  the  notice  of  the  dishonor 
of  the  note,  and  by  fair  implication,  that  he  was  looked  to  for  payment. 
The  notice  in  fact  answered  all  the  purposes  for  which  a  notice  is 
required  to  be  sent  to  an  indorser.  This  was  held  sufficient  in  How- 
land  V.  Adrain  (decided  at  June  term,  1862)  30  N.  J.  Law,  41. 

No  exception  was  taken  in  the  defendant's  brief  to  the  place  where 
the  notice  was  sent. 

The  verdict  was  right  upon  the  evidence,  and  there  should  be  judg- 
ment for  the  plaintiff. 


Ch.  1)  TRANSFEU.  287 

SEARS  V.  LANTZ  &  BATES  et  al. 
(Supreme  Court  of  Iowa,  1S7S.     47  Iowa,  658.) 

Action  against  the  defendants  Lantz  Si  Bates  as  makers,  and  John 
Bowman  as  indorser,  of  a  negotiable  promissory  note.  A  demurrer 
having  been  sustained  to  so  much  of  the  petition  as  sought  to  charge 
Bowman  as  indorser,  the  plaintiff  appeals. 

SiCi^vERS,  J.  The  note  was  payable  to  the  defendant  Bowman  or 
order,  and  he  wrote  on  the  back  thereof  the  following:  "December 
18,  1876.  I  hereby  assign  all  my  right  and  title  to  Louis  Meckley. 
John  Bowman."  The  ground  of  demurrer  was  in  substance  that  no 
cause  of  action  existed  against  the  defendant,  Bowman,  under  and  by 
virtue  of  the  said  writing.  Without  doubt  it  amounts  to  an  assign- 
ment of  all  the  defendant's  right  and  title  in  the  note.  Does  this  sub- 
ject him  to  the  liabilities  of  an  indorser?  is  the  question  for  determina- 
tion. An  indorsement  differs  from  an  assignment,  in  that  an  indorsee 
may  bring  the  action  in  his  own  name,  and  an  assignee  cannot.  2  Par- 
sons on  Notes  and  Bills,  1. 

It  was  held  in  McCarty  v.  Clark,  10  Iowa,  588,  that  the  assignment 
of  a  promissory  note  as  collateral  security  for  the  payment  of  another 
debt  passed  the  title  to  the  indorsee,  and  that  he  could  sue  in  his  own 
name  without  averring  or  showing  that  the  indebtedness  secured  by 
the  note  had  been  paid. 

In  Childs  v.  Davidson,  38  111.  438,  it  was  held  that  "I  guarantee  the 
payment  of  the  within  note"  amounted  to  an  assignment,  and  trans- 
ferred the  legal  title  to  the  note  so  as  to  enable  the  holder  to  maintain 
an  action  against  the  maker.  See,  also,  Rowe  v.  Haines,  15  Ind.  445, 
77  Am.  Dec.  101. 

In  Sands  v.  Wood,  1  Iowa,  263,  it  was  held  the  words  "I  assign  the 
within  note  to  Miss  Sarah  Coffin"  amounted  to  an  indorsement,  and  the 
party  so  transferring  the  note  became  liable  as  an  indorser. 

The  effect  of  the  assignment  in  Sands  v.  Wood  was  to  assign  and 
transfer  whatever  title  the  assignor  had  in  the  note.  He  used  no  words 
that  in  and  of  themselves  indicated  that  he  bound  or  made  himself 
liable  in  case  the  maker  after  demand  failed  to  pay  the  note.  But  it 
was  held  the  law  as  a  legal  conclusion  attached  to  the  words  used  the 
liability  that  follows  the  indorsement  of  a  promisson,^  note. 

It  will  be  difficult,  we  apprehend,  to  draw  a  distinction  between  that 
case  and  the  one  at  bar.  Here  the  defendant  assigned  all  his  right 
and  title  in  the  note,  and  this  in  legal  contemplation  was  the  effect  of 
the  assignment  in  Sands  v.  Wood. 

In  neither  case  was  there  any  limit  attached  to  the  liability  of  the 
assignor.  That  resulted  as  a  legal  conclusion.  It  must  be  regarded 
as  settled  in  this  state  that  the  assignment  of  a  promissory  note  by  the 
payee  thereof,  in  writing  on  the  note,  vests  the  legal  title  therein  in 
the  assignee,  so  as  to  enable  him  to  bring  an  action  in  his  own  name 


28S  NEGOTIATION.  (Part  2 

against  the  maker.  Such  being  true,  an  assignment  amounts  to  an  in- 
dorsement, and  makes  the  assignor  Hable  as  an  indorser,  within  the 
rule  laid  down  by  Parsons,  above  cited. 

The  result  is  the  demurrer  should  have  been  overruled. 

Reversed. 


CENTRAL  TRUST  CO.  v.  FIRST  XAT.  BANK. 
(Supreme  Court  of  the  Uuited  States,  1879.     101  U.  S.  GS,  2o  L.  Ed.  876.) 

Strong,  J.     This  case,  as  made  by  the  bill,  answers,  replications, 
and  proofs,  is  as  follows:    On  the  24th  day  of  September,  1874,  the 
First  National  Bank  of  Wyandotte,  Kan.,  made  its  promissory  note  at 
Chicago,  111.,  in  these  words : 
'•$o,00U.  Chicago,  Illinois,  Sept.  24,  1874. 

"Four  months  after  date  we  promise  to  pay  to  Cook  County  National 
Bank,  of  Chicago,  or  order,  five  thousand  dollars,  with  interest  at  the 
rate  of per  cent,  per  annum  after  due,  value  received,  all  paya- 
ble at  Cook  County  National  Bank.  B,  Judd, 

"Cashier  1st  Nat'l  Bank,  Wyandotte,  Kas. 

"$6,000  Wyandotte  Co.  and  City  bonds  as  collateral." 

The  note  was  made  and  delivered  to  the  Cook  County  Bank,  in  pur- 
suance of  an  arrangement  between  that  bank  and  Judd,  the  cashier 
of  the  Wyandotte  Bank,  by  which  it  was  agreed  the  latter  should  ex- 
ecute a  four  months  note  for  $5,000,  with  security,  and  have  the  same 
discounted  by  the  Cook  County  Bank,  and  the  proceeds  placed  to  the 
credit  of  the  Wyandotte  Bank,  but  not  to  be  drawn  against  so  as  to 
reduce  the  credit  for  such  proceeds  below  $4,000 — such  note  to  remain 
with  the  Cook  County  Bank,  and  to  be  surrendered  to  the  maker  on 
the  renewal  or  close  of  the  account.  It  was  distinctly  understood  be- 
tween the  officers  of  the  two  banks  when  the  note  was  given  that 
it  should  be  held  by  the  Cook  County  Bank  as  a  memorandum,  and 
not  be  negotiated  or  separated  from  the  Wyandotte  city  and  coun- 
ty bonds  for  $6,000  accompanying  it,  which  were  delivered  contempo- 
raneously with  it  as  collaterals.  Accordingly,  the  .sum  of  $4,000,  part 
of  the  proceeds  of  the  discount,  was  suffered  to  remain  on  deposit  to 
the  credit  of  the  Wyandotte  Bank  until  the  Cook  County  Bank  failed, 
became  insolvent,  and  passed  into  the  hands  of  a  receiver.  At  the 
time  of  such  failure  and  the  appointment  of  a  receiver  there  was  also 
an  additional  credit  of  $868  due  from  the  Cook  County  Bank  to  the 
Wyandotte  Bank.  When,  therefore,  the  note  matured  there  was  due 
from  the  payee  to  the  maker  of  the  note  the  sum  of  $4,868.  But  be- 
fore its  maturity,  to  wit,  on  the  7th  day  of  October,  1874,  the  Cook 
County  Bank,  in  violation  of  its  agreement  above  mentioned,  passed 
the  note  to  the  New  York  State  Loan  &  Trust  Company,  by  which  it 
was  discounted,  without  any  knowledge  of  any  defense  which  the 
Wyandotte  Bank  had  against  it,  or  any  knowledge  of  the  origin  of 


Ch.  1)  TRANSFER.  289 

the  note  and  of  the  agreement  between  the  two  banks,  other  than 
what  the  face  of  the  note  revealed. 

The  note  was  protested  when  it  fell  due,  and  it  is  now  held  by  the 
Central  Trust  Company  of  New  York,  the  receiver  of  the  New  York 
State  Loan  &  Trust  Company,  and  the  collaterals,  the  municipal  bonds, 
are  held  still  by  the  Cook  County  Bank. 

This  bill  has  been  filed  to  compel  its  surrender  and  the  surrender  of 
the  Wyandotte  city  and  county  bonds  on  the  payment  of  $132,  the 
difference  between  $5,000  and  $4,868,  the  sum  standing  to  the  credit 
of  the  Wyandotte  Bank  against  the  payee;  the  claimant  offering  to 
pay  that  sum. 

In  view  of  these  facts,  fairly  deducible  from  the  evidence,  it  is  mani- 
fest that,  as  between  the  complainant  and  the  Cook  County  Bank,  there 
is  a  perfect  defense  against  the  note  to  the  extent  of  $J:,868,  the  sum 
standing  to  the  credit  of  the  Wyandotte  Bank  due  from  the  payee. 
On  the  payment  of  $132  the  maker  of  the  note  has  a  clear  equity  to 
have  it  surrendered,  together  with  the  municipal  bonds  held  as  collat- 
erals. 

But  it  is  claimed  that  the  trust  company,  having  received  the  note 
before  its  maturity,  and  having  discounted  it  in  the  usual  course  of 
business  without  any  knowledge  of  any  equities  or  defense  against  it, 
is  entitled  to  hold  it  free  from  any  defense  which  the  maker  could  set 
up  against  the  payee ;   that  is,  against  the  Cook  County  Bank. 

A  large  portion  of  the  argument  before  us  has  been  expended  upon 
the  questions  whether,  inasmuch  as  the  note  was  given  by  the  cashier 
of  the  Wyandotte  Bank  at  Chicago,  and  was  made  payable  at  a  future 
day,  it  was  not  void  under  the  general  banking  law.  We  pass  those 
questions  as  unnecessary  to  be  considered.  If  it  be  conceded  that  the 
note  was  valid  at  its  inception,  it  is  certainly  true  the  maker  had  a  good 
defense  against  it  while  it  was  in  the  hands  of  the  payee,  and  we  do 
not  perceive  that  the  manner  in  which  the  trust  company  or  its  receiv- 
er obtained  it  puts  them  or  either  of  them  in  any  better  position  than 
the  payee  occupied. 

The  note  was  not  indorsed  to  the  trust  company,  and  it  was  not, 
therefore,  taken  in  the  usual  course  of  business  by  that  mode  of  trans- 
fer in  which  negotiable  paper  is  usually  transferred.  Had  it  been  in- 
dorsed by  the  Cook  County  Bank,  it  may  be  that  the  trust  company 
would  hold  it  unaffected  by  any  equities  between  the  maker  and  the 
payee.  But  instead  of  an  indorsement,  the  president  of  the  Cook 
County  Bank  merely  guaranteed  its  payment,  and  handed  it  over  with 
this  guaranty  to  the  trust  company.  The  note  was  not  even  assigned. 
There  was  written  upon  it  only  the  following : 

"For  value  received,  we  hereby  guarantee  the  payment  of  the  with- 
in note  at  maturity  or  at  any  time  thereafter,  with  interest  at  10  per 
cent,  per  annum  until  paid,  and  agree  to  pay  all  costs  and  expenses 
paid  or  incurred  in  collecting  the  same.  B.  F.  Allen,  Pres't." 

Sm.&  M.B.&  N.— 19 


290  NEGOTIATION.  (Part  2 

In  no  commercial  sense  is  this  an  indorsement,  and  probably  it  was 
not  inteiuled  as  such.  Allen  had  agreed  that  the  note  should  not  be 
negotiated,  and  for  this  reason  perhaps  it  was  not  indorsed.  That  a 
guaranty  is  not  a  negotiation  of  a  bill  or  note,  as  understood  by  the  law 
merchant,  is  certain.  Snevily  v.  Ekel,  1  Watts  &  S.  (Pa.)  203;  Lam- 
ourieux  v.  Hewit,  5  Wend.  (N.  Y.)  307;  Miller  v.  Gaston,  2  Hill  (N. 
Y.)  1S8.  In  this  case,  the  guaranty  written  on  the  note  was  filled  up. 
It  expressed  fully  the  contract  between  the  Cook  County  Bank  and  the 
trust  company.  Being  express,  it  can  raise  no  implication  of  any  other 
contract.  "Expressum  facit  cessare  tacitum."  The  contract  cannot, 
therefore,  be  converted  into  an  indorsement  or  an  assignment.  And  if 
it  could  be  treated  as  an  assignment  of  the  note,  it  would  not  cut  ofif 
the  defenses  of  the  maker.  Such  an  effect  results  only  from  a  transfer 
according  to  the  law  merchant ;  that  is,  from  an  indorsement.  An  as- 
signee stands  in  the  place  of  his  assignor,  and  takes  simply  an  assign- 
or's rights ;  but  an  indorsement  creates  a  new  and  collateral  contract. 
2  Parsons,  Notes  and  Bills,  46  et  seq.,  notes. 

At  best,  therefore,  the  defendants  below  can  claim  no  more  or  great- 
er rights  than  those  of  the  Cook  County  Bank,  and  the  complainants 
are  entitled  to  a  return  of  the  note  and  of  the  collaterals  on  payment 
of  the  sum  of  $132. 

Decree  affirmed.^" 


HATCH  V.  BARRETT  et  al. 
(Supreme  Court  of  Kansas,  ISSo.     34  Kan.  223,  8  Tac.  129.) 

Action  by  Phillip  Barrett  and  another  to  have  a  note  signed  by  him 
as  maker  and  a  mortgage  given  to  secure  the  same  canceled  on  the 
ground  that  the  note  and  mortgage  had  been  secured  by  the  payee  by 
duress.  The  defendant  Hatch  answered,  by  way  of  defense  and  cross- 
petition,  that  he  was  a  purchaser  for  value  of  the  note  and  mortgage 
from  the  payee  without  notice  of  the  duress.  Judgment  for  the  plain- 
tiffs.^^ 

HoRTON,  C.  J.  *  *  *  Between  the  parties  to  the  original  trans- 
action, of  course,  the  payment  of  the  note  could  not  be  enforced  in  the 
courts.  It  is  claimed,  however,  by  Charles  B.  Hatch  that  he  is  entitled 
to  hold  the  note  and  mortgage  free  from  any  defense  which  the  mak- 
ers could  set  up  against  the  payee,  upon  the  ground  that  he  purchased 
the  note  for  a  valuable  consideration  before  its  maturity,  in  the  usual 
course  of  business,  without  the  knowledge  of  any  equities  or  defense 

10  Accord:  Belcher  v.  Smith,  7  Cush.  (Mass.)  4S2  (1S51).  Contra:  Partridge 
V.  David,  20  Vt.  499  (1S48);  National  Bank  v.  Galland.  14  Wash.  502,  45  Pae. 
35  (189G);  Donnerbera;  v.  Opponheimer,  15  Wash.  290.  46  Pae.  254  (1806); 
Kellogg  V.  Latham,  58  Kan.  4:i,  48  Pae.  587  (1897). 

1 1  The  statement  of  facts  is  written  by  the  editors.  Part  of  the  opinion  is 
omitted. 


Ch.  1)  TRANSFER.  201 

against  it.  He  asserts  himself  to  be  a  bona  fide  owner  of  the  note  and 
mortgage  for  value.  The  following  is  the  writing  upon  the  back  of 
the  note,  of  the  date  of  July  23,  ISSi  : 

"State  of  Arkansas,  County  of  Washington — ss. :  I,  James  C.  Rog- 
ers, do  hereby  assign  the  within  note  to  Charles  B.  Hatch,  of  Osage 
county,  Kansas.  Said  assignment  is  made  without  recourse  on  me, 
either  in  law  or  equity.  J.  C.  Rogers. 

"Signed  in  the  presence  of  H.  F.  Raymond,  Clerk  Co.  Court,  Wash- 
ington County,  Arkansas." 

The  question  is,  whether  this  writing  can  be  considered  in  a  com- 
mercial sense  an  indorsement.  H  the  note  was  not  "indorsed"  to 
Hatch,  it  was  not  taken  by  him  in  the  usual  course  of  business  by  the 
mode  of  transfer  in  which  negotiable  paper  is  usually  transferred.  "A 
negotiable  promissory  note,  if  payable  to  'order,'  can  be  assigned  free 
from  all  equities  only  by  indorsement,  for  there  is  no  statute  in  this 
state  that  authorizes  a  negotiable  promissory  note,  payable  to  'order,' 
to  be  transferred  free  from  all  or  any  equitable  defenses  or  claims,  ex- 
cept by  indorsement."  Comp.  Laws  1879,  c.  14,  §  1 ;  McCrum  v.  Cor- 
by, 11  Kan.  464. 

The  alleged  indorsement  is  clearly  not  in  the  usual  or  common  form, 
but  substantially  different  therefrom.  The  words  of  the  indorsement, 
taken  together,  must  be  treated  as  only  an  assignment  of  the  note.  An 
assignee  stands  in  the  place  of  the  assignor,  and  takes  simply  an  as- 
signor's rights;  but  the  assignment  of  a  note  will  not  cut  off  the  de- 
fenses of  the  maker.  Trust  Co.  v.  Bank,  101  U.  S.  GS,  25  L.  Ed.  876  ; 
Bank  v.  Walker  (C.  C.)  2  McCrary,  565,  5  Fed.  399.  We  think  it  will 
be  conceded  that  if  there  were  only  written  upon  the  back  of  the  note 
the  following  words:  "I,  James  C.  Rogers,  do  hereby  assign  the  with- 
in note  to  Charles  B.  Hatch,  of  Osage  county,  Kansas" — that  such 
writing  would  not  be  considered  an  indorsement  in  a  commercial  sense. 
We  do  not  think  the  additional  words  written  upon  the  back,  to  wit, 
"Said  assignment  is  made  without  recourse  on  me,  either  in  law  or 
equity,"  alter  or  change  the  legal  rights  of  the  parties  under  the  writ- 
ten assignment,  and  all  of  the  writing  must  be  treated  as  merely  an 
assignment  of  the  note.  Daniel,  Neg.  Inst.  §§  666,  667,  688,  701; 
Martin  v.  McMasters,  14  La.  420 ;  Hailey  v.  Falconer,  32  Ala.  536 ; 
Vincent  v.  Horlock,  1  Camp.  442. 

Of  course,  we  understand  that  an  indorsement  qualified  by  the  words 
"without  recourse"  is  not  out  of  due  course  of  trade,  and  does  not 
throw  any  suspicion  upon  the  character  of  the  paper.  A  note  contin- 
ues negotiable,  notwithstanding  the  words  "without  recourse" ;  but  in 
this  case,  the  indorsement  goes  further  than  the  mere  words  "without 
recourse,"  and  therefore,  as  before  stated,  we  cannot  consider  the  writ- 
ing by  which  the  note  was  transferred  as  an  indorsement  in  a  commer- 
cial sense.  If  parties  accept  paper  with  the  indorsement  "without  re- 
course," with  the  expectation  that  the  paper  is  negotiable,  the  indorse- 
ment ought  to  be  made  in  strict  compliance  with  the  technical  rules  of 


292  NEGOTIATION.  (Part  2 

commercial  law,  in  this  way:  "Without  recourse.  John  Doe;"  or 
"Pay  to  Richard  Roe,  or  order,  without  recourse.  John  Doe ;"  or  in 
some  other  like  form. 

This  disposes  of  the  case,  as,  upon  the  foregoing  conclusion,  the 
judgment  of  the  district  court  must  be  affirmed.     *     *     *  12 


THORP  V.  MINDEMAN. 

cousin,  1904.     123  Wis.  1 
146,  107  Am.  St.  Rep.  K 

See  ante,  p.  96,  for  a  report  of  the  case. 


(Supreme  Court  of  Wisconsin,  1904.    123  Wis.  149,  101  N.  W.  417,  68  L.  R.  A. 
146,  107  Am.  St.  Rep.  1003.) 


EVANS  V.  FREEMAN. 

(Supreme  Court  of  North  Carolina,  1906.     142  N.  C.  61.  54  S.  E.  S47.) 

Plaintiff  sued  upon  a  bond,  dated  June  6,  1899,  by  which  the  de- 
fendant promised  to  pay  to  David  A.  Askew  on  November  15,  1900. 
the  sum  of  $50,  being  the  purchase  money  for  the  right  to  sell  an  au- 
tomatic stock  feeder  in  Hertford  county.  The  bond  was  transferred 
to  the  ])laintiff  by  the  following  indorsement :  "For  value  received,  I 
herewith  transfer  and  assign  all  my  right,  title  and  interest  in  and  to 
the  within  note  to  J.  D.  Evans,  July  1,  1899.     [Signed]  D.  A.  Askew." 

The  defendant's  counsel  requested  the  court  to  charge  the  jury  as 
follows :  "The  transfer  on  the  back  of  the  note  is  not  such  an  indorse- 
ment as  raises  any  presumption  in  favor  of  the  holder  of  the  note, 
and  one  who  took  it  with  such  an  indorsement  holds  it  subject  to  the 
condition  on  which  it  was  held  by  the  original  payee  as  to  oft'sets  and 
equities."  The  court  refused  to  give  the  instruction,  and  the  defend- 
ant excepted.^' 

W.ALKER,  J.  *  *  *  Tlicre  is  one  other  matter  which  requires 
some  attention.  The  defendant  contended  that  the  plaintiff  was  not 
a  holder  in  due  course,  because  by  the  terms  of  the  indorsement  he  was 
put  on  notice  of  any  and  all  equities  and  defenses  of  the  maker  as 
against  the  payee,  Askew,  the  reason  being  that  only  the  right  and  ti- 
tle of  the  payee  was  transferred  and  the  indorsee  acquired  no  better 
title  under  such  an  indorsement  than  his  indorser  himself  had,  but,  ex 
vi  termini,  only  his  right  and  title,  which  were  subject  to  the  defense 
set  up  in  this  action.  There  was  at  one  time  very  strong  and  convinc- 
ing authority  for  such  a  position  (Aniba  v.  Yeomans,  39  Mich.  171), 
and  there  was  much  also  said  against  it  (1  Daniel,  Neg.  Inst.  [5th  Ed.] 
§  688c).    But  we  think  the  controversy  has  finally  been  settled  by  the 

12  Accord:  Fox  v.  Clpra.  5  Kan.  App.  312,  48  Pac.  452  (1897). 
18  Only  the  part  of  the  case  relevant  to  this  exception  is  given. 


Ch.  1)  TRANSFER.  293 

"Negotiable  Instruments  Law"  as  recently  adopted.  Revisal  1905,, 
c.  54. 

Ours  is  a  qualified  indorsement,  under  Revisal  1905,  §  2187,  and 
while  the  indorser  is  constituted  a  mere  assignor  of  the  title  to  the  in- 
strument, it  is  provided  that  such  an  indorsement  shall  not  impair  its 
negotiability.  A  qualified  indorsement  may,  by  the  express  terms  of 
that  section,  be  made  by  adding  to  the  indorser's  signature  the  words 
"without  recourse,"  or  any  words  of  similar  import.  It  has  been  set- 
tled in  commercial  law  that  a  transfer  by  indorsement  of  the  "right 
and  title"  of  the  payee  or  an  indorser  to  a  negotiable  note  is  equiva- 
lent to  an  indorsement  "without  recourse,"  and  words  such  as  were 
used  in  this  case  are  therefore  in  their  meaning  or  "import"  similar  to 
such  an  indorsement,  and  this  is  their  reasonable  interpretation.  1 
Daniel,  supra,  §§  700,  700a;  Norton  on  Bills  &  Notes  (3d  Ed.)  120; 
Hailey  v.  Falconer,  32  Ala.  536 ;  Rice  v.  Stearns,  3  Mass.  225,  3  Am. 
Dec.  129;  Randolph,  Com.  Paper  (2d  Ed.)  §§  721,  722,  1008;  God- 
dard  V.  Lyman,  14  Pick.  (Mass.)  268;  Borden  v.  Clark,  26  Mich.  410; 
Eaton  &  Gilbert  on  Commercial  Paper,  §  61. 

However  the  law  may  have  been,  it  is  now  true,  as  it  appears  from 
the  statute  and  the  authorities  just  cited,  that  such  an  indorsement  does 
not  in  law  discredit  the  paper  or  even  bring  it  under  suspicion,  nor 
does  it  in  any  degree  affect  its  negotiability.  The  indorsee  is  supposed 
to  take  it  on  the  credit  of  the  other  parties  to  the  instrument  (Revisal 
1905,  §  2187),  though  the  indorser  may  still  be  liable  on  certain  warran- 
ties specified  in  the  statute.  Revisal  1905,  §  2214.  This  conclusion  we 
believe  to  be  in  accord  with  the  intention  of  the  Legislature  in  enact- 
ing the  negotiable  instruments  law,  as  the  leading  purpose  was  to  af- 
ford as  much  protection  to  the  holders  of  commercial  paper  as  is  con- 
sistent with  a  just  regard  for  the  rights  of  other  interested  parties, 
and,  by  freeing  its  transfer  of  unnecessary  fetters,  to  promote  its  easy 
circulation  and  to  give  it  greater  currency  as  a  medium  of  exchange.^* 


GERMANIA  NAT.  BANK  OF  MILWAUKEE  v.  MARINER. 

(Supreme  Court  of  Wisconsin,  1906.    129  Wis.  544,  109  N.  W.  574.) 
WiNStow,  J.     The  plaintiff"  sued  the  appellant  and  the  Northwest- 
ern Straw  Works  as  makers  of  the  following  promissory  note : 

"Milwaukee,  January  6,  1905. 
"Four  months  after  date  the  Northwestern  Straw  Works  promise  to 
pay  to  the  order  of  F.  G.  Bigelow  ($20,000)  Twenty  Thousand  Dollars 
at  the  First  National  Bank,  Milwaukee.     Value  received. 

"The  Northwestern  Straw  Works, 

"E.  R.  Stillman,  Treas. 
"John  W.  Mariner." 

14  Accord:     Spencer  v.  Halpern,  62  Ark.  595,  37  S.  W.  711,  36  L.  R.  A.  120 
(1896),  action  against  indorser. 


2di  NEGOTIATION.  (Part  2 

The  defendants  answered  jointly,  alleging  that  the  note  was  the  note 
of  the  Northwestern  Straw  Works  (a  corporation)  alone,  and  was 
signed  by  Mr.  Mariner  as  secretary  of  the  corporation  and  not  in  his 
individual  capacity.  The  case  was  tried  without  a  jury,  and  the  evi- 
dence showed  without  dispute  that  the  plaintiff  purchased  the  note 
from  the  payee  in  due  course  and  for  value  before  due;  that  it  repre- 
sented a  loan  made  to  the  corporation  defendant  alone ;  that  the  by- 
laws of  the  corporation  required  its  notes  to  be  signed  by  two  officers, 
either  the  president  or  treasurer  and  the  secretary ;  that  Mr.  Stillman 
was  the  treasurer  of  the  corporation  and  Mr.  Mariner  the  secretary  ; 
that  Mr.  Mariner  signed  his  name  thereto  simply  for  the  purpose  of 
making  it  the  note  of  the  corporation  and  not  intending  to  bind  him- 
self, but  neglected  to  add  the  word  "Secretary"  to  his  name;  that  the 
plaintiff  had  no  information  as  to  the  capacity  in  which  Mr.  Mariner 
signed  the  note  further  than  that  afforded  by  the  note  itself ;  and  that 
the  defendant  corporation  went  into  bankruptcy  after  the  maturity  of 
the  note  and  made  a  composition  with  its  creditors  under  which  there 
was  paid  to  the  plaintiff'  on  the  note  $4,020.  There  was  no  proof  that 
the  corporation  had  ever  held  out  to  the  plaintiff  or  the  public  that  Mr. 
Stillman  or  any  single  officer  had  authority  to  execute  notes  for  it. 
Upon  these  facts  the  court,  upon  motion,  ordered  the  complaint  amend- 
ed so  as  to  charge  Mr.  Mariner  as  indorser,  found  him  liable  as  such, 
and  entered  judgment  against  him  for  the  balance  due  upon  the  note, 
from  which  judgment  Mr.  Mariner  appeals. 

The  question  as  to  the  liability  of  Mr.  Mariner  under  the  facts  stat- 
ed is  certainly  not  free  from  difficulty.  The  general  rule  is  well  sup- 
ported that  when  it  clearly  appears,  either  in  the  body  of  the  note  or 
by  appropriate  words  added  to  the  signatures  themselves,  that  a  corpo- 
ration is  the  party  making  the  promise,  there  is  no  individual  liability 
on  the  part  of  the  signers.  1  Randolph,  Comm.  Paper  (2d  Ed.)  §  135. 
In  an  early  case  in  this  state,  however  (Dennison  v.  Austin,  1-5  Wis. 
334),  this  principle  was  in  effect  modified,  as  it  is  modified  in  some 
other  jurisdictions,  by  a  proviso  to  the  effect  that,  if  the  signers  in 
fact  had  no  authority  to  bind  the  corporation,  they  bind  themselves  in- 
dividually. The  negotiable  instrument  law  (chapter  3.j6,  p.  682,  Laws 
of  ISnO)  recognizes  both  the  general  principle  and  the  proviso,  in  sec- 
tion 1675 — 20  (page  694),  in  these  words:  "Where  the  instrument 
contains  or  a  person  adds  to  his  signature  words  indicating  that  he 
signs  for  or  on  behalf  of  a  principal,  or  in  a  representative  capacity, 
he  is  not  liable  on  the  instrument  if  he  was  duly  authorized." 

As  it  appears  without  dispute  in  the  present  case  that  the  signers  of 
the  note  were  authorized  to  execute  it  on  behalf  of  the  corporation, 
the  proviso  need  not  be  considered.  In  the  present  case  the  body  of 
the  note  declares  that  the  "Northwestern  Straw  Works"  (presumably 
a  corporation)  is  the  promisor.  It  does  not  say  "I"  or  "we"  promise 
to  pay,  but  specifically  names  a  corporation  as  the  promisor.     Hence, 


Ch.  1)  TRANSFER.  295 

SO  far  as  Mr.  Stillman  is  concerned,  the  note  itself  makes  it  clear  that 
he  signed  only  on  behalf  of  the  corporation.  Parol  evidence  would  not 
be  admissible  to  show  that  he  signed  as  a  joint  maker.  Liebscher  v. 
Kraus,  74  Wis.  387,  43  N.  W.  166,  5  L.  R.  A.  496,  17  Am.  St.  Rep. 
171.  The  same  claim  is  forcibly  made  as  to  the  signature  of  the  de- 
fendant Mariner,  and  it  is  not  without  authority  to  support  it.  Shaver 
V.  Ocean  Mining  Company,  21  Cal.  45. 

We  are  not  inclined,  however,  to  rest  the  case  upon  any  doubtful 
proposition.  Granting  that  the  section  does  not  apply  as  to  the  signa- 
ture of  Mr.  Mariner,  we  think  it  would  be  conceded  that  upon  its  face 
it  is  ambiguous  so  far  as  Mr.  Mariner  is  concerned.  The  instrument 
says  that  the  "Northwestern  Straw  Works"  promises  to  pay.  The  sig- 
nature of  Mr.  Mariner  is  the  bare  signature  of  an  individual.  This  is 
certainly  not  usual,  and  should  arrest  the  attention  of  any  one  dealing 
with  it  at  once.  People  do  not  ordinarily  sign  contracts  purporting  on 
their  face  to  be  contracts  of  others.  If  they  do,  the  fact  itself  sug- 
gests at  once  a  doubt  as  to  what  they  mean  by  it.  In  other  words,  the 
instrument  becomes,  as  to  such  signatures,  ambiguous. 

The  negotiable  instrument  law,  before  referred  to,  contains  several 
provisions  with  reference  to  the  construction  of  negotiable  instruments 
bearing  the  signatures  of  persons  who  have  not  made  their  intentions 
clear,  and  these  must  be  considered.  Subdivision  6,  §  1675 — 17,  p. 
693,  provides  that,  "where  a  signature  is  so  placed  on  an  instrument 
that  it  is  not  clear  in  what  capacity  the  person  making  the  same  intend- 
ed to  sign,  he  is  to  be  deemed  an  indorser."  This  provision,  by  its 
very  terms,  applies  only  to  a  case  of  doubt  arising  out  of  the  location 
of  the  signature  upon  the  instrument.  Names  are  sometimes  placed 
at  the  side,  on  the  end,  or  across  the  face  of  the  instrument,  and  thus 
a  doubt  arises  as  to  whether  the  signer  intended  to  be  bound  as  a  mak- 
er or  an  indorser,  or  perhaps  as  a  guarantor,  and  to  solve  these  doubts 
the  section  in  question  was  evidently  framed.  It  was  to  settle  a  doubt 
fairly  arising  from  the  ambiguous  location  of  the  name,  and  applies 
to  no  other. 

In  the  present  case  there  is  no  doubt  of  this  nature.  The  signature 
of  Mr.  Mariner  is  placed  in  the  usual  and  proper,  in  fact  the  only  prop- 
er, place  for  a  maker.  The  doubt  arising  is  not  a  doubt  whether  he 
intended  to  sign  as  maker,  indorser,  or  guarantor,  for  it  is  clear  from 
the  location  of  the  name  that  he  did  not  intend  to  sign  as  indorser  or 
guarantor,  but  simply  a  doubt  whether  he  intended  to  sign  in  an  in- 
dividual or  in  a  representative  capacity  as  maker.  To  say  that,  where 
it  conclusivelv  appears  from  the  instrument  that  the  signer  intended  to 
sign  as  a  maker,  the  statute  is  intended  to  make  him  an  indorser,  would 
be  little  short  of  ridiculous.  The  statute  was  passed  to  meet  a  case 
where  it  is  doubtful  from  the  instrument  whether  a  man  intended  to 
become  an  indorser,  not  to  make  an  indorser  out  of  a  person  who, 
without  doubt,  intended  to  sign  as  maker,  either  individually  or  as 


296  NEGOTIATION.  (Part  2 

representative  of  another.  We  have  no  doubt,  therefore,  that  this  sec- 
tion has  no  application  to  the  present  case. 

Sections  IGT:— 3  and  167: — i,  c.  356,  p.  712,  Laws  of  1899,  are  al- 
so referred  to  as  having  some  bearing  on  the  question.    Section  16? T — 

3  provides  that  "a  person  placing  his  signature  upon  an  instrument 
otherwise  than  as  maker,  drawer  or  acceptor  is  deemed  to  be  an  in- 
dorser,  unless  he  clearly  indicates  by  appropriate  words  his  intention  to 
be  bound  in  some  other  capacity."  Section  1677 — 4  provides  that, 
"where  a  person  not  otherwise  a  party  to  an  instrument  places  there- 
on his  signature  in  blank  before  delivery,  he  is  liable  as  an  indorser  in 
accordance  with  the  following  rules,"  etc.  As  to  the  last-named  sec- 
tion, it  is  manifest  that  it  has  no  application,  because  Mr.  Mariner  did 
not  place  his  signature  upon  the  note  in  blank.  The  first-named  sec- 
tion is  equally  inapplicable,  because  it  is  certain,  from  the  instrument 
itself,  that  he  placed  his  signature  thereon  as  maker,  either  individual- 
ly or  in  a  representative  capacity ;  hence  the  contingency  named  in  the 
section  has  not  arisen.  It  seems  entirely  clear  from  the  language  of 
these  two  sections,  and  from  the  notes  thereto,  that  they  were  in- 
tended to  lay  down  in  statutory  form  the  propositions  already  decided 
by  this  court  in  Cady  v.  Shepard,  12  Wis.  639,  and  King  v.  Ritchie, 
18  Wis.  554,  and  other  cases  following  them.  There  are  no  other  sec- 
tions of  the  negotiable  instrument  law  which  can  be  reasonably  claimed 
to  have  any  material  bearing  on  the  question  now  under  considera- 
tion, and  it  must  therefore  be  determined  upon  general  principles  of 
the  common  law. 

It  is  elementary  that,  in  case  a  written  contract  is  ambiguous  in  its 
terms,  parol  proof  of  the  facts  and  circumstances  under  which  it  was 
executed  may  be  introduced  to  aid  in  its  construction.  This  rule  ap- 
plies to  commercial  paper,  even  in  the  hands  of  third  persons,  because, 
where  the  ambiguity  is  apparent  to  a  reasonably  prudent  man  on  the 
face  of  the  paper,  he  is  necessarily  put  upon  inquiry  Mechem,  Agen- 
cy, §  443;    Hood  v.  Hallenbcck,  7  Hun  (N.  Y.)  362;   10  Cyc.  p.  1051; 

4  Thompson,  Corp.  §  5141.  The  parol  evidence  in  the  present  case 
showed  without  dispute  that  Mr.  Mariner's  signature  was  attached 
simply  in  his  representative  capacity  and  as  agent  of  the  corporation. 
There  being  a  plain  ambiguity  in  this  respect  appearing  on  the  face  of 
the  note,  the  evidence  was  properly  received,  and  the  judgment  against 
Mr.  ]\Iariner  individually  was  erroneously  rendered. 

Judgment  reversed,  and  action  remanded,  with  directions  to  dismiss 
the  complaint. 


Ch.  1)  TRANSFER.  297 

SECTION  3.— TRANSFER  BY  INDORSEMENT 
I.  Blank  and  Special,  Indorsements 


BROMAGE  et  al.  v.  LLOYD  et  al. 
(Court  of  Exchequer,  1847.    1  Exch.  32.) 

Assumpsit.  The  declaration  stated,  that  the  defendants,  on,  etc., 
made  their  promissory  note  in  writing,  and  thereby  jointly  and  several- 
ly promised  to  pay  one  H.  Lloyd  Harries  (since  deceased),  or  order, 
ioOO.  on  demand,  and  then  delivered  the  said  note  to  the  said  H.  Lloyd 
Harries,  who  then  indorsed  the  said  promissory  note,  but  without  mak- 
ing any  delivery  thereof:  and  afterwards,  to  wit,  on,  etc.,  the  said  H. 
Lloyd  Harries  died,  having  first  made  his  last  will  and  testament,  in 
writing,  duly  executed  and  attested  as  by  law  required,  and  thereby 
appointed  his  then  wife,  to  wit,  one  Jane  Harries,  executrix  thereof, 
who,  after  the  death  of  the  said  H.  Lloyd  Harries,  to  wit,  on,  etc.,  duly 
proved  the  said  will  and  took  upon  herself  the  execution  thereof  and 
became  and  was  sole  executrix  thereof;  and  she,  as  such  executrix, 
afterwards,  to  wit,  on,  etc.,  for  good  and  valid  consideration  to  her  as 
such  executrix  as  aforesaid  in  that  behalf,  transferred  the  said  note, 
so  indorsed  as  aforesaid  to  the  plaintiffs  to  wit,  by  delivery  thereof  to 
them  by  her  as  such  executrix  as  aforesaid,  of  all  which  the  defend- 
ants then  had  notice,  and  then,  in  consideration  of  the  premises,  prom- 
ised to  pay  the  amount  of  the  same  note  to  the  plaintiffs,  according  to 
the  tenor  and  effect  thereof,  and  of  the  said  indorsement  and  delivery. 
Breach,  nonpayment. 

General  demurrer,  and  joinder.^' 

Pollock,  C.  B.  This  is  an  action  on  a  promissory  note,  upon  which 
a  party  has  written  his  name,  and  after  his  death  his  executrix  delivers 
the  note  to  the  plaintiffs  without  indorsing  it ;  so  that  there  is  a  writ- 
ing of  his  name  by  the  deceased,  and  a  delivery  by  his  executrix. 
Those  acts  will  not  constitute  an  indorsement  of  the  note.  The  per- 
son to  whom  it  is  so  delivered  has  no  right  to  sue  upon  it. 

Alderson,  B.  The  promissory  note  was  made  payable  to  the  tes- 
tator "or  order."  That  means  order  in  writing.  The  testator  has  writ- 
ten his  name  upon  the  note,  but  has  given  no  order ;  the  executrix 
has  given  an  order,  but  not  in  writing.  The  two  acts,  being  bad,  do 
not  constitute  one  good  act. 

RoLFE,  B.    The  word  "transfer"  means  indorsement  and  delivery. 

PlaTT,  B.,  concurred. 

Judgment  for  the  defendant.^® 

15  Arg:unients  of  counsel  are  omitted. 

ic  See  Louisville  Mining  Co.  v.  Trust  Co.,  18  Colo.  App.  345,  71  Pae.  Sas 
(1903). 


298  NEGOTIATION.  (Part  2 

RIKER  V.  CORBY. 

(Supreme  Court  of  New  Jereey,  1811.     3  N.  J.  Law.  Oil.) 

The  action  below  was  brought  by  Corby,  as  assignee  of  Cyrus 
Baldwin,  against  Riker,  as  maker  of  a  note  of  hand ;  the  note  war. 
given  by  Riker  to  Baldwin,  and  indorsed  in  blank.  It  was  assigned 
for  error,  that  it  did  not  appear  that  Corby  had  any  interest  in  the 
note. 

Per  Curiam.  The  indorsement  in  blank  was  an  authority  for  the 
indorsee  to  overwrite  an  assignment,  and  this  might  have  been  done 
even  at  the  trial ;  but  as  it  was  not  done,  it  did  not  appear  that  Corby 
had  any  interest  in  the  note. 

Judgment  reversed. 


CLARK  v.  WALKER. 
(Supreme  Court  of  Indiana,  1841.    6  Blackf.  82.) 

Dewey,  J.  This  was  an  action  of  debt  by  Clark  against  Walker  on 
three  sealed  notes  for  the  payment  of  money.  The  declaration  alleges 
that  the  notes  were  made  by  Walker,  and  were  payable  to  one  Dobyns, 
who  by  indorsement  assigned  them  to  Clark.  Among  several  plea§. 
which  led  to  issues  of  fact.  Walker  pleaded  non  assignment  of  the 
notes  under  oath.  On  the  trial  of  the  cause,  the  plaintiff  produced 
the  notes  described  in  the  declaration,  on  each  of  which  there  was  a 
special  assignment  from  Dobyns  to  the  plaintiff.  It  having  been  ad- 
mitted by  the  parties  that  the  indorsements  were  originally  in  blank, 
and  had  been  filled  up  after  the  filing  of  the  plea,  and  before  the  rep- 
lication thereto  was  put  in,  the  court,  on  the  objection  of  the  de- 
fendant, excluded  the  notes  and  assignments  from  being  given  in  evi- 
dence. 

This  decision  cannot  be  sustained.  It  was  competent  to  the  assignee 
of  the  notes  to  fill  up  the  blank  indorsements  on  the  trial.  Chitt.  on 
Bills,  149.  Indeed,  it  was  immaterial  whether  they  were  filled  up  at 
all  or  not.  We  have  heretofore  decided  that  a  blank  indorsement  is 
sufficient,  prima  facie,  to  enable  the  holder  of  negotiable  paper  to 
maintain  an  action  upon  it.    Bowers  v.  Trevor,  5  Blackf.  24. 

The  circumstance  that  the  notes  were  sealed  makes  no  difference. 
Such  instruments  are  assignable  by  indorsement  by  the  statute. 

The  judgment  is  reversed  with  costs.    Cause  remanded,  etc. 


Ch.  1)  TRANSFER.  299 

BURCH  et  al.  v.  DANIEL. 
(Supreme  Court  of  Georgia,  1S97.     101  Ga.  22S.  28  S.  E.  622.) 

Lumpkin,  P.  J.  In  order  to  authorize  one  to  institute  and  maintain 
in  his  own  name  an  action  upon  a  promissory  note,  the  legal  title  to 
the  paper  must  be  in  the  plaintiff. 

This  was  an  action  by  Daniel  upon  promissory  notes  which  were 
originally  payable  to  John  A.  Fretwell,  or  order.  Upon  each  of  the 
notes  was  written  the  following  transfer:  "For  value  received,  I 
hereby  sell  and  transfer  the  within  note  to  C.  S.  Pope,  without  re- 
course on  me.  J.  A.  Fretwell."  Without  the  knowledge  or  consent 
of  the  makers  of  the  notes,  the  word  "order"  had  been  in  each  of  them 
erased,  and  the  word  "bearer"  substituted  in  its  stead,  before  the  ac- 
tion was  brought,  though  it  does  not  appear  when  or  by  whom  these 
alterations  had  been  made,  or  that  this  had  occurred  before  Daniel, 
the  plaintiff,  became  possessed  of  the  notes. 

Whatever  may  be  the  truth  as  to  this  matter,  it  is  certain  that  the  le- 
gal title  to  the  notes  was  not  in  the  plaintiff  when  he  brought  his 
action.  Manifestly  it  was  in  Pope,  as  the  notes  had  never  been  in- 
dorsed by  him  to  any  one.  The  unauthorized  change  in  the  phraseol- 
ogy of  the  notes,  whether  innocently  or  fraudulently  made,  did  not 
render  them  negotiable  by  mere  delivery.  If  Daniel  was  in  fact  the 
equitable  owner  of  the  notes,  he  might  have  instituted  an  action  there- 
on, for  his  use,  in  the  name  of  the  person  holding  the  legal  title ;  but, 
under  the  facts  as  they  appear  in  the  record  before  us,  his  case  falls 
squarely  within  the  rule  announced  at  the  beginning  of  this  opinion. 
In  this  connection,  see  Dalton  City  Co.  v.  Johnson,  57  Ga.  398 ;  Ben- 
son V.  Abbott,  Parker  &  Co.,  95  Ga.  69,  22 'S.  E.  127. 

Judgment  reversed. ^^ 


SMITH  et  al.  v.  CLARKE. 
(Nisi  Prius.  before  Lord  Keuyon,  C.  J.,  1794.     Peake,  295.) 

This  action  was  brought  by  the  plaintiffs  as  indorsees  of  a  bill  of 
exchange  against  the  acceptor. 

The  bill  was  indorsed  in  blank  by  the  payee,  and  after  several  in- 
dorsements it  came  to  one  Jackson  (whose  assignees  had  indemnified 
the  present  defendant)  under  a  special  indorsement  to  him  or  order. 
Jackson  sent  it  to  Muir  &  Atkinson,  and  they  discounted  it  with  the 
plaintiffs,  but  Jackson  had  not  indorsed  it.  The  plaintiffs  had  struck 
out  all  the  indorsements  except  the  first. 

Law,  for  the  defendant,  objected  that  this  special  indorsement  had 
restrained  the  negotiability  of  the  bill,  and  that  the  plaintiffs  could 
not  recover  without  an  indorsement  by  Jackson. 

17  See  same  case  109  Ga.  256,  34  S.  E.  310  (1S99). 


300  NEGOTIATION.  (Part  2 

Lord  Kenyon.  The  fair  holder  of  a  bill  may  consider  himself  as 
the  indorsee  of  the  payee,  and  strike  out  all  the  other  indorsements. 
This  special  indorsement  being  made  after  the  payee  had  indorsed  it. 
cannot  affect  the  title  of  the  present  plaintiffs. 

Note. — The  plaintiffs  afterwards  proved  a  letter  from  Jackson  to 
Muir  &  Atkinson,  desiring  them  to  discount  this  and  other  bills,  but 
Lord  Kenyon  thought  the  plaintiffs'  case  sufBciently  made  out  with- 
out this  evidence. 


MYERS  &  SON  V.  FRIEND  &  SCOTT. 

(Supreme  Court  of  Appeals  of  Virginia,  1821.     1  Rand.  12.) 

This  was  an  appeal  from  the  superior  court  of  Prince  George  coun- 
ty. In  that  court,  Myers  &  Son  brought  an  action  of  detinue  against 
Friend  &  Scott  for  a  certain  treasury  note  numbered  2,562,  dated 
the  11th  day  of  October.  1814,  and  made  payable  the  11th  day  of 
October,  1815,  being  for  the  sum  of  $1,000,  which  note  was  made  pay- 
able to  James  Barbour  or  order  at  Washington  and  by  him  indorsed 
on  the  back  as  follows :  "Pay  to  George  Rowland  or  his  order.  James 
Barbour."  Under  this  indorsement,  there  was  a  blank  indorsement 
by  the  said  Rowland,  thus:  "George  Rowland."  Myers  &  Son,  being 
regularly  possessed  of  the  said  note  under  the  last  mentioned  indorse- 
ment, made  the  following  indorsement  under  the  name  of  the  said 
Rowland:  "Pay  to  the  cashier  of  the  branch  of  the  State  Bank  of 
North  Carolina  at  Newbern,  or  order.  Moses  Myers  &  Son."  The 
said  note,  thus  indorsed,  was  inclosed  in  a  letter  by  mail  to  the  said 
cashier  at  Newburn ;  but  the  mail  in  which  it  was  conveyed  was 
robbed,  the  letter  and  note  taken  out,  and  the  note,  by  means  unknown, 
came  to  the  possession  of  one  Jackson,  who  transferred  the  same  to 
Chappell.  who  transferred  it  to  Parish,  who  transferred  it  to  James 
H.  Hardaway,  a  merchant  of  Brunswick,  who  received  the  same  in 
the  ordinary  course  of  business  and  for  a  valuable  consideration  with- 
out any  notice  of  the  loss  by  the  plaintiffs,  unless  an  advertisement, 
inserted  in  the  Petersburg  Republican  (a  newspaper  of  Petersburg. 
in  which  town  the  defendants  reside)  and  other  papers,  should  be 
deemed  a  notice.  The  note  afterwards  came  regularly  to  the  hands 
of  the  defendants.  After  the  institution  of  this  suit,  the  defendants 
erased  all  the  indorsements  subsequent  to  the  blank  indorsement 
aforesaid  by  George  Rowland,  so  that  only  the  indorsements  of  Bar- 
bour and  Rowland  remained  on  the  said  note  at  the  trial ;  but  the  in- 
dorsement of  the  plaintiffs  to  the  cashier  aforesaid,  though  erased, 
was  still  legible. 

The  jury  who  tried  the  cause  found  a  special  verdict,  setting  forth 
the  facts  above  stated,  and  submitting  the  law  arising  from  them  to 
the  decision  of  the  court. 


Ch.  1)  TRANSFER.  301 

The  court  pronounced  judgment  in  favor  of  the  defendants,  and  the 
plaintiffs  appealed  to  this  covirt. 

Roane,  J.  The  court  is  of  opinion  that  as  the  treasury  note  in 
question  is,  by  the  act  of  Congress  providing  for  its  emission,  trans- 
ferable by  delivery  and  assignment  only,  it  could  not  have  been  trans- 
ferred originally  without  such  an  assignment.  A  property  in  it  could 
not  have  been  acquired,  as  against  the  true  owner,  by  a  mere  posses- 
sion thereof,  even  for  a  valuable  consideration  actually  paid.  This 
privilege  only  attaches  as  against  the  true  owner,  in  relation  to  bank 
notes,  or  cash  notes  payable  to  bearer,  or  notes  indorsed  in  blank,  and 
which  thereby  become,  in  effect,  payable  to  the  bearer;  and  it  only 
attaches  in  consideration  of  the  cash  quality  which  these  papers  have, 
and  from  their  circulating  in  currency  by  mere  delivery  only,  and 
being  generally,  if  not  universally,  considered  as  money.  This 
ground  of  claim  was  sanctioned  in  favor  of  the  bona  fide  holder  of 
such  papers,  in  the  case  of  Wilson  v.  Rucker,  1  Call,  500.  But  it  was 
also  held  that  it  did  not  extend  to  include  military  certificates,  which 
were  only  considered  as  mere  documents  of  debt,  and  not  as  cash  or 
currency.  It  did  not  include  them,  although  it  was  found  by  the  ver- 
dict in  that  case  that  there  was  a  general  custom  that  they  could  be 
transferred  by  delivery  only,  without  assignment.  No  such  custom 
is  found  in  relation  to  the  note  in  question ;  and,  therefore,  that  case 
is  more  than  an  authority  for  ousting  this  note  from  the  privilege 
now  claimed.  In  this  respect,  this  case  is  much  weaker  than  that  of 
Wilson  and  Rucker ;  and,  considered  in  relation  to  its  original  state, 
the  claim  of  the  appellee  would  be  clearly  repelled. 

The  court  is  also  of  opinion  that  this  character  of  the  paper  was 
not  changed  by  the  indorsement  of  Barbour  to  Rowland,  or  his  or- 
der; and  if  a  greater  negotiability  should  be  held  to  have  been  given 
to  it  by  the  blank  indorsement  of  the  latter,  that  negotiability  might 
be  again  restrained  by  a  special  indorsement,  and  the  note  thereby 
brought  back  to  its  original  state.  The  indorsement  to  the  cashier 
of  the  Bank  at  Newbern  "or  his  order"  is  not  different  from  that  of 
Barbour  to  Rowland  "or  his  order,"  which  preceded  the  blank  in- 
dorsement of  the  latter,  and,  as  is  before  said,  transferred  no  property 
by  a  mere  delivery.  The  case  of  Ancker  v.  Bank  of  England,  Doug. 
637,  shows  that  such  a  restriction  may  be  made;  that  the  negotiability 
of  a  bill  or  note  may  be  stopped  or  lessened ;  and  that,  in  case  of  a 
special  or  restricted  indorsement,  the  receiver  is  bound  to  read  it  at 
his  peril,  and  see  that  he  comes  within  the  authority  comprised  in  it. 
In  the  case  before  us,  the  appellee  should  have  deduced  his  title  to  the 
note  under  that  cashier  to  whom  it  was  confided  and  indorsed.  He 
could  acquire  no  property  in  it  from  another,  from  a  man  who  only 
had  the  possession  of  it.  He  therefore  had  no  right  to  strike  out  the 
last  indorsement,  but  that  right  appertained  to  the  present  appellants , 
and  by  striking  out  the  name  of  the  cashier  at  Newberri,  to  whose 


302  NEGOTIATION.  (Part  2 

hands  it  bad  never  come,  and  who  was  to  be  the  mere  agent  of  the 
appellants,  they  entitled  themselves  to  bring  this  action. 

We  are  therefore  of  opinion  that  the  law  on  this  special  verdict  is 
for  the  appellants,  and  that  the  judgment  of  the  superior  court  is 
erroneous  and  should  be  reversed,  and  entered  for  the  appellants. 


DOLLFUS  et  al.  v.  FROSCH. 
(Supreme  Court  of  Xew  York,  1845.    1  Denio,  367.) 

Assumpsit,  tried  at  the  circuit  court  for  the  city  and  county  of  New 
York  in  October,  1843,  before  Kent,  late  Chief  Judge.  The  suit  was 
commenced  by  declaration  containing  the  money  counts  in  September, 
1842.  The  plaintiffs  offered  in  evidence  four  several  bills  of  exchange, 
all  dated  New  York,  December  23,  1841,  drawn  (per  procuration) 
by  the  defendant,  by  E.  Brue,  addressed  to  Messrs.  Johnston  &  Co. 
at  Paris,  France,  and  payable  to  the  order  of  Messrs.  Dollfus,  Meig 
&  Co.  (the  plaintiffs),  on  the  10th  day  of  July  then  next,  for  different 
sums,  amounting  in  the  whole  to  18,427  francs.  Three  of  the  bills 
appeared  to  have  been  indorsed  to  Messrs.  Raymond  &  Co.,  and  the 
fourth  to  Mr.  B.  Renville ;  and  the  last  appeared  to  have  been  several 
times  afterwards  transferred  by  full  indorsements,  the  last  indorsee 
being  "the  bank  of  France."  On  the  face  of  each  of  the  bills  the 
words  "nonacceptable"  were  written  between  the  lines.  When  the 
bills  were  produced  at  the  trial  a  pen  had  been  drawn  over  the  in- 
dorsements, apparently  with  a  view  to  cancel  the  same,  by  which  they 
were  rendered  nearly  illegible. 

The  defendant's  counsel  objected  to  the  reading  of  the  bills  in  evi- 
dence on  the  ground  that  the  indorsements  showed  the  title  of  the  bills 
to  be  in  the  indorsees,  and  that  a  retransfer  was  necessary  to  enable  the 
plaintiffs  to  maintain  a  suit  upon  them.  The  objection  was  overruled, 
and  the  defendant's  counsel  excepted.^**     Verdict  for  plaintiff. 

Jewett,  j.  *  *  *  The  second  point  made  by  the  counsel  for 
the  defendant  was  that  inasmuch  as  it  appeared  from  the  drafts  that 
they  contained  special  indorsements,  without  any  retransfer  to  the 
plaintiffs,  they  were  bound  to  explain  the  indorsements,  and  show  that 
they  were  made  to  agents  for  the  purpose  of  collection. 

The  case  shows  that  when  the  drafts  were  produced  on  the  trial 
these  indorsements  had  been  struck  out  by  the  drawing  of  a  pen 
across  them.  I  am  of  opinion  that  the  objection  is  not  well  taken, 
and  that,  the  indorsements  having  been  struck  out,  the  law  did  not 
require  the  plaintiffs  to  show  that  such  indorsements  were  made  for 
the  purpose  of  collection  before  they  were  entitled  to  stand  in  court 
prima  facie  as  the  owners  of  the  drafts.     In  Manhattan  Company  v. 

18  The  statement  of  facts  is  abridiied,  and  only  that  portion  of  the  opinion 
relating  to  this  exception  is  printed. 


Ch.  1)  TRANSFER.  303 

Reynolds  et  al.,  2  Hill,  140,  the  indorsement  to  "Kendrick  or  orcies" 
nad  not  been  struck  out.  Prima  facie,  therefore,  Kendrick  might  be 
deemed  the  owner  until  it  was  proved  that  the  object  of  the  indorse- 
ment was  to  enable  him  to  collect  the  paper  on  account  of  the  plaintiffs. 
Chautauqua  County  Bank  v.  Davis  et  al.,  21  Wend.  584,  was  a  suit 
upon  a  bill  of  exchange  drawn  by  Henry  Davis  and  three  other  per- 
sons, on  William  Davis  of  New  York,  payable  to  the  order  of  A..  D. 
Patchin.  The  action  was  joint  against  the  drawer  and  acceptor.  The 
bill  had  been  indorsed,  "Pay  Richard  Yates,  Esq.,  Cashier,  or  order. 
A.  D.  Patchin,  Cashier,"  and  "Pay  H.  Baldwin,  Cashier,  or  order. 
R.  Yates,  Cashier,  per  F.  Leak."  All  the  indorsements,  except  the 
signature  "A.  D.  Patchin,"  were  stricken  out.  The  defendant  moved 
for  a  nonsuit,  on  the  ground  that  title  to  the  bill  was  not  shown  in 
the  plaintiffs.  The  plaintiffs  then  proved  that  the  bill  belonged  to 
them,  that  Patchin  was  their  cashier,  and  that  the  indorsements  to 
Yates  and  Baldwin  were  made  solely  for  collection. 

The  point  raised  in  the  case  now  under  consideration  did  not  arise 
in  either  of  the  cases  referred  to.  In  those  cases  the  point  was  whether 
the  plaintiffs  having  proved  that  the  indorsements  had  been  made  for 
the  purpose  of  collection,  and  that  the  plaintiffs  in  fact  owned  the  notes, 
authorized  them  on  the  trial  to  strike  out  such  indorsements.  In  this 
case  the  indorsements  had  been  made  by  the  plaintiffs,  upon  each  of 
the  drafts,  and  one  had  been  subsequently  indorsed  by  the  indorsees. 
On  the  trial,  when  the  drafts  were  produced  in  evidence,  such  indorse- 
ments had  all  been  stricken  out,  when  or  by  whom  there  was  no  evi- 
dence; nor  was  there,  in  fact,  any  evidence  as  to  the  purpose  for 
which  the  indorsements  had  been  made,  or  by  what  means  the  plain- 
tiffs had  become  possessed  of  the  drafts.  It  appears,  by  a  note  under 
the  first  case  above  cited,  that  in  Hart  et  al.  v.  Windle,  15  La.  265. 
it  was  decided  that  a  special  indorsement  by  the  plaintiff  appearing 
on  the  note',  at  the  trial,  prima  facie  the  right  of  action  was  in  the 
indorser ;  and  unless  the  former  showed  title  by  retransf er,  or  that 
the  indorser  had  no  interest  beyond  a  mere  agency,  the  action  would 
fail,  and  that  possession  of  the  note  by  the  plaintiff  would  not  be  suf- 
ficient to  overcome  the  presumption  arising  from  the  indorsement. 

That  it  was  not  necessary  for  the  plaintiffs,  in  order  to  be  entitled 
to  recover,  to  make  such  proof  in  this  respect,  as  contended  for  by 
the  defendant's  counsel,  I  think  is  settled  by  the  case  of  Dugan  et  al., 
Executors  of  Clark,  v.  United  States,  3  Wheat.  172,  4  L-  Ed.  362. 
That  was  a  suit  upon  a  bill  payable  to  the  order  of  J.  Clark,  which  by 
several  intermediate  indorsements  came  to  T.  T.  Tucker,  Treasurer 
of  the  United  States,  or  order,  who  purchased  it  for  the  government 
with  government  funds.  He  afterwards  indorsed  it  to  Willinks  & 
Van  Staphorst  specially,  by  whom  the  bill  was  presented  for  accept- 
ance and  acceptance  refused.  When  produced,  the  last  indorsement 
was  still  on  the  bill,  and  the  objection  was  taken  that  the  plaintiff 
could  not  recover  without  showing  a  reindorsement ;    but  the  court 


r>04  NEGOTIATION.  (Part  2 

held  that  the  evidence  was  sufficient  to  entitle  the  plaintiff  to  recover 
upon  the  bill.  Mr.  Justice  Livingston,  in  delivering  the  opinion  of 
the  court,  says:  "After  an  examination  of  the  cases  on  this  subject 
(which  cannot  all  of  them  be  reconciled)  the  court  is  of  opinion  that 
if  any  person  who  indorses  a  bill  of  exchange  to  another,  whether 
for  value  or  for  the  purpose  of  collection,  shall  come  to  the  posses- 
sion thereof  again,  he  shall  be  regarded,  unless  the  contrary  appear 
in  evidence,  as  the  bona  fide  holder  and  proprietor  of  such  bill,  and 
shall  be  entitled  to  recover  notwithstanding  there  may  be  on  it  one  or 
more  indorsements  in  full,  subsequent  to  the  one  to  him.  without  pro- 
ducing any  receipt  or  indorsement  back  from  either  of  such  indorsees, 
whose  names  he  may  strike  from  the  bill  or  not,  as  he  may  think 
proper."  *  *  * 
New  trial  denied.^" 


RIDER  v.  TAINTOR. 
(Supreme  .Tudiclal  Court  of  Massachusetts,   Berkshire,   18G2.     4  Allen.  35fi.> 

Contract  upon  the  following  promissory  note:  "$107.  Six  months 
from  date,  for  value  received,  I  promise  to  pay  Stephen  E.  Avery 
or  bearer  one  hundred  and  seven  dollars  with  use.  Lee,  December  1, 
1860.  Albert  J.  Taintor."  The  note  bore  the  following  indorsement: 
"Pay  E.  A.  Bliss,  cashier,  or  order.     Warren  Newton,  Cashier." 

At  the  trial  in  the  superior  court,  it  appeared  that  the  plaintiff  had 
purchased  the  note  in  suit  before  it  became  due  for  a  full  considera- 
tion, but  the  bill  of  exceptions  stated  that  "there  was  no  evidence  that 
E.  A.  Bliss,  to  whom  said  note  had  been  indorsed,  had  transferred  or 
indorsed  said  note  to  the  plaintiff,"  or  "that  the  plaintiff  had  any  title 
in  said  note  from  said  Bliss,  or  that  said  note  was  sued  with  the 
knowledge  or  assent  of  said  Bliss."  Rockwell,  J-.  ruled  that  the  plain- 
tiff was  entitled  to  recover,  and  the  jury  returned  a  verdict  according- 
ly ;    and  the  defendant  alleged  exceptions. 

BiGELOW,  C.  J.  The  contract  of  the  promisor  of  the  note  declared 
on  is  to  pay  the  sum  due  on  the  note  at  its  maturity  to  the  person  who 
shall  then  be  the  bearer.  The  production  of  the  note  by  the  plain- 
tiff is  therefore  evidence  of  his  title,  and,  accompanied  as  it  was  in 
the  present  case  with  proof  that  the  plaintiff  had  become  the  owner 
of  the  note  by  purchase  before  it  became  due,  established  a  conclu- 
sive right  to  recover  against  the  defendant. 

The  indorsement  of  a  third  person,  directing  the  payment  of  the 
note  to  be  made  to  the  order  of  another,  did  not  change  the  contract 

18  Accord:  Middleton  v.  Griflith.  57  N.  J.  Law,  442.  31  Atl.  405,  51  Am.  St. 
Rep.  tJl7  (1894);  Bank  of  Kansas  City  v.  Mills,  24  Kan.  604  (18S0);  Curtis  v. 
Sprague.  51  Cal.  2.39  flSTG).  Contra:  Southern  Bank  t.  Bank,  27  Ga.  252 
(1859).  Compare  New  Haven  Co.  v.  New  Haven  Co.,  76  Conu.  120,  55  Atl.  604 
(1903) ;   Jerman  v.  Edwards,  29  App.  D.  C.  535  (1907). 


Ch.  1)  TRANSFER.  305 

of  the  promisor,  or  enable  him  to  set  up  in  defense  that  the  plaiiitifif's 
title  was  imperfect,  merely  because  he  had  not  obtained  the  signature 
of  the  person  to  whom  some  intermediate  holder  had  ordered  the  note 
to  be  paid.  Wilbour  v.  Turner,  5  Pick.  526;  Wayman  v.  Bend,  1 
Camp.  175  ;  Story  on  Notes,  §  132. 
Exceptions  overruled. 


II.  Restrictive  Indorsement 
EDIE  &  LAIRD  V.  EAST  INDIA  CO. 

(Court  of  King's  Bench,  1761.     1  Wm.  Bl.  295.) 

Action  on  two  bills  of  exchange  of  £2,000.  each,  drawn  by  R.  Clive 
on  the  East  India  Company,  at  365  days  after  date,  payable  to  R. 
Campbell  or  order.  Campbell  indorsed  one  to  Ogleby,  "or  order,"  the 
other  to  Ogleby,  without  adding  the  words  "or  order."  But  at  the 
trial  the  words  "or  order"  appeared  upon  the  indorsement  in  another 
handwriting.  The  East  India  Company  accepted  both  bills.  Ogleby 
then  indorsed  them  to  the  plaintiffs,  and  soon  after  became  insolvent. 
The  company  then  refused  payment.  The  jury  found  a  verdict  for 
the  plaintiffs  on  the  first  bill,  but  for  the  defendants  on  the  second, 
apprehending  that  by  the  usage  of  merchants  it  was  not  assignable, 
without  the  words  "or  order"  in  Campbell  the  payee's  indorsement. 

Morton  moved  for  a  new  trial.^° 

Lord  MansEield,  C.  J.  There  can  be  no  dispute.  Where  the  in- 
dorsement is  in  blank,  there  you  may  write  over  it  whatever  you 
please.  And  it  has  been  permitted  to  be  done  even  in  court.  Lucas 
V.  Marsh,  Barnes,  453 ;  Lambert  v.  Oakes,  1  Ld.  Raym.  443,  Salk. 
127.  But  for  this  there  is  no  occasion.  Everything  shall  be  intended 
upon  such  a  blank  indorsement.  The  point  relied  on  at  the  trial  for 
defendants  was  that,  where  a  special  indorsement  was  made  to  A.  B., 
and  the  indorser  omitted  the  words  "or  order,"  this  was  equivalent  tc 
the  most  restrictive  indorsement.  Many  witnesses  were  examined  by 
defendants  to  prove  this  usage.  But  it  did  not  appear  that  in  any 
one  fact  the  indorsee  of  such  special  indorsement  ever  lost  the  money 
by  such  omission.  The  evidence  was  only  matter  of  opinion.  I  told 
the  jury  that  upon  the  general  law  (laying  usage  out  of  the  case)  the 
indorsement  carried  the  property  to  Ogleby ;  and  that  the  negotiability 
was  a  consequence  of  the  transfer.  But  if  they  found  an  established 
usage  among  merchants  that,  where  the  words  "or  order"  were  omit- 
ted, the  bill  was  only  negotiable  on  the  credit  of  the  indorsee,  they 
should  find  for  the  defendants.  If  otherwise,  or  they  were  doubtful, 
then  either  for  the  plaintiffs,  or  make  a  case  of  it.     They  found  for 

2  0  Arguments  of  counsel  and  the  opinions  of  Foster  and  Wilmot,  J  J.,  are 
omitte^. 

Sm.&  M.B.«&  N.— 20 


^06  NEGOTIATION.  (Part  2 

the  defendants  on  the  bill  in  question ;  for  the  plaintiff  on  the  other, 
concerning  whicli  there  was  no  dispute. 

Now,  upon  the  best  consideration  I  have  been  able  to  give  this 
matter,  I  am  very  clear  of  opinion  that,  at  the  trial,  I  ought  not  to 
have  admitted  the  evidence  of  usage.  But  the  point  of  law  is  here 
settled ;  and,  when  once  solemnly  settled,  no  particular  usage  shall 
be  admitted  to  weigh  against  it.  This  would  send  everything  to  sea 
again.  It  is  settled  by  two  judgments  in  Westminster  Hall,  both  of 
them  agreeable  to  law  and  to  convenience.  The  two  cases  I  go  upon 
are  Moore  and  Manning,  in  Comyns,  and  Acheson  and  Fountain,  in 
Strange.  These  cases  go  upon  a  general  proposition,  in  law,  that  an 
indorsement  to  A.  implies  "or  order,"  and  is  negotiable.  The  main 
foundation  is  to  consider  what  the  bill  was  in  its  origin.  The  present 
bill,  in  its  original  creation,  was  not  a  bare  authority,  but  a  negotiable 
draft.  There  are  no  restrictive  words  in  it.  And  whatever  carries 
the  property  carries  the  power  to  assign  it.  It  were  absurd,  if  the 
merchant's  opinion  should  prevail,  that  this  is  now  converted  into  a 
personal  authority.  If  it  be  such,  and  the  indorsee  dies,  it  could  not 
go  to  his  executors  and  administrators,  in  whom  most  clearly  the 
property  of  the  bill  does  vest.  Upon  this  ground,  that  the  point  is 
settled  both  by  King's  Bench  and  Common  Pleas,  and  well  settled,  I 
think  there  should  be  a  new  trial.  Otherwise,  also,  I  should  be  of  the 
same  opinion.  Certainly,  the  suggestion  of  surprise  is  not  in  all  cases 
a  reason  for  a  new  trial ;  but  in  particular  cases,  such  as  the  present, 
it  may  be. 

The  question  of  costs  is  very  peculiar.  There  is  a  verdict  in  part 
for  the  plaintiff,  which  already  carries  costs  for  him.  But,  for  form's 
sake,  we  must  set  aside  the  whole  verdict,  which  is  usually  done  on 
payment  of  costs.  But  this  will  be  giving  defendants  costs,  which  they 
could  not  otherwise  have,  merely  because  they  have  obtained  an  im- 
proper verdict.  Therefore,  I  think  that,  under  these  particular  cir- 
cumstances, the  verdict  should  be  set  aside  without  costs. 

Dexnison,  J.  I  am  of  the  same  opinion.  If  the  words  to  A.  B. 
only  were  inserted,  I  should  think  it  would  not  be  restrictive ;  at  least 
it  should  be  left  to  a  jury.  In  Rawlinson  and  Stone,  M.  20  Geo.  II, 
Barnes,  164,  Willes,  559,  in  C.  P.,  confirmed  on  error  in  K.  B.  3  Wils. 
1,  2  Stra.  1260,  an  inland  bill  of  exchange  was  drawn  payable  to  A. 
or  order,  who  indorsed  it  to  B.,  without  adding  anything  more.  The 
question  was.  Whether  there  was  such  an  interest  in  the  executor  of 
the  assignee,  as  that  he  might  assign  it.  The  court  held,  upon  inquiry 
from  merchants,  that  it  might  be  indorsed  thus :  "C,  Executor  or  Ad- 
ministrator of  B."  When  a  man  says.  "Pay  to  A.,"  the  law  says,  it 
is  "to  A.  or  order."  He  then  says,  "I  intend  it  should  not  be  so." 
What  signifies  what  you  intend?  The  law  intends  otherwise.  Same 
•opinion  as  to  costs. 

New  trial  was  granted  without  payment  of  costs. ^'^ 

21  See  Tower  v.  Fiuuie,  4  Call  (Va.)  411  (1797). 


Ch.  1)  TRANSFER.  307 

BLAINE,  GOULD  &  SHORT  v.  BOURNE  &  CO. 

(Supreme  Court  of  Khode  Island,  1875.     11  R.  I.  119,  23  Am.  Rep.  429.) 

Assumpsit  on  a  bill  of  exchange,  heard  by  the  court. 
Potter,  J.    The  draft  in  question  was  as  follows : 

"Banking  House  of  Blaine,  Gould  &  Short, 

"North  East,  Pa.,  August  16,  1873. 
"Thirty  days  after  date  pay  to  the  order  of  Frank  Thayer  seven 
hundred  dollars.  Frank  Thayer. 

"To  Messrs.  B.  G.  Chace  &  Co.,  Providence,  R.  I. 

"Due  September  18." 

Thayer  was  the  agent  in  Pennsylvania  to  make  purchases  for 
Chace  &  Co.,  of  Providence,  and  he  drew  on  them  for  payment. 

This  draft  was  indorsed  by  Thayer  in  blank,  and  was  discounted 
by  the  plaintiffs  before  acceptance.  The  plaintiffs  indorsed  it  as  fol- 
lows : 

"Pay  Jay  Cooke  &  Co.,  or  order,  on  account  of  Blaine,  Gould  & 
Short,  North  East,  Pa.  Alfred  A.  Short,  Cash'r." 

By  Jay  Cooke  &  Co.  it  was  sent  to  the  defendants  in  Providence 
for  collection,  indorsed  as  follows : 

"Pay  to  the  order  of  Messrs.  Bourne  &  Co. 

"Jay  Cooke  &  Co." 

The  draft  was  paid  by  Chace  &  Co.  to  the  defendants  about  noon 
of  September  18.  Jay  Cooke  &  Co.  stopped  payment  about  11  a.  m. 
of  that  day,  and  about  1  p.  m.  of  the  same  day  their  failure  was  gen- 
erally known  in  Providence. 

The  draft  was  never  the  property  of  Jay  Cooke  &  Co.,  and  was 
never  credited  by  them  to  the  plaintiff,  but  was  merely  received  by 
them  for  collection. 

Jay  Cooke  &  Co.  were  owing  the  defendants,  and  the  defendants 
credited  it  in  their  account  with  them,  and  claim  that  they  had  a  right 
so  to  do. 

The  rights  of  parties  to  bills  forwarded  for  collection  have  been 
a  fruitful  source  of  litigation.  Questions  of  this  sort  have  generally 
arisen  where  some  party  becomes  insolvent,  and  the  contention  is  who 
shall  bear  the  loss. 

When  is  the  last  holder  of  paper  sent  for  collection  bound  to  look 
beyond  the  last  remitter? 

We  are  referred  by  defendants'  counsel  to  one  case  only.  Bank 
of  Metropolis  v.  New  England  Bank.  17  Pet.  174,  also  in  1  How.  234, 
11  L.  Ed.  115.  In  that  case  a  bank  had  forwarded  for  collection 
paper  with  a  general  or  unrestricted  indorsement  to  another  bank, 
which,  with  its  own  similar  indorsement,  had  sent  it  to  a  third  bank 
for  collection.  The  second  or  intermediate  bank  failed,  and  on  the 
day  of  its  failure  notifiec'  the  third  bank  that  the  paper  was  the  prop- 


808  NEGOTIATION.  (Part  2 

erty  of  the  first  bank.  In  a  suit  by  the  first  against  the  third  bank  te 
recover  the  proceeds,  the  court,  while  admitting  that  if  it  was  a  case 
of  two  banks  acting  as  collecting  agents  for  each  other,  and  where  no 
consideration  was  paid  or  money  advanced,  the  paper  would  remain 
the  property  of  the  sender,  holds  that  in  this  case  the  third  bank, 
which  held  the  paper,  not  having  notice  by  the  indorsement  or  other- 
wise that  the  paper  was  not  the  property  of  the  second  bank,  had  a 
right  to  treat  it  as  theirs,  and  was  not  bound  to  inquire,  and  that  where 
two  banks  dealt  together  in  this  way  for  several  years,  kept  an  ac- 
count current,  and  mutually  credited  the  collections,  there  w^as  a  lien 
upon  the  paper  so  transmitted  for  the  balance  without  regard  to  who 
might  be  the  real  owner.  The  first  bank,  by  indorsing  the  paper  in 
such  a  manner  as  to  make  it  appear  prima  facie  the  property  of  the 
failing  bank,  had  no  particular  equity  in  its  favor. 

But  this  came  again  before  the  United  States  Supreme  Court  in 
Bank  of  Metropolis  v.  New  England  Bank,  6  How.  212,  13  L-  Ed. 
409,  where  the  court  lays  down  its  propositions  more  definitely :  That 
if  the  collecting  bank,  at  the  time  of  the  dealings,  had  notice  that 
the  bill  was  not  the  property  of  the  intermediate  remitting  bank,  but 
had  been  merely  sent  by  them  for  collection  as  agent  for  some  other 
bank,  then  the  collecting  bank  had  no  right  to  retain  for  any  balance 
due  from  the  intermediate  bank  which  had  failed.  Even  if  the  col- 
lecting bank  had  no  notice,  they  could  not  retain  as  against  the  real 
owner,  unless  credit  had  been  given  to  the  intermediate  remitting 
bank,  or  what  was  equivalent,  balances  suffered  to  remain  to  be  met 
by  such  paper ;  but  if  the  latter  was  the  case,  and  they  had  treated  the 
intermediate  bank  as  the  owner,  and  had  no  notice,  then  they  might 
retain. 

And  there  are  further  explanations  of  the  decision  in  Wilson  v. 
Smith.  3  How.  763,  709,  11  L.  Ed.  820.  And  see  it  criticised  and 
restricted  in  McBride  v.  Farmers'  Bank  of  Salem,  25  Barb.  657,  661, 
which  case  was  affirmed  on  appeal  in  McBride  v.  Farmers'  Bank, 
26  N.  Y.  450.  See,  also.  Reeves  et  al.  v  State  Bank,  8  Ohio  St.  465 ; 
Jones  V.  Milliken  &  Son,  41  Pa.  252 ;  Dickerson  v.  Wason,  54  Barb. 
230,  also  in  47  N.  Y.  439,  7  Am.  Rep.  455.  There  are  some  cases 
going  still  further  in  favor  of  the  original  remitting  bank,  and  allow- 
ing parol  evidence  to  show  the  fact.  Lawrence  v.  Stonington  Bank, 
6  Conn.  521,  and  cases  there  cited;  Bank  of  Washington  v.  Trip- 
lett  &  Neale,  1  Pet.  25,  7  L.  Ed.  37;  Commercial  Bank  of  Clyde  v. 
Marine  Bank,  *42  N.  Y.  337,  also  in  1  Abb.  Dec.  405. 

A  general  indorsement  of  bills  is  prima  facie  evidence  of  property 
in  the  indorsee,  and,  even  where  it  is  subject  to  any  equity  or  trust 
between  former  parties,  may  change  the  legal  property  as  to  bona 
fide  holders  for  value.  Collins  v.  Martin,  1  B.  &  P.  648.  But  even 
where  there  is  a  general  indorsement  of  paper  sent  only  for  collection. 
it  will  still  remain  the  property  of  the  sender  as  to  all  persons  having 
notice. 


€h.  1)  TRANSFER.  'ii09 

The  counsel  for  the  plaintiffs  say  that  the  present  case  would  come 
under  the  head  of  what  is  in  some  places  denominated  a  "short  en- 
try." It  would  seem  that  in  London  it  was  a  custom  (Giles  et  al.  v. 
Perkins  et  al.,  9  East,  12,  and  counsel  arguendo  in  Ex  parte  Thomp- 
son, 1  Mont.  &  Mac,  102,  110)  for  bankers  to  receive  bills  for  collec- 
tion and  to  enter  them  immediately  in  their  customers'  accounts,  but 
never  to  carry  out  the  proceeds  in  the  column  to  their  credit  until  ac- 
tually collected ;  and  this  was  called  a  "short  entry,"  or  "entering 
short."  And  such  bills  always  continued  the  property  of  the  customer, 
unless  the  contrary  was  to  be  inferred  from  some  course  of  dealing. 
Whereas  country  bankers  in  England  generally  credited  to  their  cus- 
tomers at  once  all  bills  considered  good,  and  generally  allowed  drafts 
upon  the  proceeds.  And  even  in  the  latter  cases  Lord  EHenborough 
held  such  bills  did  not  pass  to  the  assignees  in  bankruptcy,  if  there 
was  a  balance  in  favor  of  the  customer  over  and  above  the  bills. 
Giles  et  al.  v.  Perkins  et  al.,  9  East,  12 ;  Ex  parte  Harford,  2  Rose, 
163.  But  Lord  Eldon  held  that  where  they  were  with  the  knowledge 
of  the  customer  entered  as  cash,  and  the  customer  was  entitled  to  draw 
against  them,  he  could  not  claim  the  specific  bills.  Ex  parte  Sar- 
geant,  1  Rose,  153;  Ex  parte  Thompson,  1  Mont.  &  Mac.  102  (A. 
D.  1828).  But  even  where  the  custom  was  to  enter  short,  and  it  was 
not  done,  this  would  not  change  the  property,  unless  some  act  of  the 
customer  concurred.  Ex  parte  Sargeant,  1  Rose,  153 ;  Ex  parte 
Pease,  1  Rose,  232 ;  and  the  Vice  Chancellor's  opinion  in  Ex  parte 
Thompson,  1  Mont.  &  Mac.  102,  112. 

But  besides  the  ground  that  this  was  equivalent  to  a  short  entry. 
and  that  the  cases  decided  upon  that  point  apply  to  it,  it  is  contended 
that  in  this  case  the  effect  of  the  restriction  in  the  indorsement  was  to 
give  to  all  subsequent  holders  express  notice  of  the  trust,  and  we 
think  this  view  of  the  plaintiff's  counsel  is  correct. 

The  indorsee  is  rather  an  agent  of  the  indorser  with  power  of  sub- 
stitution, and  the  bill  is  still  in  the  possession  of  the  indorser  by  his 
agent.  Ex  parte  Sargeant,  1  Rose,  153.  The  very  mode  of  indorse- 
ment in  this  case  shows  that  it  is  not  a  case  of  ordinary  indorsement, 
and  that  no  consideration  has  been  paid  for  it.  Eadie  &  Laird  v.  E. 
India  Co.,  1  W.  Bla.  295,  also  in  2  Burr.  1216.  The  bill  must  be  taken 
by  the  holder  subject  to  the  trust ;  and,  says  Judge  Story  (on  Agency, 
§  211),  if  he  voluntarily  consents  to  or  aids  in  any  other  appropria- 
tion he  is  responsible;  and  says  Judge  Byles  (on  Bills,  *157),  he  holds 
the  bill  or  money  as  trustee  for  the  restraining  party,  and  is  liable  to 
the  party  making  the  restriction.  The  words  are  notice  that  the  re- 
stricted indorsee  has  no  property  in  the  bill,  that  he  is  a  mere  trustee, 
and  that  he  can  appoint  no  subagent  except  for  the  purpose  of  hold- 
ing the  bill  or  money  on  the  same  trust,  and  if  the  holder  pays  it  to 
the  intermediate  agent  he  becomes  responsible  for  its  misapplication. 

In  the  case  of  Sigourney  v.  Lloyd  et  al.,  8  B.  &  C.  622,  also  in  3 


310  NEGOTIATION.  (Part  2 

M.  &  R.  58,  and  in  Dan.  &  U.  132,  2  Chitty,  Jr.,  on  Bills,  1412,  1439, 
it  was  contended  that  an  indorsement,  "Pay  to  B.  for  my  use,"  was  a 
mere  direction  to  B.  as  to  the  application  of  the  money;  but  Lord 
Tenterden  said  that  if  it  meant  no  more  the  words  were  useless,  as 
he  would  be  so  liable  without  those  words. 

In  that  case  the  payee  indorsed  generally  to  A.  A.,  the  plaintiff, 
indorsed,  "Pay  B.  or  order  for  my  use."  The  defendants  discounted 
it  and  applied  it  to  the  credit  of  B.  B.  failed,  and  it  was  held  that  the 
indorsement  was  sufficient  notice  to  prevent  its  transfer  for  the  bene- 
fit of  any  other  person ;  that  all  subsequent  indorsees  were  trustees 
for  the  plaintiff;  and  that  whoever  advanced  any  money  on  it  did  it 
at  his  peril.  And  on  appeal  this  judgment  was  confirmed  by  the 
Exchequer  Chamber,  the  court  holding  that  the  money  to  whomso- 
ever paid  was  in  trust  for  the  indorser.  Lloyd  et  al.  v.  Sigourney,  5 
Bing.  525,  also  in  3  M.  &  P.  229,  and  3  You.  &  Jer.  220,  and  Dan.  & 
LI.  213. 

This  custom  of  restricted  indorsing  is  not  of  late  origin,  but  is 
spoken  of  as  usual  in  Snee  et  al.  v.  Prescott  et  al.,  1  Atk.  245,  249 
(A.  D.  1743);  the  object  being,  as  there  stated,  to  prevent  the  in- 
dorsement being  filled  up  in  such  a  manner  as  to  pass  the  interest  in 
the  bill. 

If  the  defendants  in  the  present  suit  had  paid  the  cash  to  Jay  Cooke 
before  hearing  of  the  failure,  it  would  have  presented  a  different 
question.  But  they  had  no  right  to  apply  the  money  of  the  plaintiffs 
to  the  payment  of  a  debt  due  to  them  (the  defendants)  from  Jay 
Cooke.  This  is  not  such  a  payment  as  can  protect  them  against  a 
suit  by  the  plaintiffs,  the  real  owners.  Truettcl  v.  Barandon,  2  Chitty. 
Jr.,  on  Bills,  1002.  also  in  8  Taunt.  100,  and  1  Moore,  543;  Thomp- 
son V.  Giles,  2  Chitty,  Jr.,  on  Bills,  1190,  also  in  2  B.  &  C.  422,  and 
3  D.  &  R.  733  ;  Lloyd's  note  to  Paley,  quoted  in  full  in  Story  on  Agency, 
§  228,  note;  1  Bell's  Comm.  *270.  which  work  is  praised  by  Mr. 
Warren  as  being  a  "mine  of  commercial  law." 

Judgment  for  plaintiffs. 


HOOK  V.  PRATT  et  al. 
(Court  of  Appeals  of  New  York,  1879.    78  N.  Y.  371,  34  Am.  Rep.  539.) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme  Court, 
in  the  Fourth  Judicial  Department,  affirming  a  judgment  in  favor  of 
plaintiff,  entered  upon  a  decision  of  the  court  on  trial  without  a  jury 
(reported  below,  14  Hun,  396). 

This  action  was  brought  by  plaintiff,  as  trustee  of  Charles  H.  Hook, 
against  defendants,  as  executors  of  the  will  of  James  P.  Haskin.  de- 
ceased, upon  a  draft  signed  and  indorsed  by  said  testator,  of  which 
the  following  is  a  copy: 


•Ch.  1)  TIIANSFER,  311 

"$5,000.  Syracuse,  N.  Y.,  Septembei  13,  1872. 

"Orrin  Welch,  Treasurer  Morris  Run  Coal  Co. .  Pay  to  the  or- 
der of  myself,  one  year  after  date,  five  thousand  dollars,  for  value  re- 
ceived. [Signed]     J.  P.  Haskin 

Indorsed:  "Pay  to  the  order  of  Mrs.  Mary  Hook,  35  King,  for 
the  benefit  of  her  son  Charlie.  [Signed]     Jj  P.  Haskin." 

Defendants  waived  demand  upon  the  drawee  and  notice  of  protest. 
Upon  the  trial  defendants'  counsel  moved  for  a  nonsuit,  in  substance, 
upon  the  ground  that  the  indorsement  was  restrictive  and  did  not 
import  a  consideration,  but  imported  a  gift.  The  motion  was  de- 
nied and  said  counsel  excepted. 

It  was  then  admitted  by  plaintiff's  counsel  that  Charles  H.  Hook,  the 
cestui  que  trust,  and  the  "Charlie"  referred  to  in  the  indorsement, 
was  a  boy  some  seven  or  eight  years  old  at  the  date  of  the  draft ;  that 
he  was  claimed  by  plaintiff  to  be  the  illegitimate  son  of  defendants' 
testator,  which  claim  was  admitted  by  said  Haskin ;  that  plaintiff  was 
at  the  date  of  said  draft  a  married  woman,  living  in  the  city  of  Roch- 
ester with  her  husband,  who  is  made  a  party  defendant,  and  was 
married  not  long  before  the  draft  was  drawn.  The  boy  lived  with  hei 
and  was  taken  care  of  by  her.  A  motion  was  again  made  for  a  non- 
suit, which  was  denied,  and  defendants'  counsel  excepted. -- 

Rapallo,  J.  The  point  mainly  relied  upon  by  the  appellant  is  that 
the  draft  and  indorsement  upon  which  this  action  is  brought  do  not 
on  their  face  import  a  consideration.  The  draft  was  drawn  by  the 
defendants'  testator  upon  the  treasurer  of  an  incorporated  company, 
payable  to  the  drawer's  own  order,  and  purported  to  be  for  value 
received.  It  was  indorsed  by  the  drawer  by  a  special  indorsement, 
"Pay  to  the  order  of  Mrs.  Mary  Hook,  for  the  benefit  of  her  son 
Charlie."  The  appellant  claims  that  this  is  one  of  those  restrictive 
indorsements  which  do  not  purport  to  be  made  for  a  consideration, 
and  do  not  entitle  the  indorsee  to  maintain  an  action  on  the  bill,  with- 
out proving  a  consideration. 

As  a  general  rule  an  indorsement  of  a  negotiable  bill  which  purports 
to  pass  the  title  to  the  bill  to  the  indorsee  imports  a  consideration,  and 
the  burden  of  proving  want  of  consideration  rests  upon  the  party  al- 
leging it.  The  restrictive  indorsements  which  are  held  to  negative 
the  presumption  of  a  consideration  are  such  as  indicate  that  they  are 
not  intended  to  pass  the  title,  but  merely  to  enable  the  indorsee  to 
collect  for  the  benefit  of  the  indorser,  such  as  indorsements  "for  col- 
lection," or  others  showing  that  the  indorser  is  entitled  to  the  pro- 
ceeds. These  create  merely  an  agency,  and  negative  the  presumption 
of  the  transfer  of  the  bill  to  the  indorsee  for  a  valuable  consideration. 

But  where  the  indorsement  purports  to  pass  the  title  to   the  bill 

2  2  Argumeuts  of  counsel  and  citations  of  authorities  at  end  of  opinion  are 
omitted. 


312  NEGOTIATION.  (Part  2 

ihorem  from  the  indorser,  and  divest  him  of  all  beneficial  interest,  a 
consideration  for  such  transfer  is  presumed.  All  the  cases  cited  by 
the  counsel  for  the  appellant  rest  upon  these  principles.  The  citation 
from  3  Kent,  Com.  92.  states  the  principle  to  be  that  when  the  in- 
dorsement is  a  mere  authority  to  receive  the  money  for  the  use  or 
according  to  the  directions  of  the  indorser,  it  is  evidence  that  the  in- 
dorsee did  not  give  a  valuable  consideration  for  it  and  is  not  the  abso- 
lute owner.  This  accords  with  the  statement  of  the  principle  by  Wil- 
niot,  J.,  in  Edie  v.  E.  India  Co.,  2  Burr.  1227.  So  an  indorsement,  "Pay 
to  S.  \V.  or  order  for  our  use"  (Sigourney  v.  Lloyd,  8  B.  &  C.  622, 
3  Y.  &  J.  220),  was  held  to  create  a  mere  agency,  and  the  addition  even 
of  the  words  "value  received"  to  such  an  indorsement  has  been  held 
not  to  vary  its  effect  (Wilson  v.  Holmes,  5  Mass.  543,  4  Am.  Dec. 
75).  In  Edie  v.  East  India  Co.,  2  Burr.  1221,  the  examples  of  restric- 
tive indorsements  put  by  way  of  illustration  are,  "Pay  to  my  steward 
and  no  other  person,"  or  "Pay  to  my  servant  for  my  use."  These 
show  that  there  was  no  intention  to  pass  the  title  to  the  bill ;  and  the 
same  effect  has  been  given  to  an  indorsement,  "Pay  to  P.  only." 
It  was  held  that  these  words  indicated  that  the  indorsee  was  agent 
only,  and  paid  no  consideration  for  the  bill,  as  a  purchaser  would  not 
have  accepted  such  an  indorsement.  Power  v.  Finnic,  4  Call  (Va.) 
411.  But  an  indorsement  to  one  person  for  the  use  or  benefit  of  an- 
other affords  no  such  indication.  The  indorser  parts  with  his  whole 
title  to  the  bill,  and  the  presumption  is  that  he  does  so  for  a  consid- 
eration. The  only  effect  of  such  an  indorsement,  by  way  of  restric- 
tion, is  to  give  notice  of  the  rights  of  the  beneficiary  named  in  the 
indorsement,  and  protect  him  against  a  misappropriation.  When  a 
bill  is  indorsed.  "Pay  to  A.  or  order  for  the  use  of  B.,"  A.  cannot 
pass  the  bill  off  for  his  own  debt,  but  he  can  by  indorsing  it  transfer 
the  title,  and  will  hold  the  proceeds  for  the  benefit  of  B.,  and  be  ac- 
countable to  him  for  them.  Evans  v.  Cramlington,  Carth.  5,  affirmed 
in  the  Exchequer  Chamber,  2  Vent.  309.  In  Treuttel  v.  Barandon. 
8  Taunt.  100,  cited  by  the  appellant,  drafts  payable  to  the  drawer's 
own  order  were  indorsed  by  him  to  De  Roure  &  Co.  or  order  "for  the 
account  of  Treuttel  &  Wurz."  It  appeared  that  De  Roure  &  Co. 
were  the  agents  of  Treuttel  &  Wurz,  and  the  latter  were  held  entitled 
to  maintain  trover  for  the  drafts  against  a  party  to  whom  De  Roure 
&  Co.  had  pledged  them  for  their  own  debt.  There  is  nothing  in 
this  case  to  sustain  the  proposition  that  a  draft  thus  drawn  and  in- 
dorsed does  not  import  a  consideration,  or  that  the  indorsee  could  not 
maintain  an  action  upon  it  against  the  drawer  and  indorser  without 
proving  a  consideration.  The  effect  of  the  special  indorsement  was 
simply  to  give  notice  of  the  interest  of  Treuttel  &  Wurz,  and  prevent 
De  Roure  &  Co.  from  appropriating  the  drafts  to  their  own  use. 
Blaine  v.  Bourne,  11  R.  I.  119,  23  Am.  Dec.  429,  is  to  the  same  point. 
In  the  present  case  the  indorsement  did  not  purport  to  restrain 
the  indorsee  from  negotiating  the  draft,  for  it  was  "Pay  to  the  order 


Ch.  1)  TRANSFER.  313 

of  Mrs.  Mary  Hook,"  for  the  benefit  of  her  son  Charlie.  She  was 
constituted  trustee  of  her  son  and  held  the  legal  title.  3  Kent,  Com. 
S9.  The  indorsement  gave  notice  of  the  trust,  so  that  if  she  had 
passed  it  off  for  her  own  debt,  or  in  any  other  manner  indicating  that 
the  transfer  was  in  violation  of  the  trust,  her  transferee  would  take 
it  subject  to  the  trust,  but  there  was  nothing  reserved  to  the  drawer 
and  indorser.  He  retained  no  interest  in  it.  The  presumption  is 
that  the  draft  was  drawn  and  indorsed  by  him  for  a  consideration  re- 
ceived either  from  the  indorsee  or  the  beneficiary.  If  the  youth  of 
the  beneficiary  should  be  deemed  to  afford  a  presumption  that  no 
consideration  was  paid  by  him,  the  presumption  would  be  that  it 
emanated  from  his  mother. 

The  facts  admitted  on  the  trial  do  not  establish  that  the  considera- 
tion was  illegal.  They  show  that  the  boy  lived  with  his  mother  and 
was  taken  care  of  by  her.  There  is  nothing  illegal  in  an  undertaking 
iDy  a  putative  father  to  support  his  illegitimate  child,  or  to  pay  a  sum 
of  money  in  consideration  of  such  support  being  furnished  by  another, 
though  it  be  the  mother  of  the  child.  If  such  was  the  consideration 
of  this  obligation,  and  it  was  furnished  by  Mrs.  Hook,  she  was  at  lib- 
erty to  take  it,  payable  to  herself  in  her  own  right,  or  for  the  benefit 
of  her  child.     *     *     * 

Judgment  affirmed. 


WILLIAMS,  DEACON  &  CO.  v.  SHADBOLT. 

(Queen's  Bench  Division,  1885.    1  Cab.  &  El.  529.) 

This  was  an  action  on  bills  of  exchange  by  indorsees  against  the 
acceptors. 

The  Dana  Land  &  Lumber  Company  carried  on  business  in  Mo- 
bile, Alabama,  United  States,  and  consigned  timber  from  time  to 
time  to  the  defendants,  timber  merchants  and  agents  in  London. 
The  course  of  business  was  for  the  Dana  Company  to  draw  on  the 
defendants  from  time  to  time,  not  against  particular  shipments,  but 
for  amounts  regulated  by  the  quantity  of  timber  in  course  of  ship- 
ment. These  drafts  the  Dana  Company  used  to  discount  with  the 
Bank  of  Mobile,  at  Mobile;  and  the  Bank  of  Mobile  forwarded  them 
to  the  plaintiffs  in  London  indorsed  restrictively  in  the  manner  the 
bill  hereinafter  set  out  was  indorsed.  The  plaintiffs  on  receiving 
the  draft  would  take  it  to  the  defendants  for  acceptance,  and  the 
plaintiffs  thereupon  credited  the  Mobile  Bank  with  the  amount  of 
the  draft,  and  allowed  them  to  draw  on  them  at  once  against  the 
amount  so  credited.  The  acceptances  would  then,  in  the  ordinary 
course,  be  paid  by  the  defendants  to  the  plaintiffs  at  maturity.  The 
defendants  were  not  aware  that  the  plaintiffs  used  to  allow  the  Bank 
of  Mobile  to  draw  against  the  amount  of  the  acceptances  before  ma- 
turitv. 


314  NEGOTIATION.  (Part  2 

In  pursuance  of  the  above  course  of  business  the  Dana  Company 
drew  bills  upon  the  defendants  in  a  form  of  which  the  following  is  a 
sample : 

"Sixty  days  after  si.s^ht  of  this  first  of  exchange  (second  and 
third  unpaid),  pay  to  the  order  of  ourselves  £1,G00.  sterling  value 
received,  and  charge  the  same  to  account  of  as  advised. 

"Dana  Land  and  Lumber  Company. 
"To  Messrs.  Geo.  Shadbolt  &  Son,  London." 

This  draft  with  others  was  discounted  by  the  Dana  Company  with 
the  Bank  of  Mobile,  and  indorsed  to  the  bank.  The  bank  indorsed 
the  drafts  to  the  plaintiffs  as  follows : 

"Pay  to  the  order  of  Messrs.  Williams.  Deacon  &  Co.,  for  collection 
per  account  of  the  Bank  of  Mobile,  Mobile,  Alabama. 

"A.  F.  Manley,  Cashier." 

The  plaintiffs  presented  the  drafts  to  the  defendants  for  acceptance, 
and  the  defendants  accepted  the  same.  The  plaintiffs  thereupon  al- 
lowed the  Bank  of  Mobile  to  draw  on  them  for  the  amount  of  the  said 
bills. 

Before  the  bills  matured,  the  Dana  Company  paid  to  the  Bank  of 
Mobile  the  amount  of  the  bills,  and  wrote  to  the  defendants  releasing 
them  from  their  liability  as  acceptors. 

The  defendants  never  received  any  assignments  of  timber  on  ac- 
count of  these  bills. 

Subsequently  both  the  Dana  Company  and  the  Bank  of  Mobile 
failed. 

Ca\e,  J.  The  question  is  what  is  the  effect  of  a  bill  being  restric- 
tively  indorsed?  Section  35  of  the  Bills  of  Exchange  Act,  1882,  de- 
fines a  restrictive  indorsement  as  one  which  prohibits  the  further  ne- 
gotiation of  the  bill,  or  which  expresses  that  it  is  a  mere  authority  to 
deal  with  the  bill  as  thereby  directed,  and  not  a  transfer  of  the  own- 
ership thereof.  We  have  therefore  in  this  case  an  indorsement  which 
is  not  a  transfer  of  the  ownership  of  the  bill,  but  merely  operates  as 
an  authority  to  the  indorsee  to  receive  the  money  on  behalf  of  the 
indorser.  This  kind  of  indorsement  was  well  known  long  before  the 
act  of  1882.  In  Lloyd  v.  Sigourney,  5  Bingham,  525,  the  bankers  of 
the  person  to  whom  the  bill  was  restrictively  indorsed  discounted  the 
bill  for  their  customer,  and  allowed  him  to  apply  the  proceeds  for 
his  own  use ;  and  it  was  held  that  the  bankers  were  liable  for  that 
amount  to  the  indorser.  Best.  C.  J.,  there  says :  "Whoever  reads  the 
indorsement  on  this  bill  of  exchange  must  perceive  that  its  operation 
is  limited,  and  that  the  object  of  the  indorser  was  to  prevent  the  money 
received  in  respect  of  the  bill  from  being  applied  to  the  use  of  any 
other  person  than  himself.  To  whomsoever  the  money  might  be 
paid,  it  would  be  paid  in  trust  for  the  indorser ;  and  into  whose  hands 
soever  the  bill  traveled,  it  carried  that  trust  on  the  face  of  it.  And 
we  see  no  inconvenience  to  commercial  interests  from  such  a  limita— 


oh.  1)  TRANSFER.  315 

tion  of  the  effect  of  the  indorsement  so  expressed.  The  only  result 
will  be  to  make  parties  open  their  eyes,  and  read  before  they  dis- 
count." Those  observations  are  eminently  applicable  in  this  case. 
The  indorsee  had  authority  to  collect  the  amount  of  the  bill ;  but  the 
ownership  of  the  bill  and  of  the  debt  remained  in  the  Bank  of  Mo- 
bile, and  the  payment  to  that  bank  was  a  perfectly  good  payment. 
That  it  is  a  good  payment  is  perfectly  clear,  unless  the  course  of  busi- 
ness between  the  plaintiffs  and  the  Bank  of  Mobile  makes  a  difference ; 
for  the  appointment  of  an  agent  to  receive  a  debt  does  not  prevent 
the  payment  of  the  debt  to  the  real  creditor.  Can,  then,  the  arrange- 
ment between  the  plaintiffs  and  the  Bank  of  Mobile,  that  the  latter 
shall  draw  on  the  former  for  the  amount  of  the  acceptances,  affect 
the  rights  of  the  parties  to  the  bill,  and  alter  the  quality  of  the  indorse- 
ment? Can  it  be  that,  if  the  Bank  of  Mobile  does  not  draw  against 
an  acceptance,  the  defendants  can  pay  the  amount  of  the  acceptance 
to  the  Bank  of  Mobile;  but  if  the  Bank  of  Mobile  does  draw,  then 
the  defendants  can  only  legally  pay  the  plaintiffs,  and  this,  though 
the  defendants  know  nothing  about  the  arrangement  between  the 
plaintiffs  and  the  Bank  of  Mobile?  Again,  if  the  property  in  the 
bill  passes  to  the  plaintiffs,  when  does  it  pass?  Clearly  not  at  the 
time  of  the  indorsement.  Does  it  pass,  then,  at  the  time  the  advance 
is  made  by  the  plaintiff's?  This  would  be  subsequent  to  the  indorse- 
ment and  delivery  of  the  bill ;  and  so  the  property  in  the  bill  would 
pass  without  indorsement  or  delivery.  In  my  opinion  the  plaintiffs 
never  got  any  property  in  the  bill.  They  got  merely  an  expectation 
that  the  money  would  be  paid  by  the  defendants,  but  were  never  own- 
ers of  the  bill.  The  plaintiffs'  right  of  action  is  against  the  Bank  of 
Mobile,  and  not  against  the  defendants.  As  against  the  defendants, 
they  cannot  assert  rights  in  respect  of  the  bill  which  their  indorsers. 
the  Bank  of  Mobile,  cannot  assert ;  and  it  is  clear  that  the  Bank  of 
Mobile  have  no  cause  of  action  against  the  defendants. 

1  do  not  think  this  decision  can  produce  any  mischief  or  inconven- 
ience. As  Chief  Justice  Best  says :  "Parties  must  open  their  eyes 
and  read  before  they  discount." 

If  the  plaintiffs  desire  to  secure  themselves  in  the  course  of  busi- 
ness they  have  adopted,  they  should  insist  upon  a  general  indorse- 
ment, and  not  take  a  restrictive  one.  A  restrictive  indorsement  has 
been  long  used  for  the  very  purpose  of  preventing  the  property  in 
the  bill  from  passing,  and  its  effect  as  so  doing  has  now  been  sanctioned 
by  the  Legislature;  and  it  would  be  very  dangerous  to  hold  that,  by 
reason  of  a  secret  arrangement  between  indorser  and  indorsee,  a 
title  can  be  conferred,  and  the  property  pass,  and  so  the  rights  of  the 
acceptor  be  affected,  without  his  knowledge. 

Judgment  for  the  defendants.^' 

2  3  Accord:  Smith  v.  Bayer,  46  Or.  143,  79  Pac.  497,  114  Am.  St.  Rep.  858 
(1905). 


316  NEGOTIATION.  (Part  2 


III.  Qualified  Indorsement. 
EPLER  V.  FUNK. 

(Supreme  Court  of  Pennsylvania,  1848.    8  Pa.  468.) 

Rogers,  J.-*  This  is  an  action  by  an  indorser  against  the  maker  to 
recover  $1U0,  payable  to  the  order  of  Henry  Hamer  12  months  after 
date.  It  is  indorsed  to  J.  M.  Funk,  without  recourse.  The  defense 
is,  that  the  consideration  of  the  note  was  for  the  right  of  vending 
Hoover's  patent  cornstalk  cutting  machine,  in  Dauphin  county ;  that 
the  machine  was  entirely  worthless,  and  that  defendant  was  induced 
to  enter  into  the  contract  by  combination,  contrivance,  and  fraud. 
The  plaintiff,  after  proving  the  handwriting  of  the  maker  and  indorser, 
offered  the  note  in  evidence,  which  was  objected  to,  because,  the  de- 
fendant says,  it  is  not  admissible  under  the  statement  filed,  and  in  a 
case  like  this  it  is  necessary  to  file  a  narr.,  setting  out  specially  the 
cause  of  action,  the  transfer  of  it,  and  all  the  special  circumstances. 
But  we  are  of  opinion  there  is  nothing  in  the  objections.  The  case 
was  clearly  embraced  by  the  statement,  and  the  cause  of  action  is  set 
out  with  convenient  certainty.  There  is  nothing  in  the  second  bill. 
An  indorser,  it  is  true,  is  not  a  competent  witness  for  the  indorsee ; 
but  where  he  is  released  by  the  indorsee,  as  here,  he  is  competent,  not 
to  impeach,  but  to  enforce  payment  of,  the  note.  This  has  been  re- 
peatedly ruled.  Vide  Barnes  v.  Ball  et  al.,  1  Mass.  73 ;  Rice  v. 
Slearns,  3  Mass.  225,  3  Am.  Dec.  129. 

The  third  bill  presents  more  difficulty.  The  defendant  contends  that, 
under  the  circumstances  exhibited  on  the  face  of  the  note,  on  the 
special  indorsement  and  the  facts  given  in  evidence,  he  is  entitled  to 
make  the  same  defense  against  the  indorser  as  between  the  original 
parties  to  the  note.  The  note  is  indorsed  by  the  payee  to  the  order  of 
J.  M.  Funk,  the  plaintiff,  "without  recourse."  This,  it  is  said,  is  not 
in  the  usual  course  of  business;  that  it  was  sufficient  to  put  the  in- 
dorser on  his  guard,  and  to  lead  him  to  suspect  there  was  something 
wrong  in  the  transaction,  as  between  the  maker  and  payee.  But  al- 
though most  usually  notes  go  forth  indorsed  in  blank,  yet  I  cannot 
agree  that  such  an  indorsement  affects  the  negotiable  quality  of  the 
paper.  It  shows  only  an  unwillingness  to  be  answerable  for  the  sol- 
vency of  the  maker — a  prudent  precaution,  particularly  where,  as  here, 
the  note  has  a  long  time  to  run  before  it  matures.  And  this  is  the  view 
taken  of  this  fact  in  Rice  v.  Stearns,  3  Mass.  225,  3  Am.  Dec.  129. 
In  that  case  a  promissory  note  was  indorsed  specially  thus:  "For 
value  received,  I  order  the  contents  of  the  note  to  be  paid  to  A.  B.,  at 
his  own  risk."  Two  points  were  ruled:  (1)  That  in  an  action  on  such 
a  note,  by  the  indorser  against  the  maker,  the  promisee  is  a  witness 
to  prove  the  execution  of  the  note.     (2)  Which,  I  take  it,  is  the  case 

-*  Part  of  the  opinion  is  omitted. 


Ch.  1)  TRANSFER.  317 

here,  such  special  indorsement  transfers  the  property  of  the  note,  with 
its  negotiable  quality,  to  the  indorser. 

There  seems  to  be  no  question  that  there  was  a  consideration  pass- 
ing- between  the  present  holder  and  the  payee.    *    *    * 

Judgment  affirmed. 


IV.  Conditional  Indorsement. 
ROBERTSON  v.  KENSINGTON  et  al. 

(Court  of  Common  Pleas,  ISll.    4  Taunt.  30.) 

This  was  an  action  of  assumpsit,  and  the  first  count  in  the  declara- 
tion was  on  a  bill  of  exchange,  of  which  the  following  is  a  copy,  viz. 

"Edinburgh,  18th  Nov.,  1808. 

"il80.  sterling.  At  45  days  after  date,  pay  this  first  of  exchange, 
to  the  order  of  Mr.  Robert  Robertson,  £180.  sterling,  value  received, 
which  place  to  account,  as  advised,  W.  Forbes,  J.  Hunter  &  Co. 

"To  Messrs.  Kensington,  Styan  &  Adams,  Bankers,  London. 

"Accepted,  Kensington  &  Co.     Entered,  P.  J.  Raeburn. 

Indorsed:  "Edinburgh,  19  Nov.  1808.  Pay  the  within  sum  to 
Messrs.  Clerk  &  Ross,  or  order,  upon  my  name  appearing  in  the  Ga- 
zette as  ensign  in  any  regiment  of  the  line,  between  the  1st  and  61th, 
if  within  two  months  from  this  date.  R.  Robertson."  "Clerk  & 
Ross."  "J.  Tindale."  "Thomas  Eyre  &  Sons."  "Thomas  Nelson." 
"Budding  &  Nelson."     "Bank  of  England." 

The  plaintiff  declared  as  payee,  against  the  defendants  as  acceptors. 
The  declaration  also  contained  counts  for  money  had  and  received  by 
the  defendants  to  the  use  of  the  plaintiflf,  for  money  paid  by  the  plain- 
tiff to  the  use  of  the  defendants,  on  an  account  stated,  and  for  interest. 

The  plea  was  the  general  issue.  At  the  trial  of  this  cause  before 
Mansfield,  C.  J.,  and  a  special  jury,  at  the  sittings  after  Hilary  term, 
1811,  at  Guildhall,  a  verdict  was  entered  by  consent  for  the  plaintiff 
for  the  sum  of  £180.,  subject  to  the  opinion  of  the  court  on  the  fol- 
lowing case : 

The  bill,  which  was  for  £180.,  was  drawn  at  Edinburgh  on  the  18th 
November,  1808,  by  Sir  Wm.  Forbes,  J.  Hunter  &  Co.,  upon  the  de- 
fendants, who  are  bankers  in  London,  payable  to  the  order  of  the 
plaintiff,  at  45  days  date,  for  value  received.  The  indorsements  by 
the  plaintiff,  and  by  Clerk  &  Ross,  as  above  set  forth,  were  made  be- 
fore the  bill  was  presented  to  the  defendants  for  acceptance.  The  bill 
was  delivered  to  Clerk  &  Ross,  army  agents  in  Edinburgh,  being  per- 
sons then  employed  by  the  plaintiff  to  procure  for  him  by  purchase  the 
commission  of  ensign  above  referred  to.  The  bill,  with  those  indorse- 
ments upon  it,  was  afterwards  presented  to  the  defendants  for  ac- 
ceptance, and  accepted  by  them  in  the  usual  course  of  their  business 
as  bankers.     It  was  afterwards  indorsed  and  negotiated  by  the  other 


318  NEGOTIATION.  (Part  2 

persons  whose  names  appear  as  inclorsers,  and  finally  with  the  Bank  of 
En.^dantl,  who  discounted  it.  At  the  expiration  of  the  45  days  speciiied 
in  the  bill  as  originally  drawn,  and  the  days  of  grace,  the  defendants 
paid  the  contents  to  the  Bank  of  England,  who  presented  it  to  them 
for  payment.  The  plaintiff,  at  the  time  of  drawing  the  bill,  paid  the 
full  value  for  the  same  to  Sir  Wm.  Forbes,  J.  Hunter  &  Co.,  the  draw- 
ers, but  did  not  ask,  or  obtain,  their  consent,  or  that  of  the  defendants, 
the  acceptors,  to  make  any  alteration  in  the  tenor  of  the  bill  by  indorse- 
ment either  as  to  the  condition  of  the  payment,  or  the  extension  of 
time.  The  plaintifif's  name  had  never  appeared  in  the  Gazette  as  ensign 
in  any  regiment  of  the  line. 

The  question  for  the  opinion  of  the  court  was  whether  the  plaintiff 
was  entitled  to  recover.  If  he  was,  the  verdict  was  to  stand;  if  he  was 
not  entitled  to  recover,  a  verdict  was  to  be  entered  for  the  defendants. 

This  case  was  argued  by  Lens,  Serjt.,  for  the  plaintiff,  who  con- 
tended that  it  was  competent  for  the  plaintiff  by  this  special  indorse- 
ment to  make  only  a  conditional  transfer  of  the  absolute  interest  in  the 
bill,  which  he  had  purchased  for  a  full  consideration,  and  had  vested  in 
him  by  the  delivery  of  the  drawer.  The  defendants,  by  subsequently 
accepting  the  bill,  had  become  parties  to  that  conditional  transfer,  and 
as  the  condition  had  never  been  performed,  the  transfer  was  defeated, 
and  they  became  liable,  after  the  expiration  of  the  two  months,  to  pay 
the  plaintiff',  to  whom  the  property  then  reverted,  the  contents  of  the 
bill,  of  which  none  of  the  indorsers  could  enforce  payment  against  the 
defendants  at  the  45  days'  end,  because  they  had  all  received  the  bill 
subject  to  the  condition,  and  were  bound  thereby.  He  cited  Ancher 
V.  Bank  of  England,  Doug.  638. 

Shepherd,  Serjt.,  for  the  defendant,  contended  that  it  was  imma- 
terial whether  the  acceptance  was  before  or  after  the  conditional  in- 
dorsement. The  acceptance  admitted  the  handwriting  of  the  drawer, 
but  it  did  not  mix  itself  with  the  conduct  of  the  indorsers.  It  admitted 
nothing  which  was  on  the  back  of  the  bill.  The  whole  practice  of 
the  courts  was  accordingly ;  for  in  an  action  against  the  acceptor  it  be- 
came unnecessary  to  prove  the  handwriting  of  the  drawer,  but  it  was 
necessary  to  prove  the  handwriting  of  the  indorser. 

The  Court  gave  judgment  for  the  plaintiff. 


SECTION  4.— TRANSFER  BY  DELIVERY 


MAURAN  V.  LAIMB. 
(Supreme  Court  of  New  York,  1S27.    7  Cow.  174.) 
Assumpsit  by  the  plaintiff  as  bearer,  against  the  defendant,  as  draw- 
er, of  a  check  on  the  Bank  of  America,  dated  New  York,  October  31, 
1824.  for  $1,912.02,  payble  to  No.  25  or  bearer. 


Ch.  1)  TRANSFER.  319 

The  cause  was  tried  at  the  New  York  circuit,  March  25,  1826,  be- 
fore Duer,  Judge. 

It  was  admitted  at  the  trial  that  the  plaintiff  had  no  interest  in  the 
check,  but  sued  for  the  benefit  of  Mrs.  Remsen,  to  whom  the  check 
belonged,  with  her  consent. 

The  defendant  objected  that  the  action  was  not  sustainable  by  the 
plaintiff  in  his  name;  but  the  objection  was  overruled.  Verdict  for 
the  plaintiff.  2^ 

WoODwoRTH,  J.  It  is  contended  that  the  plaintiff,  being  a  mere 
agent,  and  having  no  interest,  cannot  maintain  this  action.  It  appears 
that  the  plaintiff  came  fairly  by  the  possession ;  and  his  name  was  used 
for  the  benefit  of  Mrs.  Remsen,  claiming  to  be  the  person  in  interest. 
The  rule  is  that  the  bearer  of  a  note  or  bill  payable  to  bearer  need  not 
prove  a  consideration,  unless  he  possesses  it  under  suspicious  circum- 
stances. 1  Chit,  on  Bills,  51.  If  a  question  of  mala  fide  possessio 
arises,  that  is  a  fact  to  be  raised  by  the  defendant,  and  submitted  to  the 
jury.  Conroy  v.  Warren,  3  John.  Cas.  259,  2  Am.  Dec.  156.  In  that 
case,  Mr.  Justice  Kent  referred  to  Livingston  v.  Clinton,  decided  July 
term,  1799,  where  the  law  was  laid  down  that,  if  a  note  be  indorsed  in 
blank,  the  court  never  inquires  into  the  right  of  the  plaintiff,  whether  he 
sues  in  his  own  right  or  as  trustee ;  that  any  person  in  the  possession  of 
a  note  may  sue;  and  he  says  a  decision  to  the  like  effect  (Cooper  v. 
Kerr)  was,  in  March,  1800,  affirmed  in  the  Court  of  Errors.  In  Payne 
V.  Eden,  3  Caines,  213,  the  note  was  indorsed  to  the  plaintiff.  He  had 
no  interest,  but  was  merely  a  trustee  for  others.  No  objection  was  tak- 
en to  his  want  of  interest.  The  question  was  as  to  the  consideration  of 
the  note,  and,  that  being  illegal,  the  plaintiff  failed.  Thompson,  Jus- 
tice, who  delivered  the  opinion  of  the  court,  considered  the  cause  in 
the  same  point  of  view  as  if  the  original  parties  were  before  the  court. 
In  consequence  of  proving  that  the  plaintiff  has  no  interest,  the  remedy 
is  not  defeated ;  but  the  defendant  is  permitted  to  avail  himself  of  a 
defense  against  the  original  party.  It  is  no  answer  to  say  that  the 
defendant  cannot  plead  a  set-off  against  the  cestui  que  trust.  It  may, 
in  some  cases,  be  a  hardship,  as  such  a  defense  applies  to  the  parties 
on  the  record  only.  The  act  authorizing  a  set-off  may  not  be  sufficient 
to  meet  this  case ;  but  the  remedy  is  with  the  Legislature,  not  the  courts 
of  justice.     *     *     * 

New  trial  denied.^" 

2B  The  statement  of  facts  is  abridged,  and  the  arguments  of  counsel  and  part 
of  the  opinion  are  omitted. 

2  6  Accord:  Cleary  y.  De  Beck  Co.,  54  Misc.  Rep.  537.  104  N,  Y.  Supp.  831 
(1907). 


320  NEGOTIATION.  (Part  2 

GAGE  V.  KENDALL. 
(Supreme  Court  of  New  York,  1836.    15  Wend.  640.) 

Error  from  the  Cortland  common  pleas.  Kendall  declared  in  the 
court  below  on  a  promissory  note  made  by  Gage,  payable  to  William 
Castle  or  bearer.  The  defendant  pleaded  the  general  issue,  and  gave 
notice  with  his  plea  that  he  would  prove,  on  the  trial,  that  the  plaintiff, 
at  the  commencement  of  the  suit,  had  no  title  to  or  interest  in  the  note 
declared  on,  but  had  transferred  the  same  to  one  Shankland,  who  was 
the  owner  and  holder  thereof,  and  that  the  suit  was  commenced  with- 
out the  knowledge,  consent  or  authority  of  the  plaintiff.  On  the  trial, 
the  defendant  offered  to  prove  the  facts  set  forth  in  his  notice.  The 
evidence  was  objected  to,  and  rejected  by  the  court.  The  defendant 
excepted.  The  plaintiff  obtained  a  verdict,  upon  which  judgment  was 
entered.    The  defendant  sued  out  a  writ  of  error. 

Per  Curiam.  The  question  is  whether  the  fact  that  the  holder  and 
owner  of  a  negotiable  note  has  prosecuted  such  note  in  the  name  of  a 
stranger,  without  his  knowledge  or  consent,  is  a  bar  to  a  recovery  in 
the  name  of  such  nominal  plaintiff. 

Perhaps  this  question  cannot  be  better  answered  than  it  has  been 
by  this  court  in  Lovell  v.  Evertson,  11  Johns.  52.  The  note  being  in- 
dorsed in  blank  (in  this  case  payable  to  bearer),  the  owner  had  a  right 
to  fill  it  up  with  what  name  he  pleased,  and  the  person  whose  name 
was  so  inserted  would  be  deemed,  on  record,  as  the  legal  owner;  and 
if  not  so  in  fact,  he  could  sue  as  trustee  for  the  persons  having  the  real 
interest.  But  the  defendant  could  have  no  concern  with  that  question. 
He  was  responsible  to  the  person  whose  name  was  so  inserted  in  the 
blank  indorsement.  It  is  true,  as  contended  for  by  the  plaintiff  in  er- 
ror, that  suits  should  be  brought  by  the  persons  having  the  legal  in- 
terest in  contracts ;  but,  in  the  case  of  negotiable  paper,  a  suit  may  be 
brought  in  the  name  of  a  person  having  no  interest  in  the  contract. 
He  may  sue  as  trustee  for  those  who  are  interested. 

But  why  should  the  defendant  give  himself  the  trouble  to  investigate 
the  plaintiff's  title?  He  owes  the  money  to  some  one.  In  this  case  he 
offered  to  show  that  he  owed  it  to  Mr.  Shankland,  who  had  brought 
the  suit.  It  is  not  a  case,  therefore,  of  mala  fide  possession.  A  recov- 
ery in  this  case  in  the  name  of  the  present  plaintiff  might  be  pleaded, 
with  proper  averments,  in  bar  of  a  new  suit  in  favor  of  any  other  per- 
son. The  defendant  is  not  deprived,  in  such  a  suit,  of  any  defense 
which  he  may  have  as  against  the  real  owner.  There  is,  in  principle, 
no  objection  to  a  suit  on  a  promissory  note  in  the  name  of  a  nominal 
plaintiff ;  nor  is  there  any  authority  against  it.  The  cases  referred  to 
do  not  sustain  the  defense.  In  the  case  of  Olcott  v.  Rathbone,  5  Wend. 
49-i,  it  was  said  the  owner  of  a  promissory  note,  indorsed  in  blank, 
can  make  whom  he  pleases  the  holder.  The  difficulty  in  that  case  was 
that  it  did  not  appear  that  the  owner  had  assigned  the  note  to  the  plain- 


Ch.  1)  TRANSFER.  321 

tiff,  or  had  directed  that  suit.  There  is  no  such  difficulty  here.  The 
defendant's  offer  was  to  show  that  the  true  owner  had  himself  brought 
the  suit.  The  case  of  Waggoner  v.  Colvin,  11  Wend.  27,  when  prop- 
erly considered,  is  not  an  authority  for  the  plaintiff  in  error.  That 
case  came  up  on  demurrer.  The  defendant  pleaded  that,  before  the 
commencement  of  the  suit,  the  plaintiff  had  indorsed  the  note  to  Stil- 
well  and  others  and  delivered  the  note  to  them,  who  were  the  true  and 
lawful  owners  and  possessors  of  the  note.  The  court  said  that  the  plea 
was  good,  because  it  showed  the  legal  title  out  of  the  plaintiff,  but  add- 
ed that,  if  the  suit  was  brought  in  the  name  of  the  plaintiff  for  the  ben- 
efit of  the  owners,  that  fact  should  be  replied,  and  it  would  be  a  good 
answer  to  the  plea — distinctly  asserting  that  a  suit  may  be  brought  in 
the  name  of  a  person  having  no  interest  in  the  note,  if  for  the  benefit 
and  by  the  direction  of  the  owner. 

The  court  below  decided  correctly,  and  their  judgment  must  be  af- 
firmed. 

Judgment  affirmed. 


HAYS  V.  HATHORN  et  al. 

(Court  of  Appeals  of  New  York,  1878.    74  N.  Y.  486.) 

•  Appeal  from  judgment  of  the  General  Term  of  the  Supreme  Court, 
in  the  Third  Judicial  Department,  affirming  a  judgment  in  favor  of 
plaintiff,  entered  upon  a  decision  of  the  court  on  trial  without  a  jury 
(reported  below,  10  Hun,  511). 

This  action  was  upon  a  promissory  note,  alleged  in  the  complaint 
to  have  been  made  by  the  firm  of  Hathorn  &  Southgate,  payable  to 
the  order  of  defendant,  Frank  H.  Hathorn,  and  by  him  indorsed  and 
transferred  to  plaintiff. 

The  facts  appear  sufficiently  in  the  opinion. ^^ 

Hand,  J.  In  their  answer  the  defendants  denied  that  the  note  on 
which  the  action  was  brought  was  ever  transferred  to  the  plaintiff  or 
that  he  was  the  legal  owner  or  holder  thereof.  They  further  denied 
that  the  plaintiff  was  the  real  party  in  interest,  and  alleged  that  the 
Saratoga  County  Bank  was  the  real  party  in  interest  and  the  owner 
and  holder  and  should  be  the  plaintiff,  and  that  the  note  was  duly 
transferred  to  it  instead  of  to  the  plaintiff. 

Upon  the  trial,  the  plaintiff  having  produced  the  note  which  was 
payable  to  the  order  of  F.  H.  Hathorn  and  indorsed  in  blank  by  him, 
rested.  The  defendants  then  offered  to  prove  that  the  note  ''was  not 
the  property  of  the  plaintiff;  that  the  same  was  never  transferred  to 
him;  that  he  was  not  the  real  party  in  interest;  that  the  note  was  the' 
property  of  the  savings  bank,  who  is  the  real  party  in  interest."     The 

^7  The  arguments  of  counsel  are  omitted. 
Sm.&M.B.&N.— 21 


322  NEGOTIATION.  (Part  2 

evidence  was  objected  to  by  the  plaintiff  as  immaterial  and  was  ex- 
cluded. Tiiis  ruling  I  think  was  erroneous  and  renders  necessary  a 
reversal  of  the  judgment. 

Under  the  answer  and  this  offer,  the  defendants  unquestionably  pro- 
posed to  show  substantially  that  the  plaintiff  had  no  title,  legal  or 
equitable,  to  the  note,  and  no  right  as  owner  to  its  possession.  This 
might  have  been  done  by  proving  that  he  was  the  mere  finder  or  the 
unlawful  possessor,  or  that  the  right  to  its  possession  and  ownership 
was  in  the  bank,  to  whom  they  were  liable  thereon,  or  in  some  other 
way.    This  they  had  a  right  to  show. 

It  may  be  that,  had  their  offer  been  admitted,  they  would  have  pro- 
duced in  fact  no  evidence  to  sustain  it  or  prevent  a  recovery,  but  in 
considering  the  validity  of  their  exception  to  the  exclusion,  we  must 
assume  that  the  evidence  would  have  fully  covered  the  propositions 
contarined  in  the  offer.  And,  as  remarked  in  the  dissenting  opinion  in 
the  court  below,  "unless  the  defendants  are  to  be  precluded  altogether 
from  giving  any  evidence  of  a  matter  confessedly  issuable,  I  do  not  see 
how  this  offer  could  be  rejected." 

The  cases  relied  upon  as  justifying  the  exclusion  of  the  evidence  do 
not  go  that  length.  In  Cummings  v.  Morris,  25  N.  Y.  625,  it  was  held 
that  the  maker  of  a  note  could  not  defeat  the  plaintiff,  not  a  payee,  by 
proof  that  the  consideration  of  the  transfer  to  him  was  contingent  up- 
on his  collecting  the  note.  Such  plaintiff  was  declared  to  be  the  real 
party  in  interest  on  the  express  ground  that  the  transfer  was  complete 
and  irrevocably  vested  in  him  the  title  to  the  note.  In  City  Bank  v. 
Perkins,  29  N.  Y,  554,  86  Am.  Dec.  332,  there  was  no  question  of  ex- 
clusion of  evidence,  but  all  the  circumstances  being  proved,  it  was  held 
that  where  the  cashier  of  a  bank  holding  commercial  paper,  pledged  it 
"duly  indorsed"  to  the  plaintiff  as  security  for  a  loan  by  the  plaintiff  to 
his  bank,  and  it  had  been  actually  transmitted  under  his  direction  to 
the  plaintiff  so  indorsed,  it  was  no  defense  to  one  admitting  his  liabili- 
ty upon  such  paper  to  show  lack  of  authority  in  the  cashier  alone  to 
contract  a  loan  for  the  bank ;  or  the  fraudulent  diversion  by  him  of 
the  funds  received  from  the  plaintiff'  on  such  loan.  Some  remarks  in 
the  opinion  in  that  case,  not  necessary  to  the  decision,  are  perhaps  too 
broad  to  be  entirely  approved,  but  it  is  fully  conceded  in  it  that  proof 
that  the  plaintiff  had  no  right  whatever  to  the  possession  but  was  a 
mere  finder  or  had  obtained  it  by  some  "positive  breach  of  law"  would 
be  a  defense. 

Brown  v.  Penfield,  36  N.  Y.  473,  holds  merely  that  proof,  by  the 
party  liable  on  a  bill,  of  gross  inadequacy  of  the  consideration  for  the 
transfer  of  such  bill  to  the  plaintiff  does  not  impeach  the  validity  of 
•such  transfer  as  to  the  party  so  liable. 

In  Allen  v.  Brown,  44  N.  Y.  228,  it  was  decided  that,  as  against  the 
plaintiff  holding  legal  title  to  the  claim  by  written  assignment  valid  up- 
on its  face,  the  debtor  cannot  raise  the  question  as  to  the  considera- 


Ch.  1)  TRANSFER,  323 

tion  for  such  assignment  or  the  equities  between  the  assignor  and  as- 
signee. 

In  Eaton  v.  Alger,  47  N.  Y.  345,  the  note  being  payable  to  bearer 
and  produced  by  the  plaintiff  upon  the  trial,  it  was  proved  that  the  pay- 
ee had  delivered  it  to  the  plaintiff  upon  his  undertaking  to  collect  it  at 
his  own  expense  and  pay  to  such  payee  upon  its  collection  a  certain 
sum  of  money.  This  was  held  to  show  sufficiently  that  the  plaintiff 
and  not  the  payee  was  the  real  party  in  interest  under  the  Code. 

Sheridan  v.  The  Mayor,  68  N.  Y.  30,  reiterates  the  doctrine  that,  as 
against  the  debtor,  the  plaintiff  holding  a  written  assignment  of  the 
claim  to  himself  vahd  on  its  face,  obtained  the  legal  title  and  was  the 
real  party  in  interest  notwithstanding  the  fact  that  the  assignment  was 
without  consideration  and  merely  colorable  as  between  him  and  the 
original  claimant.  Such  assignment  is  expressly  declared  to  protect  the 
debtor  paying  the  assignee  against  a  subsequent  suit  by  the  assignor. 

In  Gage  v.  Kendall,  15  Wend.  640,  the  fact  that  the  prosecution  of 
the  note  was  by  its  owner  and  holder  in  the  name  of  the  plaintiff,  a 
stranger  to  it,  without  his  consent  or  knowledge,  was  sought  to  be  set 
up  as  a  defense,  but  it  was  ruled  out  on  the  ground  that  the  nominal 
plaintiff  need  have  no  title  to  or  interest  in  the  paper  sued  upon.  We 
apprehend  the  Code  has  changed  this,  and  that  such  facts  would  now 
be  fatal  to  an  action.  Such  a  plaintiff  could  not  in  any  view  be  the  real 
party  in  interest.  Indeed  he  would  not  even  have  manual  possession 
of  the  paper. 

From  this  glance  at  the  cases,  it  appears  that  it  is  ordinarily  no  de- 
fense to  the  party  sued  upon  commercial  paper,  to  show  that  the  trans^ 
fer  under  which  the  plaintiff  holds  it  is  without  consideration  or  sub- 
ject to  equities  between  him  and  his  assignor,  or  colorable  and  merely 
for  the  purpose  of  collection,  or  to  secure  a  debt  contracted  by  an  agent 
without  sufficient  authority.  It  is  sufficient  to  make  the  plaintiff  the 
real  party  in  interest  if  he  have  the  legal  title  either  by  written  trans- 
fer or  delivery,  whatever  may  be  the  equities  between  him  and  his  as- 
signor. But,  to  be  entitled  to  sue,  he  must  now  have  the  right  of  pos- 
session and  ordinarily  be  the  legal  owner.  Such  ownership  may  be 
as  equitable  trustee,  it  may  have  been  acquired  without  adequate  con- 
sideration, but  must  be  sufficient  to  protect  the  defendant  upon  a  re- 
covery against  him  from  a  subsequent  action  by  the  assignor. 

As  we  understand  the  scope  of  the  offer  in  the  present  case,  it  went 
to  entirely  disprove  any  ownership  or  interest  whatever,  or  even  right 
to  possession  as  owner  in  the  plaintiff.  It  should  therefore  have  been 
admitted.  It  may  be  true  that  the  plaintiff,  if  this  note  had  been  deliv- 
ered to  him  with  the  intent  to  transfer  title,  might  have  lawfully  over- 
written the  blank  indorsement  with  a  transfer  to  himself ;  it  is  also  true 
that  the  production  of  the  paper  by  him  was  prima  facie  evidence  that 
it  had  been  delivered  to  him  by  the  payee  and  that  he  had  title  to  it, 
but  the  defendants'  offer  was  precisely  to  rebut  this  very  presumption. 


324  NEGOTIATION.  (Part  2 

and  for  aught  that  we  can  know  the  evidence  under  it  would  have 
done  so. 

The  judgment  must  be  reversed  and  a  new  trial  ordered,  costs  to 

abide  the  event. 


PREVOT  V.  ABBOTT. 
(Court  of  Common  Pleas,  1814.     5  Taunt.  786.) 

The  plaintiff  declared  on  a  bill  of  exchange  drawn  by  the  defendant, 
requiring  B.  Skinner,  90  days  after  date,  to  pay  to  the  defendant  or 
his  order  £27.  5s.  Gd.,  and  averred  that  the  defendant  delivered  the  bill 
to  the  plaintiff,  and  averred  an  acceptance,  presentment  for  payment, 
and  dishonor.  After  verdict  for  the  plaintiff,  Vaughan,  Serjt.,  obtain- 
ed a  rule  nisi  in  arrest  of  judgment,  upon  the  ground  that  no  indorse- 
ment by  the  defendant  was  averred,  and  that  the  bill  could  not  pass 
without  indorsement  by  mere  delivery ;  and  on  this  day,  no  cause  being 
shown,  he  made  the 

Rule  absolute. 


GROVER  V   GROVER. 

(Supreme  Judicial  Court  of  Massachusetts,  Middlesex,  1837.     24  Pick.  261,  35 

Am.  Dec.  319.) 

Assumpsit  upon  a  promissory  note  made  by  the  defendant,  and  pay- 
able to  the  order  of  Hiram  S.  Grover,  the  plaintiff's  intestate. 

At  the  trial,  before  Putnam,  J.,  it  appeared,  that  in  March,  1832, 
Grover  V.  P.lanchard  called  to  see  the  intestate.  Upon  an  inquiry  be- 
ing made,  whether  the  intestate  had  put  on  record  a  deed  of  mortgage 
given  to  secure  the  payment  of  the  note  in  question,  the  intestate  pro- 
duced the  deed,  which  had  not  then  been  recorded,  and  the  note,  and 
said  to  Blanchard,  *T  will  make  a  present  of  these  to  you,  if  you  will 
accept  them."  Blanchard  then  took  them  and  put  them  in  his  pocket, 
saying  that  he  would  accept  them  as  a  token  of  love,  or  affection,  or 
respect.  Before  they  parted,  Blanchard  handed  them  back  to  the  in- 
testate, saying  to  him,  "You  may  keep  the  papers  until  I  call  for  them, 
or  collect  them  for  me."  No  assignment  was  made  on  the  note  or 
mortgage.  Afterwards  the  intestate  put  the  mortgage  deed  on  record. 
The  plaintiff,  after  the  death  of  the  intestate,  in  October,  1832,  took 
the  deed  from  the  register's  office,  and,  having  received  of  the  defend- 
ant payment  of  the  amount  secured  thereby  discharged  the  mortgage. 
Upon  the  death  of  the  intestate,  the  note  was  found  in  his  chest,  with 
his  papers ;  and  Blanchard  took  it,  refused  to  deliver  it  to  the  plaintiff, 
and  caused  this  action  to  be  brought. 

The  defendant  contended:  (1)  That  no  valid  gift  of  a  chose  in  ac- 
tion could  be  made  inter  vivos  without  writing;    (2)  that  the  name  of 


Ch.  1)  TRANSFER.  325 

the  donor,  or  of  the  administrator  or  executor  of  the  donor,  could  not 
be  used  without  his  consent,  in  an  action  brought  for  the  use  of  the 
donee;  and  (3)  that  the  donor  could  not,  by  law,  act  as  the  agent  of 
the  donee  to  keep  the  papers  or  collect  the  money. 

The  jury  found  that  the  intestate  did  intend  to  give  the  property 
contained  in  the  note  and  mortgage,  absolutely,  to  Blanchard. 

The  whole  court  were  to  determine,  upon  these  facts,  whether  or 
not  the  property  passed  and  vested  in  Blanchard,  and  whether  or  not 
he  might  maintain  this  action  without  the  consent  of  the  nominal  plain- 
tiff, for  his  own  use,  under  the  facts  and  circumstances  above  stated.^^ 

WiivDE,  J.,  delivered  the  opinion  of  the  court. 

The  jury  have  found  that  the  deceased  intended  to  give  the  prop- 
erty in  the  note,  and  in  the  mortgage  made  to  secure  it,  absolutely,  to 
Blanchard ;  and  the  question  is  whether  by  the  rules  of  law  this  inten- 
tion can  be  carried  into  effect. 

It  is  objected  that  no  valid  gift  of  a  chose  in  action  can  be  made  in- 
ter vivos,  without  writing,  and  this  objection  would  be  well  maintain- 
ed, if  a  legal  transfer  of  a  chose  in  action  were  essential  to  give  effect 
to  a  gift.  But  as  a  good  and  effectual  equitable  assignment  of  a  chose 
in  action  may  be  made  by  parol,  and  as  courts  of  law  take  notice  of 
and  give  effect  to  such  assignments,  there  seems  to  be  no  good  founda- 
tion for  this  objection.  It  is  true  that  the  cases,  which  are  numerous, 
in  which  such  equitable  assignments  have  been  supported,  are  founded 
on  assignments  for  a  valuable  consideration ;  but  there  is  little,  if  any, 
distinction  in  this  respect,  between  contracts  and  gifts  inter  vivos. 
The  latter  indeed,  when  made  perfect  by  delivery  of  the  things  giv- 
en, are  executed  contracts.  2  Kent's  Comm.  (3d  Ed.)  438.  By  de- 
livery and  acceptance  the  title  passes,  the  gift  becomes  perfect,  and 
is  irrevocable.  There  is,  therefore,  no  good  reason  why  property  thus 
acquired  should  not  be  protected  as  fully  and  effectually  as  property 
acquired  by  purchase.  And  so  we  think  that  a  gift  of  a  chose  in  ac- 
tion, provided  no  claims  of  creditors  interfere  to  affect  its  validity, 
ought  to  stand  on  the  same  footing  as  a  sale. 

The  cases  favorable  to  the  defense  do  not  depend  on  the  question 
whether  an  assignment  must  be  in  writing,  but  on  the  question  wheth- 
er a  legal  transfer  is  not  necessary  to  give  validity  to  a  donation  of 
a  chose  in  action.  The  donation  of  a  note  of  hand  payable  to  bearer, 
or  of  bank  notes,  lottery  tickets  and  the  like,  where  the  legal  title 
passes  by  delivery,  is  good,  for  by  the  form  of  the  contract  no  writ- 
ten assignment  is  necessary ;  but  as  to  all  other  choses  in  action,  ne- 
gotiable securities  excepted,  it  has  been  held  in  several  cases,  that 
they  are  not  subjects  of  donation  mortis  causa,  on  the  ground  un- 
doubtedly, for  I  can  imagine  no  other,  that  a  legal  assignment  is  nec- 
essary to  give  effect  to  such  donations,  and  the  -same  reason  would 
apply  to  donations  inter  vivos. 

2  8  Arguments  of  counsel  are  omitted. 


326  NEGOTIATION.  (Part  2 

The  leading  case  on  this  point  is  that  of  Miller  v.  Miller,  3  P.  Wms. 
356,  in  which  it  was  held  that  the  gift  of  a  note,  being  a  mere  chose 
in  action,  could  not  take  effect  as  a  donation  mortis  causa,  because 
no  property  therein  could  pass  by  delivery,  and  an  action  thereon  must 
be  sued  in  the  name  of  the  executor.  But  in  Snellgrave  v.  Bailey,  3 
Atk.  214,  Lord  Hardwicke  decided  that  the  gift  and  delivery  over  of 
a  bond  was  good  as  a  donation  mortis  causa,  on  the  ground  that  an 
equitable  assignment  of  the  bond  was  sufficient.  It  seems  to  be  very 
difficult  to  reconcile  these  two  cases.  The  distinction  suggested  by 
Lord  Hardwicke  in  the  case  of  Ward  v.  Turner,  2  Ves.  Sr.  431,  in 
which  he  adheres  to  the  decision  in  Snellgrave  v.  Bailey,  is  tech- 
nical, and.  to  my  mind,  unsatisfactory;  and  certainly  has  no  applica- 
tion to  our  laws,  which  place  bonds  and  other  securities  on  the  same 
footing.  We  cannot,  therefore,  adopt  both  decisions  without  manifest 
inconsistency;  and  we  think,  for  tlie  reasons  already  stated,  that  the 
decision  in  Snellgrave  v.  Bailey  is  supported  by  the  better  reasons, 
and  is  more  conformable  to  general  principles,  and  the  modern  de- 
cisions in  respect  to  equitable  assignments.  We  are,  therefore,  of  opin- 
ion that  the  gift  of  the  note  of  hand  in  question  is  valid;  and  in  com- 
ing to  this  conclusion,  we  concur  with  the  decision  in  the  case  of 
Wright  V.  Wright,  1  Cow.  (N.  Y.)  598,  wherein  it  was  held  that  the 
gift  and  delivery  over  of  a  promissory'  note,  mortis  causa,  is  valid  in 
law,  although  the  legal  title  did  not  pass  by  the  assignment. 

It  is  not  necessary  to  decide  whether  the  gift  of  the  mortgage  se- 
curity is  valid,  although  it  is  reported  to  have  been  said  by  the  Vice 
Chancellor,  in  the  case  of  Duffield  v.  Elwes,  1  Sim.  &  Stu.  243,  that 
a  mortgagor  was  not  compellable  to  pay  the  mortgage  debt  without 
having  back  the  mortgage  estate,  and  for  that  and  other  reasons  he 
decided,  that  a  mortgage  was  not  a  subject  of  a  gift  mortis  causa. 
This  decision,  however,  was  aftersvards  overruled  in  the  House  of 
Lords  (Duffield  v.  Elwes,  1  Bligh's  New  R.  497),  on  the  ground  that 
the  gift  of  the  debt  operated  as  an  equitable  assignment  of  the  mort- 
gage. But  as  we  think  it  clear  that  the  right  to  maintain  this  action 
does  not  depend  on  that  question,  we  give  no  opinion  in  regard  to  it. 

Another  objection  is  that,  if  the  gift  was  valid  and  complete  by 
the  delivery  of  the  note,  it  was  annulled  by  the  redelivery  to  the  donor. 
We  think  this  objection  also  is  unfounded.  In  the  case  of  Bunn  v. 
Markham,  7  Taunt.  230,  Gibbs,  C.  J.,  lays  it  down  as  a  well-settled 
principle  that  if,  after  a  donation  mortis  causa,  the  donor  resumes 
possession,  he  thereby  revokes  and  annuls  the  donation.  This  is  the 
law  no  doubt.  Whether  there  may  not  be  an  exception  to  this  rule, 
when  the  donor  takes  back  the  thing  given  at  the  request  of  the  donee 
for  a  particular  purpose,  and  agrees  to  act  as  his  agent  under  circum- 
stances negativing  every  presumption  that  he  intended  to  revoke  his 
gift,  is  a  question  which  it  is  not  necessary  now  to  consider;  for  the 
principle  has  no  relation  to  a  donation  inter  vivos.  When  such  a  do- 
nation is  completed  by  delivery,  the  property  vests  immediately  and 


Ch.  1)  TRANSFEll.  327 

irrevocably  in  the  donee ;  and  the  donor  has  no  more  right  over  it 
than  any  other  person.  But  a  donation  mortis  causa  does  no^  pass  a 
title  immediately,  but  is  only  to  take  effect  on  the  death  of  the  donor, 
who  in  the  meantime  has  the  power  of  revocation,  and  may  at  any 
time  resume  possession  and  annul  the  gift. 

The  last  objection  to  the  maintenance  of  this  action  by  Blanchard, 
in  the  name  of  the  administrator,  has  been  sufficiently  answered  in 
considering  the  first  objection.  It  is  contended  that  the  consent  of  the 
administrator  is  necessary.  But  if  an  equitable  assignment  is  sufficient 
to  complete  the  gift,  it  follows  that  the  administrator  is  trustee,  and 
cannot  set  up  his  legal  right  in  order  to  defeat  the  trust.  This  is  fully 
established  bv  the  cases  of  Duffield  v.  Ehves,  1  Bligh's  New  R.  497, 
Hunt  V.  Beach,  5  Madd.  Ch.  R.  351,  and  Duffield  v.  Hicks,  1  Dow.  1. 

Judgment  for  plaintiff  for  the  use  of  Blanchard.^* 


RANGER  V.  GARY  et  al 

(Supreme  Judicial  Court  of  Massachusetts,  Hampshire,  Franklin,  and  Hamp- 
den, 1840.    1  Mete.  369.) 

Assumpsit  on  a  promissory  note  for  $60,  made  by  the  defendants, 
Gary,  Ward  &  Bond,  on  the  21st  of  December,  1836,  payable  to  Bax- 
ter Ayres,  or  order,  on  demand,  and  by  him  indorsed  to  the  plaintiff. 
The  defendants  pleaded  the  general  issue,  and  filed  the  following  spec- 
ification of  defense,  viz. :  That  said  note,  if  made  and  indorsed  as  is 
supposed  by  the  plaintiff,  was  not  indorsed  until  the  same  was  over- 
due and  dishonored,  and  that  said  Ayres,  at  the  time  of  making  said 
note,  was,  and  hitherto  always  has  been,  and  now  is,  indebted  to  the 
defendants  in  a  larger  sum  than  the  amount  of  said  note,  as  by  their 
account  filed  by  way  of  set-off. 

At  the  trial,  in  the  court  of  common  pleas,  before  Williams,  C.  J., 
the  parties  agreed  that  it  should  be  taken  by  the  court  and  jury  as 
true  "that  the  note  declared  on  was  made  as  in  the  declaration  alleged ; 
that  it  passed,  for  a  valuable  consideration,  into  the  hands  of  the  plain- 
tiff, soon  after  it  was  made,  the  precise  time,  if  material,  to  be  left  to 
the  jury;  that  it  was  not  indorsed  to  the  plaintiff  until  the  autumn 
of  1838 ;  and  that,  at  the  time  of  making  the  note,  and  ever  since,  the 
said  Ayres  was  indebted  to  the  defendants  in  a  sum  over  $500,  which 

a 9  Accord:  Hopkins  v.  Manchester,  16  R.  I.  663,  19  Atl.  243,  7  L.  R.  A.  387 
(1889),  trover  against  donee  of  unindorsed  Instrument;  Esau  v.  Greene  &  Co., 
94  Wis.  8,  68  N.  W.  405  (1896),  trover  against  purchaser  of  unindorsed  in- 
strument. 

Compare  Dav  v.  Longhurst.  4  W.  R.  283  (Ch.  Div.  1893);  Lawless  v.  State, 
114  Wis.  189,  89  N.  W.  891  (1902);  Norton  v.  State,  129  Wis.  659,  109  N.  W. 
531,  116  Am.  St.  Rep.  979  (1900). 

See  Meuer  v.  Bank,  94  App.  Div.  331.  88  N.  Y.  Supp.  83  (1904)  s.  c.  affirmed 
183  N.  Y.  511,  70  N.  E.  1100  (1905),  with  respect  to  the  rights  of  a  transferee 
of  an  unindorsed  check  against  a  certifying  bank. 


328  NEGOTIATION.  (Part  2 

claim  has  been  filed  in  offset."  The  only  question  submitted  to  the 
jury  was  whether  said  note  was  overdue  and  dishonored  at  the  time 
of  its  transfer  to  the  plaintiff. 

Upon  this  point,  the  judge  instructed  the  jury  that  the  burden  of 
proof  was  on  the  defendants,  and  unless  the  jury  were  satisfied  af- 
firmatively that  the  transfer  of  the  note  to  the  plaintiff  was  at  least 
one  month  after  its  date,  it  could  not,  for  the  purposes  of  this  trial, 
be  considered  as  a  dishonored  note,  and  the  plaintiff  would  therefore 
be  entitled  to  a  verdict.  The  judge  further  instructed  the  jury  that 
the  transfer  of  said  note  was  to  be  considered  as  made  and  completed, 
so  as  to  vest  the  title  in  the  plaintiff,  when  she  paid  the  consideration 
therefor,  and  it  was  in  fact  delivered  to  her,  though  the  indorsement 
of  said  Ayres'  name  was  not  until  long  afterwards,  and  that  the  bur- 
den of  proof  still  remained  on  the  defendants,  notwithstanding  the 
evidence,  contained  in  said  deposition,  as  to  the  time  of  the  indorse- 
ment, taken  in  connection  with  the  other  evidence  in  the  case. 

The  jury  returned  a  verdict  for  the  plaintiff,  and  the  defendants 
alleged  exceptions  to  the  above  direction  of  the  judge.^" 

Dkwey,  j,  *  *  *  Upon  the  instruction  that  the  transfer  of 
the  note  was  to  be  considered  as  made  and  completed,  so  as  to  vest 
the  title  in  the  plaintiff  when  she  paid  the  consideration  therefor  and 
it  was  in  fact  delivered  to  her,  although  the  actual  indorsement  was 
made  long  afterwards,  we  have  not  thought  it  necessary  to  decide 
further  than  as  respects  its  bearing  and  effect  upon  the  case  now  be- 
fore us.  And  in  reference  to  the  defense  here  relied  upon,  and  the 
right  to  plead  in  offset  such  demands  as  might  have  been  pleaded,  if 
the  action  had  been  brought  in  the  name  of  the  payee,  the  court  are  of 
the  opinion  that  the  indorsement,  when  made,  should  be  regarded  as 
relating  back  to  the  time  when  the  plaintiff  paid  the  consideration  and 
the  note  was  actually  delivered  to  her,  inasmuch  as  whether  the  plain- 
tiff had  the  legal  title  from  the  time  of  the  delivery  to  her  of  the  note, 
or  the  equitable  title  merely  from  the  time  of  the  delivery,  and  the 
legal  title  by  a  subsequent  indorsement,  the  defense  here  relied  on 
must  be  equally  unavailing.  Here  is  no  question  of  want  or  failure 
of  consideration  of  this  note;  no  offer  to  prove  payment  of  it;  but 
the  defendants  rely  upon  an  account  filed  in  offset,  in  their  favor 
against  Baxter  Ayres,  the  payee  and  indorser  of  the  note,  as  their  only 
ground  of  defense  to  a  recovery  by  the  plaintiff. 

It  was  originally  a  question  of  much  doubt  whether,  in  any  case, 
where  an  action  was  instituted  on  a  dishonored  negotiable  note,  in 
the  name  of  the  indorsee,  the  defendant  could  avail  himself,  by  way 
of  set-off.  of  distinct  demands  he  might  have  held  against  the  indorser ; 
the  suit  being  between  other  parties  than  those  to  the  account  offered 
in  offset,  and  the  statute,  which  allows  set-off,  in  its  terms  embracing 

3  0  The  statement  of  facts  is  abridged,  and  the  arguments  and  part  of  the 
opinion  are  omitted. 


Ch.  1)  TRANSFER.  329 

only  demands  between  the  parties  to  the  suit.  The  English  decisions 
restrict  the  defense  to  a  dishonored  note  within  a  much  narrower 
ground  than  that  relied  on  in  the  present  case;  holding  the  plaintifif, 
in  such  cases,  liable  only  to  the  equities  arising  out  of  the  note  itself, 
or  to  the  allowance  of  such  demands  due  to  the  maker  of  the  note  as 
might  be  found  by  either  express  or  implied  understanding  of  the 
parties  to  have  been  agreed  to  be  applied  in  discharge  of  the  same. 
Burrough  v.  Moss,  10  Barn.  &  Cres.  558. 

This  court,  however,  after  much  consideration,  in  the  case  of  Sar- 
gent V.  Southgate,  5  Pick.  312,  16  Am.  Dec.  409,  held  that  the  stat- 
ute of  set-ofif  was  a  remedial  statute  and  ought  to  have  a  liberal  con- 
struction, and  that,  in  an  action  by  an  indorsee  against  the  maker  of 
a  negotiable  note  indorsed  when  overdue,  the  maker  might  file  in  off- 
set demands  he  had  against  the  indorser  for  money  due.  In  that  case 
the  note  remained  in  the  possession  of  the  payee  long  after  it  was 
dishonored,  and  the  case  presented  itself  under  circumstances  of  eq- 
uitable defense  much  stronger  than  in  the  case  at  bar.  In  Stockbridge 
V.  Damon,  5  Pick.  223,  where  a  note  was  transferred  six  years  after 
it  was  due,  and  where  the  indorsement  was  obviously  in  fraud  of  the 
maker's  rights,  the  court  also  allowed  the  demands  of  the  maker 
against  the  payee  to  be  given  in  evidence  to  defeat  a  recovery  on  the 
note.  But  the  construction  of  the  right  of  set-off,  thus  liberal  for  the 
suppression  of  fraud,  should  not  be  extended  so  as  to  work  injustice 
to  a  bona  fide  holder  of  a  note,  who  became  possessed  thereof  for  a 
"-aluable  consideration,  before  it  was  dishonored,  and  when  by  subse- 
quent indorsement  the  legal  interest  has  become  vested  in  him,  so  that 
he  may  enforce  the  collection  of  it  in  his  own  name. 

In  the  case  of  a  note  not  negotiable,  transferred  to  a  third  person, 
it  is,  from  the  very  form  and  nature  of  the  contract,  a  chose  in  action 
to  be  enforced  solely  in  the  name  of  the  payee;  and  until  actual  no- 
tice of  transfer  the  law  requires  that  all  payments  and  offsets,  which 
may  be  properly  applicable  to  the  same,  should  be  allowed.  Not  so 
in  the  case  of  a  negotiable  note,  which  by  its  very  terms  shows  that 
the  promise  is  the  subject  of  transfer  and  sale,  and  where  no  notice 
of  transfer  would  have  been  required  to  be  given  to  the  maker,  if 
there  had  been  an  actual  indorsement  before  the  note  was  overdue. 
It  is  true  that  in  respect  to  such  a  note,  if  there  were  an  attempt  to 
enforce  it  without  indorsement,  and  in  the  name  of  the  payee,  it  might 
be  defeated  by  an  offset,  if  no  notice  had  been  given;  but  when,  by 
indorsement,  the  equitable  transfer  has  become  a  legal  one,  the  case 
may  present  itself  under  a  different  aspect  as  to  the  legal  rights  of 
the  parties. 

If  this  note  had  remained  in  the  possession  and  control  of  the  payee 
until  dishonored,  or  if  it  had  been  fraudulently  indorsed  to  avoid  the 
offset  of  the  maker's  demands  against  the  payee,  we  should  have  had 
no  hesitation  in  applying  the  rule  as  stated  in  the  cases  above  cited, 
and  sustaininsf  the  defence.     But  this  case  shows  a  bona  fide  sale  of 


330  NEGOTIATION.  (Part  "1 

the  note  before  it  was  dishonored,  for  a  valuable  consideration,  and 
an  actual  delivery  of  the  same  to  the  plaintiff,  and  her  possession 
thereof  to  this  time,  and  her  subsequent  acquisition  of  the  legal  title 
by  the  indorsement.  If  this  indorsement  had  in  form  been  made  be- 
fore the  note  was  dishonored,  no  question  could  have  been  made  as  to 
the  right  of  the  plaintiff  to  recover.  Having  become  possessed  of  the 
same,  at  the  time  and  in  the  manner  she  did,  and  having,  before  the 
institution  of  her  suit,  acquired  the  legal  title,  and  consequently  the 
right  to  sue  in  her  own  name,  the  court  are  of  opinion  that  the  plain- 
tiff does  not  hold  this  note  subject  to  the  demands  filed  in  offset,  and 
to  which  it  would  have  been  liable  while  in  the  hands  of  the  payee, 
and  that,  for  this  reason,  the  defense  relied  on  cannot  prevail. 
Exceptions  overruled. ^^ 


LANCASTER  NAT.  BANK  v.  TAYLOR. 

(Supreme  Judicial  Court  of  Massachusetts,   Worcester,   1868.     100   Mass.  18. 
1  Am.  Rep.  71,  97  Am.  Dec.  70.) 

Contract  on  a  promissory  note  for  $1,000,  signed  by  the  defendant, 
dated  April  16,  1866,  payable  to  Jonathan  S.  Butterick  or  order,  and 
indorsed  by  him  to  the  plaintiffs.  Trial  in  the  superior  court,  before 
Reed,  J.,  who  allowed  the  following  bill  of  exceptions: 

"It  was  conceded  at  the  trial  that  the  defendant  wrote  his  name 
upon  the  paper  produced  in  support  of  the  declaration,  and  that  the 
plaintiffs  received  the  same  on  April  16,  1866,  in  payment  of  a  previous 
note  of  like  tenor  signed  by  the  defendant  and  indorsed  by  Butterick, 
which  fell  due  on  that  day ;  and  there  was  evidence  that  by  mistake 
Butterick  did  not  at  the  time  indorse  the  note  declared  on. 

"The  defendant  oft'ered  to  show  that  Butterick  applied  to  him  to  sign 
a  note  for  $100  as  an  accommodation  for  Socrates  Henry,  and  that  for 
that  purpose  he  signed  a  blank  note,  which  Butterick  was  authorized  to 
fill  up  as  a  note  for  $100  only,  but  which  he  in  fact  by  fraud  and  with- 
out authoritv  filled  up  as  a  note  for  $1,000,  and  indorsed  and  got  dis- 
counted at  the  plaintiffs'  bank  for  his  own  benefit,  and  which  was  the 
previous  note  above  named. 

"The  defendant  further  offered  to  show  that  the  signature  to  the 
note  in  suit  was  obtained  by  Butterick  by  a  like  request  for  his  sig- 
nature to  a  note  for  $100  for  Henry's  benefit,  and  that  he  signed  his 
name  in  blank,  and  authorized  Butterick  to  fill  up  the  instrument  over 
his  signature  as  a  note  for  $100  only,  but  that  Butterick  fraudulently 
and  without  authority  filled  it  up  as  a  note  for  $1,000;  that  the  de- 
fendant never  received  anything  on  account  of  this  or  the  previous 
note ;  that  Butterick  never  indorsed  the  note  to  the  plaintiffs  till  long 

«i  Accord:     Beard  v.  Dedolph,  29  Wis.  136  (1871). 


Ch.  1)  TRANSFER.  331 

after  its  maturity,  and  after  they  had  notice  of  the  above  facts ;  and 
that  at  the  time  of  the  taking  up  of  the  first  note  Butterick  was  re- 
sponsible and  able  to  pay  the  same,  and  the  same  could  have  been  col- 
lected of  him. 

"The  judge  ruled  that,  if  the  note  was  passed  and  sold  to  the  plain- 
tiffs before  maturity,  but  by  mistake  was  not  indorsed,  and  the  bank 
in  consideration  therefor  relinquished  a  note  for  a  like  amount  on 
which  the  defendant  was  legally  liable  as  maker,  and  the  note  was 
afterwards,  before  action,  indorsed  by  Butterick,  the  plaintiffs  would  be 
entitled  to  recover,  even  if  the  facts  offered  by  the  defendant  were 
true ;  whereupon  the  defendant  submitted  to  a  verdict,  and  excepted 
to  the  foregoing  ruling."  ^^ 

Foster,  J.  The  rule  that  the  indorsee  of  a  negotiable  promissory 
note,  who  has  taken  it  before  maturity  for  value  and  without  notice  of 
any  want  of  consideration  or  other  defect  rendering  it  void  in  its  in- 
ception, can  enforce  it  against  the  maker,  notwithstanding  it  was  value- 
less in  the  hands  of  the  original  payee,  is  founded  upon  the  custom  of 
merchants  and  the  statute  of  3  &  4  Anne,  c.  9.  It  is  an  exception  to 
the  general  rule  of  the  common  law,  according  to  which  a  written 
promise  can  be  enforced  only  in  the  name  of  the  party  to  whom  it  is 
made,  and,  if  it  has  been  assigned,  although  the  assignee  is  allowed  to 
bring  an  action  upon  it  in  the  name  of  his  assignor,  yet  he  has  no 
greater  rights  than  the  assignor  possessed,  and  the  instrument  remains 
subject  to  every  defense  that  would  have  existed  if  no  assignment  had 
taken  place.  The  ordinary  rule  applies  to  all  notes  which  are  not 
negotiable,  and  to  all  negotiable  notes  which  are  not  duly  indorsed  for 
value  before  maturity.  A  note  not  negotiable  may  be  assigned  and 
transferred  like  any  other  chose  in  action,  but  can  be  sued  only  in  the 
name  of  the  payee,  and  is  liable  to  every  defense  existing  against  him. 
A  negotiable  note  not  transferred  until  it  is  overdue  may  be  sued  in 
the  name  of  the  indorsee,  but  as  to  defenses  must  be  treated  precisely 
like  one  not  negotiable.  And  a  negotiable  note  which  is  transferred 
before  maturity,  but  not  indorsed  until  afterwards,  in  our  opinion  can 
stand  on  no  better  footing.  Whoever  receives  it  takes  a  contract 
which  upon  its  face  shows  that  it  is  subject  to  every  defense  that  could 
have  been  made  between  the  original  parties.  There  is  no  custom  of 
merchants  in  favor  of  such  an  assignee,  and  no  rule  of  law  by  which 
he  is  entitled  to  greater  rights  than  the  payee.  If  the  contract  was 
originally  invalid  for  want  of  consideration  or  other  cause,  so  will  it 
be  in  any  other  hands  into  which  it  passes  before  the  legal  title  is  trans- 
ferred by  regular  indorsement.  No  such  indorsement  having  been 
made  before  the  note  is  overdue  and  dishonored,  any  subsequent  one 
takes  effect  only  from  its  date.  There  is  no  doctrine,  known  to  the 
mercantile  law,  by  which  it  can  relate  back  to  the  time  of  the  equitable 

»2  Arguments  of  counsel  are  omitted. 


332  NEGOTIATION.  (Part  2 

transfer,  and  place  the  assignee  in  the  same  position  as  if  he  had  been 
before  maturity  the  holder  of  the  note  for  value. 

It  is  true  a  distinction  between  negotiable  and  nonnegotiable  notes 
has  been  recognized  in  regard  to  the  set-off  allowed  by  statute,  and, 
where  a  negotiable  note  was  transferred  for  value  before  it  was  dis- 
honored, but  not  indorsed  till  afterwards,  a  previously  existing  set-ofif 
of  a  distinct  demand  against  the  payee  was  not  allowed  to  prevail. 
Ranger  v.  Cary,  1  j\Ietc.  369.  The  set-off  of  distinct  demands  is  a 
matter  regulated  by  statute,  and  not  a  common-law  defense.  And  the 
court  carefully  limit  the  application  of  their  opinion,  saying  that  "here 
is  no  question  of  want  or  failure  of  consideration  of  this  note,  no  ofifer 
to  prove  payment  of  it ;  but  the  defendants  rely  on  an  account  filed  in 
offset."  This  case  is  therefore  no  authority  against  the  conclusion  to 
which  we  are  conducted  by  applying  the  elementary  principles  of  the 
law  merchant. 

The  facts  in  the  present  action  show  that  the  defendant  intrusted  to 
Butterick  his  signature  to  a  blank  note,  with  authority  to  write  over  it 
a  note  of  $100  for  the  benefit  of  one  Henry ;  that  Butterick  fraudu- 
lently filled  up  the  note  now  in  suit  so  as  to  make  it  one  for  the  sum 
of  $1,000  payable  to  his  own  order,  and  passed  it  to  the  Lancaster 
Bank  in  payment  of  a  former  note — that  is,  for  a  valuable  considera- 
tion. But  Butterick  did  not  then  indorse  the  note;  and  it  remained  in 
the  hands  of  the  bank  unindorsed  till  after  its  maturity.  At  a  later 
date,  when  the  note  was  overdue  and  the  bank  had  notice  of  all  these 
facts,  Butterick  did  indorse  it.  Undeniably,  if  he  had  done  so  orig- 
inally, the  defendant  would  have  been  liable.  Having  placed  it  in  the 
power  of  Butterick  to  perpetrate  such  a  fraud,  the  injury  caused  by 
the  defendant's  own  negligence  must  have  been  borne  by  himself,  and 
not  by  the  bank,  which  was  in  no  fault  and  guilty  of  no  want  of  due 
care.  But  the  defendant  is  liable  only  upon  and  to  the  extent  of  the 
contract  which  was  written,  and  not  for  one  which  might  have  been, 
but  was  not,  made.  The  bank  saw  fit  to  take  the  note,  which  pur- 
ported to  be  in  favor  of  Butterick,  without  requiring  him  to  indorse  it. 
They  therefore  took  it  subject  to  any  defense  which  might  be  made 
to  an  action  in  Butterick's  name.  And  the  subsequent  indorsement 
does  not  improve  their  position.  When  the  note  came  into  the  hands 
of  the  bank,  payable  to  the  order  of  Butterick  and  not  indorsed  by 
him,  the  very  form  of  the  instrument  gave  notice  that  no  one  could 
bring  an  action  upon  it  except  in  the  name  of  Butterick,  and  that  it 
was  subject  to  every  defense  affecting  its  original  validity  which  could 
have  been  made  to  it  while  it  contmued  in  his  hands. 

There  is  a  recent  English  case  in  which  this  identical  question  has 
been  determined  by  eminent  judges,  of  great  experience  and  authority 
in  mercantile  law  A  check  or  sight  draft,  obtained  by  fraud  from  the 
defendant  by  one  Griflfiths,  was  transferred  for  a  valuable  consideration 
to  the  plaintiff,  before  dishonor  and  with  no  notice  to  him  of  the  fraud. 


Ch.  1)  TRANSFER.  333 

But  the  actual  indorsement  of  the  paper  was  not  made  till  the  instru- 
ment was  dishonored  and  the  plaintiff  had  notice  of  its  fraudulent 
origin.  On  this  state  of  facts,  Erie,  C.  J.,  said:  "The  intention,  no 
doubt,  was,  that  the  plaintiff  should  take  the  instrument  as  indorsee; 
but  the  indorsement  was  omitted,  and  whilst  it  was  in  the  hands  of 
the  plaintiff  without  being-  indorsed  it  was  as  if  it  had  been  an  ordinary- 
chattel  that  had  passed  by  an  equitable  and  not  by  a  legal  assignment. 
All  the  rights,  therefore,  that  the  plaintiff  had  at  that  time  at  law  were 
such  as  Griffiths  had,  and  no  more.  Then  Griffiths,  having  defrauded 
the  defendant  of  the  bill,  could  have  no  right  to  it  as  against  the  de- 
fendant. The  law  relating  to  negotiable  instruments  is  that  the  fact 
of  delivery  gives  to  the  person  who  takes  the  instrument  a  title  which  is 
good  as  against  all  the  world,  notwithstanding  there  may  be  some  de- 
fect in  the  title  of  him  from  whom  the  bill  is  taken,  provided  it  is 
taken  by  indorsement  for  value  and  without  notice  of  the  fraud  which 
constitutes  the  defect  in  title.  Now  the  title  which  the  plaintiff  gained 
on  the  delivery  of  this  instrument  was  not  like  that  which  he  would  have 
obtained  on  the  delivery  of  a  negotiable  instrument  not  requiring  in- 
dorsement ;  it  was  yet  incomplete,  but  capable  of  being  perfected  by 
indorsement.  Before  he  had  obtained  the  indorsement  he  was  not 
within  the  rule  of  law  I  have  mentioned  ;  and  when  he  did  obtain  it 
he  had  notice  that  he  could  not  gain  any  title  to  the  bill  on  account  of 
the  fraud  practiced  on  the  drawer."  In  the  same  case,  Willes,  J.,  said : 
"The  general  rule  of  law  is,  'Nemo  dat,  qui  non  habet ;'  but  in  the  case 
of  negotiable  instruments,  in  order  that  they  may  circulate  freely,  and 
that  persons  may  not  on  every  occasion  be  put  to  the  trouble  of  inquir- 
ing into  their  origin  and  the  transactions  between  the  original  parties 
to  the  bill,  there  is  an  exception  to  the  above  rule,  and  a  person  taking 
a  bill  during  its  currency,  for  value,  and  without  notice  of  any  fraud 
perpetrated  by  him  from  whom  he  takes  it,  is  entitled  to  sue  any  person 
whose  name  is  on  the  bill,  notwithstanding  that  the  person  against 
whom  he  brings  his  action  was  originally  defrauded  of  that  bill.  It  is 
necessary,  however,  that  the  bill  should  have  been  indorsed  to  the 
holder  and  taken  by  him  during  its  currency,  and  not  after  it  became 
due;  for  a  person  who  takes  a  bill  in  any  manner  after  it  has  become 
due  takes  it  subject  to  all  the  equities  between  the  antecedent  parties. 
The  person  who  claims  the  benefit  of  this  law  relating  to  bills  of  ex- 
change must  prove  that  he  is  entitled  to  do  so ;  he  must  show  that  he 
took  the  bill  by  indorsement  for  value  and  without  notice  of  fraud. 
This  is  a  doctrine  of  the  law  merchant  in  favor  of  those  who  have  ac- 
quired by  their  diligence  a  complete  title.  The  plaintiff  has  failed  to 
show  that  he  has  done  so,  and  cannot  now  recover  upon  it."  Whistler 
v.  Forster,  14  C.  B.  (N.  S.)  248. 

In  the  opinion  of  a  majority  of  the  court,  these  citations  express  with 
fullness  and  accuracy  the  rule,  and  the  limitations  of  the  rule,  of  the 
law  merchant,  which  gives  to  the  bona  fide  indorsee  for  value  before 


334  NEGOTIATION,  (Part  2 

maturity  of  a  negfotiable  instrument  a  better  title  and  a  more  complete 
riglit  of  action  than  the  original  payee  of  the  instrument  may  have 
possessed.  The  learned  judge  at  the  trial  having  proceeded  upon  a 
different  view  of  the  law,  the  exceptions  are  sustained. ^^ 


FULTZ  V.  WALTERS. 

(Supreme  Court  of  Montana,  1S74.     2  Mont.  1G.5.) 

Knowles.  J.  The  issues  in  this  case  are  presented  by  the  com- 
plaint of  the  respondent  and  the  demurrer  of  the  appellant.  It  is  an 
action  in  equity.  The  facts  set  forth  in  the  complaint  are  to  be  taken 
as  true.  The  demurrer  admits  them.  The  complaint  shows  that  James 
Walters,  as  the  agent  of  Joseph  Fultz,  deposited  in  the  First  National 
Bank  of  Helena  $3,100,  and  took  a  certificate  of  deposit  in  his  own 
name  from  said  bank  therefor;  that  the  certificate  of  deposit  is  now 
in  the  possession  of  Fultz,  but  that  Walters  has  refused,  and  still  re- 
fuses, to  make  a  written  indorsement  of  the  same  to  him ;  and  that 
said  bank  refuses  to  pay  the  same,  for  the  reason  that  the  said  cer- 
tificate is  not  indorsed  to  him,  Fultz.  The  object  of  the  action  is  to 
compel  the  said  Walters  to  indorse  this  certificate  of  deposit  to  Fultz, 
and,  should  he  fail  to  do  so,  that  the  court  appoint  a  commissioner  to 
make  the  same;  and,  further,  that  the  said  bank,  when  the  indorse- 
ment shall  be  made,  shall  be  compelled  to  pay  the  said  certificate.  The 
demurrer  was  to  the  point  that  the  complaint  did  not  state  equity  suf- 
ficient to  charge  the  bank.  The  court  overruled  the  demurrer.  The 
first  point  we  will  consider.  Does  the  complaint  state  facts  sufficient 
to  warrant  the  court  in  giving  the  relief  demanded  against  the  bank? 
A  certificate  of  deposit  made  in  the  form  of  the  one  presented  in  this 
action  is  in  effect  a  promissory  note.  It  is  made  payable  to  the  order 
of  Walters,  three  months  from  date.  Morse  on  Banks,  53,  says  of 
instruments  of  this  character :  "They  have  been  held  to  be  in  fact 
equivalent  to  promissory  notes.  Usually  they  embody  an  express 
promise  in  terms  to  pay;  but,  even  if  they  do  not,  they  are  yet  the 
bank's  acknowledgment  of  its  indebtedness,  and  so  are  of  the  same 
effect  as  if  they  expressly  promised  payment.  Substantially  they  re- 
semble promissory  notes,  and  the  courts  have  always  inclined  to  re- 
gard them  as  such,  especially  when  they  are  made  payable  otherwise 
than  immediately  and  upon  demand.  If  they  are  payable  at  a  future 
day  certain,  they  are  simply  promissory  notes,  neither  more  nor  less." 

Upon  the  same  subject,  Parsons  on  Notes  and  Bills  (volume  1,  p. 
26)  says :  "There  has  recently  been  considerable  discussion  as  to  the 
nature  of  the  instrument  in  common  use  among  bankers,  called  a  'cer- 
tificate of  deposit.'    It  is  usually  in  this  form:     T  hereby  certify  that 

»8  Compare  Keel  v.  Construction  Co.,  143  N.  C.  429,  55  S.  E.  826  (1906). 


Oh.  1)  TRANSFER.  335 

Mr.  A.  has  deposited  in  Bank  $1,000,  payable  twelve  months 

from  date,  to  his  order,  upon  the  return  of  this  certificate.  [Signed] 
B.,  Cashier.'  We  think  this  instrument  possesses  all  the  requisites  of 
a  negotiable  promissory  note;  and  that  seems  to  be  the  prevailing 
opinion."  See,  also,  to  the  same  effect.  Miller  v.  Austen,  13  How. 
218,  14  L.  Ed.  119.  Being  a  promissory  note,  this  certificate  is  ne- 
gotiable. The  bank,  then,  had  no  interest  in  the  relief  asked  against 
Walters,  the  indorsement  of  the  same.  And  it  may  be  needless  to  re- 
mark that  this  is  the  only  equity  presented  in  the  bill  for  which  the 
plaintiff  asks  relief.  I  think,  also,  that  the  plaintiff  had  a  speedy  and 
adequate  remedy  at  law  against  the  bank  without  the  indorsement 
prayed  for.  The  complaint  shows  that  Fultz  was  the  holder  of  the 
said  certificate,  and  the  real  owner  of  the  same.  Walters  had  delivered 
it  to  him,  and  claimed  no  interest  therein.  A  note  may  be  transferred 
by  assignment  as  well  as  by  indorsement.  And  it  is  not  necessary  that 
such  assignment  should  be  evidenced  by  writing.  Upon  the  subject 
of  the  assignment  of  promissory  notes,  see  2  Pars,  on  N.  &  B.  41- 
54.  In  this  discussion,  he  lays  down  the  rule:  "A  note  of  hand,  or 
a  bill  of  exchange,  being,  as  we  have  said,  itself  only  a  personal  chat- 
tel, although  called  and  regarded  for  most  purposes  as  a  chose  in  ac- 
tion, may  be  assigned  by  delivery  only,  without  any  writing  upon  it, 
or  on  another  paper." 

The  delivery  of  the  certificate  to  Fultz  under  the  circumstances  that 
appear  in  the  complaint  was  an  assignment  of  the  same.  Fultz  al- 
leges that  he  is  the  holder  and  owner  thereof,  and  that  Walters  claims 
no  interest  therein.  The  fact  that  the  certificate  was  made  payable 
to  the  order  of  Walters  makes  no  difference.  Promissory  notes,  made 
payable  to  order,  may  be  assigned,  as  we  have  seen,  by  delivery.  The 
words  "payable  to  order"  made  it  negotiable,  and  made  it  subject  to 
the  incidents  which  attach  to  negotiable  paper.  The  words  "payable 
to  order,"  in  a  promissory  note,  do  not  amount  to  a  contract  that  the 
payor  is  only  to  pay  the  same  when  it  is  indorsed  properly  by  the  payee. 
He  is  liable  to  an  assignee,  as  well  as  to  an  indorsee.  Under  our  stat- 
ute, Fultz,  being,  as  he  avers,  the  owner  and  holder  of  this  certificate, 
could  bring  an  action  thereon  in  his  own  name  against  the  bank.  Our 
statutes  provide :  "Inland  and  foreign  bills  of  exchange  and  promis- 
sory notes  are  hereby  declared  to  be  negotiable  obligations  in  this  ter- 
ritory, and  collectible  by  and  in  the  name  of  the  holders  and  owners 
thereof."     Cod.  St.  385. 

Again,  the  holder  and  owner  of  a  promissory  note  is  the  real  party 
in  interest,  and  hence,  under  our  statutes,  the  proper  person  to  bring 
an  action  on  such  an  obligation.^* 

Did  the  common-law  rule  prevail,  then  Fultz  would  have  a  right 

34  Accord:  First  Nat.  Bank  v.  Moore.  137  Fed.  505,  70  C.  0.  A.  89  (1905); 
Andrews  v.  McDaniel,  68  N.  C.  385  (1873);  Yonnker  v.  Martin,  18  Iowa,  143 
(1864);    Brown  v.  Richardson,  20  N.  Y.  472  (1859). 


336  NEGOTIATION.  (Part  2 

to  sue  the  bank,  in  the  name  of  Walters,  for  his  benefit,  and  there 
would  be  no  need  of  a  resort  to  a  court  of  equity  to  enforce  his  rights. 
For  these  reasons,  we  think  the  court  erred  in  its  ruhng,  as  far  as  the 
bank  was  concerned.  That  there  was  no  equity  presented  in  which  it 
had  an  interest  we  think  evident.  In  regard  to  Walters,  had  this  case 
been  properly  presented  by  the  demurrer,  or  briefs  filed  in  this  case, 
I,  for  myself,  would  be  inclined  to  hold  that  the  complaint  presented 
no  equity  against  him.  The  demurrer  does  not  show  wherein  there 
was  a  misjoinder  of  parties.  The  point  that  the  complaint  does  not 
show  equity  sufficient  to  charge  either  party  cannot  be  raised  on  a 
specification  that  there  is  a  misjoinder  of  parties  defendant.  This 
point  can  be  raised  by  our  Code  only  under  the  specification  that  the 
complaint  does  not  state  facts  sufficient  to  constitute  a  cause  of  ac- 
tion. The  other  ground  specified  in  the  demurrer  goes  to  the  point 
only  that  the  complaint  does  not  state  sufficient  facts  to  justify  the 
court  in  giving  the  plaintifif  the  relief  he  asks  against  the  bank,  and 
does  not  present  the  question  as  to  whether  or  not  there  was  equity 
enough  in  the  complaint  to  charge  Walters.  And  there  is  nothing  in 
the  briefs  of  appellants  that  present  this  issue.  This  court  does  not 
feel  called  upon  to  rule  upon  any  point,  in  a  case  like  this,  not  pre- 
sented by  the  exceptions  or  arguments  of  counsel. 

Considering  the  premises,  the  order  of  this  court  is  that  the  judg- 
ment of  the  court  below  be  modified,  so  as  to  give  the  relief  asked 
against  Walters  alone,  and  that,  as  to  the  First  National  Bank  of 
Helena,  the  demurrer  be  sustained  and  the  cause  dismissed. 

Judgment  modified. 


FARRIS  v.  WELLS. 
(Supreme  Court  of  Georgia,  1882.     68  Ga.  604.) 

Crawford,  J.  R.  C.  Farris  brought  suit  against  C.  W.  Wells  on 
two  bank  checks — each  one  calling  for  the  sum  of  $250 — drawn  by 
himself  (Wells),  against  the  Gate  City  National  Bank  of  Atlanta,  pay- 
able to  his  own  order,  but  not  indorsed.  The  declaration  alleged  that 
the  said  checks  were  delivered  to  the  plaintifif  by  the  defendant,  and 
upon  presentation  at  the  bank  for  payment  were  refused  on  the 
ground  that  the  said  defendant  had  notified  the  bank  not  to  pay  the 
same.  It  was  further  averred  that  the  said  defendant  had  also  re- 
fused to  pay  the  same,  although  thereunto  frequently  requested  so  to 
do.    The  case  was  dismissed  on  demurrer,  and  the  plaintifif  excepted. 

We  know  of  no  exception  to  the  rule  that,  where  an  instrument  is 
made  payable  to  order,  the  indorsement  of  the  payee  is  necessary  to 
transfer  the  legal  title  to  another.  Without  such  indorsement  the 
transferee  takes  it  as  a  mere  chose  in  action,  and  to  recover  upon  it 
must  aver  and  prove  the  consideration.     Nothing  of  the  sort  being 


Ch.  1)  TRANSFER.  33T 

averred,  the  demurrer  was  well  taken  and  properly  sustained.     Daniel 
on  Neg.  Inst.  §  664;    Story  on  Promissory  Notes,  §  121;    Story  oa 
Bills  of  Exch.  §  200. 
Judgment  affirmed. 


WALTERS  V.  NEARY. 

(Ck)urt  of  Appeal,  1904.     21  Times  L.  R.  146.) 

This  was  an  appeal  by  the  defendant  from  the  judgment  of  Mr. 
Justice  Phillimore,  reported  in  20  Times  L.  R.  555.  The  plaintiff 
claimed  a  declaration  that  the  defendant  might  be  ordered  duly  to  in- 
dorse a  certain  bill  of  exchange,  dated  February  2,  1903,  drawn  by  the 
defendant  and  payable  to  his  order  and  accepted  by  one  Chapman,  and 
he  also  claimed  -to  recover  £50.,  the  amount  of  the  bill  in  question. 
The  defendant  denied  that  the  plaintiff  was  entitled  to  his  indorse- 
ment on  the  bill,  or  that  he  was  entitled  to  recover  the  amount  for 
which  it  was  drawn.  In  February,  1903,  a  Mr.  Chapman  was  de- 
sirous of  raising  a  sum  of  money.  He  got  into  communication  with 
the  plaintiff's  solicitor,  and  it  was  arranged  that  if  Chapman  could 
procure  a  bill  of  exchange  for  i50.,  accepted  by  himself,  with  the  name 
of  a  responsible  drawer  attached,  the  plaintiff  would  lend  the  money. 
On  February  4th  Chapman  brought  to  the  plaintiff's  solicitor  a  bill 
for  £50.  drawn  by  the  defendant  and  payable  to  his  (the  defendant's) 
order  and  accepted  by  Chapman,  and  upon  this  being  handed  to  the 
solicitor  the  sum  in  question  was  advanced.  It  was  not  noticed  at  the 
time  that  the  bill  was  not  indorsed  by  the  defendant.  When  this  omis- 
sion was  discovered,  application  was  made  to  him  to  indorse  it,  but 
he  declined  to  do  so.  The  defendant,  in  his  evidence,  stated  that  Chap- 
man brought  the  bill  to  him  at  his  office,  and  he  signed  his  name  as 
drawer  and  handed  it  back  to  Chapman  for  the  purpose  of  enabling 
him  to  raise  money  upon  it,  and  that  he  received  no  value  for  it.  Mr. 
Justice  Phillimore  held  that  the  effect  of  the  transaction  was  that  the 
defendant  was  the  "holder"  of  the  bill  within  the  definition  in  section 
2  of  the  Bills  of  Exchange  Act,  1882,  immediately  after  it  had  been 
accepted  by  Chapman,  and  that  he  transferred  the  bill  by  means  of 
Chapman,  as  his  messenger  or  agent,  to  the  plaintiff,  and  that  the 
plaintiff,  as  the  transferee,  was  entitled,  under  section  31,  subsec.  4, 
of  the  act,  to  have  the  indorsement  of  the  defendant,  and  to  recover 
against  him  on  the  bill.  He  accordingly  gave  judgment  for  the  plain- 
tiff for  the  amount  of  the  bill.  The  defendant  appealed.  By  sectior 
2  of  the  Bills  of  Exchange  Act,  1882 :  "  'Holder'  means  the  payee  or 
indorsee  of  a  bill  or  note  who  is  in  possession  of  it,  or  the  bearer  there- 
of." By  section  31,  subsec.  4:  "Where  the  holder  of  a  bill  payable 
to  his  order  transfers  it  for  value  without  indorsing  it,  the  transfer 
gives  the  transferee  such  title  as  the  transferror  had  in  the  bill,  anr' 
Sm.&  M.B.&  N.— 22 


■338  NEGOTIATION.  (Part  2 

the  transferee  in  addition  acquires  the  right  to  have  the  indorsement 
of  tlie  transferror." 

The  court  dismissed  the  appeal. 

The  Master  of  the  Rolls  ^'  said  that  the  appeal  failed.  The 
facts  were  a  little  unusual.  Chapman  was  in  want  of  a  sum  of  money, 
lie  accordingly  went  to  the  defendant  with  the  view  of  raising  the 
money.  The  course  adopted  was  that  a  bill  was  made,  of  which  the 
defendant  was  the  drawer  and  Chapman  the  drawee,  and  it  was  drawn 
payable  to  the  defendant's  order.  Chapman  accepted  the  bill.  It  was 
clear  that  as  between  the  defendant  and  Chapman  the  bill  was  drawn 
to  assist  Chapman  in  raising  the  money.  The  transaction  involved 
permission  to  Chapman  to  use  the  defendant's  name  on  the  bill  for 
the  purpose  of  raising  money.  Therefore  when  Chapman  took  the 
bill  to  the  plaintiff  and  used  it  for  the  purpose  of  raising  money  he 
carried  an  authority  from  the  defendant  to  request  the  plaintiff  to  ad- 
vance money  to  Chapman  upon  it.  Chapman,  as  the  learned  judge 
had  found,  took  the  bill  to  the  plaintiff  in  the  capacity  of  agent  for 
the  defendant,  and  in  that  capacity  he  handed  the  bill  to  the  plaintiff, 
who  gave  him  value  for  it.  The  defendant's  indorsement  was  omitted 
by  mistake.  But  he  transferred  the  bill  for  value  to  the  plaintiff. 
The  plaintiff  claimed  to  have  the  bill  paid,  and  he  was  met  with  the 
difficulty  that  the  bill  was  payable  to  the  defendant's  order,  and  that 
the  defendant  had  not  indorsed  it.  The  question  was  whether  the 
plaintiff  was  entitled  in  these  circumstances  to  require  the  defendant 
to  indorse  the  bill. 

It  was  clear  that  he  was  so  entitled.  The  case  came  exactly  within 
the  authority  of  Watkins  v.  Maule,  2  Jac.  &  W.  237.  The  plaintiff 
accordingly  had  a  right  to  have  the  defendant's  indorsement  on  the 
bill,  and  as  soon  as  he  obtained  the  indorsement  he  would  become  the 
holder  for  value,  and  he  could  then  sue  the  accommodation  drawer, 
though  he  knew  when  he  took  the  bill  that  the  drawer  was  merely  an 
accommodation  drawer.  That  was  clear  from  section  28,  subsec.  2, 
of  the  Bills  of  Exchange  Act,  1882,  which  provided  that  "an  accommo- 
dation party  is  liable  on  the  bill  to  a  holder  for  value ;  and  it  is  imma- 
terial whether,  when  such  holder  took  the  bill,  he  knew  such  party  to 
be  an  accommodation  party  or  not."  It  was  said,  however,  that, 
though  the  plaintiff  became  the  holder  of  the  bill,  he  did  not  become 
the  holder  for  value.  The  answer  was  that  value  was  given  by  the 
plaintiff  at  the  defendant's  request  to  Chapman,  and  therefore  the 
plaintiff  became  the  holder  for  value.  The  judgment  was  therefore 
right.'* 

3  5  Sir  Richard  H.  Collins.    The  opinions  of  Sterling  and  Matthews,  L.  JJ., 
are  omitted. 

36  See  Seeley  v.  Reed,  28  Fed.  164  (1886). 


Ch.  1)  TRANSFER.  339 


SUBLETTE  et  al.  v.  BREWINGTON  et  al. 

(Kansas    City    Court    of   Appeals,    Missouri,    1909.      139    Mo.    App.    410,    122 

S.  W.  1150.) 

Broaddus,  p.  J.  This  is  a  suit  to  restrain  defendants  from  dispos- 
ing of  a  certain  promissory  note,  and  asking  for  its  cancellation.  On 
January  8,  1906,  the  plaintiffs  applied  to  E.  E.  Hilbert  to  procure  for 
them  a  loan  of  $1,000,  for  the  period  of  one  year.  For  the  purpose  of 
obtaining  the  loan,  they  executed  and  delivered  their  promissory  note 
for  said  sum  of  $1,000,  due  in  one  year,  payable  to  the  order  of  said 
Hilbert.  Hilbert,  with  one  of  the  plaintiffs,  applied  to  several  persons 
to  get  them  to  advance  the  money  on  the  note,  but  failed  to  get  such 
advance.  The  plaintiffs  then  went  home.  Afterwards  communica- 
tion by  telephone  was  had  between  the  plaintiffs  and  Hilbert  as  to 
whether  the  latter  had  succeeded  in  securing  the  loan.  The  matter 
was  left  in  this  condition  until  in  April,  when  plaintiffs,  according  to 
their  statements,  saw  Hilbert  for  the  purpose  of  taking  up  the  note 
when  he  informed  them  that  he  had  destroyed  it.  Thereafter,  on  the 
2d  of  October,  1906,  several  months  before  the  maturity  of  the  note, 
Hilbert  borrowed  from  defendants  $814,  and  executed  his  note  to  them 
for  that  amount  and  turned  over  to  them  the  note  in  suit,  without  in- 
dorsement, as  collateral  security.  The  defendants  took  the  note  in 
good  faith  in  the  behef  that  Hilbert  was  its  owner.  The  judgment  of 
the  court  was  for  the  defendants,  and  plaintiffs  appealed. 

The  note  in  question  was  a  negotiable  instrument  as  defined  in  sec- 
tion 1,  p.  243,  Acts  1905  (Ann.  St.  1906,  §  463-1),  entitled  "Negotiable 
Instruments,"  and  is  such  under  the  law  merchant,  and,  being  payable 
to  order,  it  did  not  pass  by  the  mere  act  of  delivery.  Section  30,  pp. 
247,  248,  Acts  1905,  is  as  follows :  "An  instrument  is  negotiated  when 
it  is  transferred  from  one  person  to  another  in  such  manner  as  to  con- 
stitute the  transferee  holder  thereof.  If  payable  to  bearer  it  is  nego- 
tiated by  delivery;  if  payable  to  order  it  is  negotiated  by  the  indorse- 
ment of  the  holder  completed  by  delivery."  Section  31 :  "The  indorse- 
ment must  be  written  on  the  instrument  itself  or  upon  a  paper  attached 
thereto.  The  signature  of  the  indorser,  without  additional  words,  is 
a  sufficient  indorsement."  H  the  case  is  to  be  determined  by  the  law 
governing  the  transfer  of  negotiable  instruments  payable  to  order,  the 
defendants  are  holders  with  notice  of  whatever  equities  plaintiff  may 
have  had. 

The  defendants'  defense  is  based  upon  the  ground  that,  as  Hilbert 
was  the  agent  of  plaintiffs,  the  law  merchant  does  not  control,  but  the 
question  is  one  of  agency.  With  this  view  we  coincide.  That  Hilbert 
was  the  agent  of  plaintiffs  to  negotiate  a  loan  by  means  of  the  note  is 
undeniable.  His  duty  was  to  obtain  a  loan  upon  the  credit  of  plain- 
tiffs' note,  which  as  a  matter  of  course  would  necessarily  become  the 
property  of  whoever  could  be  induced  to  advance  the  money  on  the  se- 


340  NEGOTIATION.  (Part  2 

curity  offered.  His  authority  was  complete.  In  effect  he  was  empow- 
ered to  dispose  of  the  paper  as  freely  as  if  it  had  been  his  own.  The 
face  of  the  paper,  in  fact,  was  a  notice  to  strangers  that  it  was  his 
property ;   and  it  was  not  issued  in  due  course  of  business. 

There  is  no  question  better  settled  than  that  the  acts  of  the  agent 
(within  the  scope  or  apparent  scope  of  his  authority)  are  binding  upon 
the  principal.  We  cannot  escape  the  conclusion  that  the  case  falls 
within  the  rule  governing  the  relation  of  agent  and  principal,  and  that 
the  law  merchant  does  not  apply.  Furthermore,  we  are  of  the  opinion 
that  the  plaintiffs  have  no  equity  as  against  defendants,  and  that  the 
transfer  to  defendants  was  for  a  sufficient  valuable  consideration.  It 
does  not  lie  in  the  mouth  of  a  party  to  plead  want  of  consideration 
where  his  agent  in  the  exercise  of  his  authority  as  such  deals  with  a 
stranger  to  his  prejudice. 

We  believe  the  judgment  of  the  court  was  for  the  right  party,  and 
it  is  therefore  aflfirmed.     All  concur.^^ 

ST  Accord:  Marling  v.  Fitzgerald,  138  Wis.  93,  120  N.  W.  388,  23  L.  R.  A. 
(N.  S.)  177  (1909). 


Ch.  2)  HOLDER  IN  DUE  COURSE.  341 

CHAPTER  II 
HOLDER  IN  DUE  COURSE 


SECTION  1.— VALUE 


BAY  V.  CODDINGTON  et  al. 
(Court  of  Chancery  of  New  York,  1821.    5  Johns.  Cli.  54,  9  Am.  Dec.  268.) 

The  plaintiff  being  owner  of  a  vessel,  employed  Randolph  &  Savage, 
defendants,  v^^ho  were  copartners,  to  sell  her  on  a  credit,  and  take 
good  notes  in  payment,  and  transmit  the  same  to  him,  with  an  account 
of  their  charges,  which  he  would  pay.  Randolph  &  Savage  sold  the 
vessel  for  $3,875,  and  on  the  3d  of  June,  1819,  received  the  notes  of 
the  purchasers,  payable  in  two,  three,  and  four  months;  some  of  them 
being  made  payable  to,  and  indorsed  by,  P.  Aymar  &  Co.,  and  the 
others  by  J.  R.  Stewart.  On  the  13th  of  June,  1819,  Randolph  & 
Savage  delivered  the  notes  so  indorsed  to  the  defendants,  J.  &  I.  Cod- 
dington,  who  were,  at  that  time,  as  they  stated  in  their  answer,  under 
heavy  responsibilities  for  Randolph  &  Savage,  as  indorsers  of  notes 
for  their  accommodation,  payable  at  different  times,  but  all  subsequent 
to  the  12th  of  June,  1819,  and  which  they  were  afterwards  obliged  to 
take  up,  as  they  fell  due,  amounting  to  above  $17,000.  The  answers 
admitted  that  Randolph  &  Savage  had  stopped  payment,  when  the 
notes  so  held  by  them  were  to  be  delivered  to  J.  &  I.  Coddington. 

The  defendants,  J.  &  I.  Coddington,  denied  all  knowledge  of  the 
manner  in  which  the  notes  had  come  to  the  hands  of  Randolph  & 
Savage,  and  alleged  that  they  believed  that  they  were  the  bona  fide 
and  exclusive  property  of  Randolph  &  Savage,  that  they  received  these 
notes  with  others,  as  a  guaranty  and  indemnity,  as  far  as  they  would 
avail,  for  their  responsibilities,  and  three  days  after  disposed  of  some 
of  the  notes  for  cash,  and  did  not  know,  until  several  days  afterwards, 
that  the  notes  belonged  to  the  plaintiffs,  as  stated  in  the  bill.  They  ad- 
mitted that,  when  they  so  received  the  notes,  Randolph  &  Savage  were 
not,  in  a  strict,  legal  sense,  indebted  to  them,  but  that  they  were  under 
large  gratuitous  responsibilities  for  them. 

The  ChanceIvLOR.^  It  is  admitted  that  Randolph  &  Savage  held 
the  notes  belonging  to  the  plaintiff,  and  which  they  transferred  to  the 
defendants  J.  &  I.  Coddington  on  the  12th  of  June,  1819,  as  agents  or 

1  James  Kent.  The  arguments  of  counsel  and  part  of  the  opinion  are 
omitted. 


342  NEGOTIATION.  (Part  2 

trustees  for  the  plaintiff,  and  that  they  had  no  authority  to  pass  them 
away.  It  was  a  gross  and  fraudulent  abuse  of  trust  on  the  part  of 
Randolph  &  Savage.  The  only  question  now  is  whether  J.  &  I.  Cod- 
dington  are  entitled,  under  the  circumstances  disclosed,  to  hold  the 
notes,  and  retain  the  amount  of  them  as  against  the  plaintiff. 

Negotiable  paper  can  be  assigned  or  transferred  by  an  agent  or 
factor,  or  by  any  other  person,  fraudulently,  so  as  to  bind  the  true 
owner  as  against  the  holder,  provided  it  be  taken  in  the  usual  course 
of  trade,  and  for  a  fair  and  valuable  consideration,  without  notice  of 
the  fraud.  But  the  defendants  J.  &  I.  Coddington,  have  not  entitled 
ihcmselves  to  the  protection  of  holders  of  that  description.  The  notes 
were  not  negotiated  to  them  in  the  usual  course  of  business  or  trade, 
nor  in  payment  of  any  antecedent  and  existing  debt,  nor  for  cash,  or 
property  advanced,  debt  created  or  responsibility  incurred,  on  the 
strength  and  credit  of  the  notes.  They  were  received  from  Randolph 
&  Savage,  and  after  they  had  stopped  payment  and  had  become  insol- 
vent within  the  knowledge  of  J.  &  I.  Coddington  and  were  seized  upon 
by  the  Coddingtons  as  tabula  in  naufragio,  to  secure  themselves  a;4ainst 
contingent  engagements  previously  made  for  Randolph  &  Savage  and 
on  which  they  had  not  then  become  chargeable.  There  is  no  case  that 
entitles  such  a  holder  to  the  paper,  in  opposition  to  the  title  of  the  true 
owner.  They  were  not  holders  for  a  valuable  consideration  within 
the  meaning  or  within  the  policy  of  the  law. 

In  Miller  v.  Race,  1  Burr.  452,  a  bank  note  was  stolen  and  came  to 
the  hands  of  the  plaintiff,  and  he  was  held  entitled  to  it.  But  the  Court 
of  King's  Bench  considered  bank  notes  as  cash,  which  passed  as  money 
in  the  way  of  business ;  and  the  holder,  in  that  case,  came  by  the  note, 
for  a  full  and  valuable  consideration,  by  giving  money  in  exchange  for 
it,  in  the  usual  course  of  his  business,  and  without  notice  of  the  rob- 
bery, and  on  those  considerations  he  was  entitled  to  the  amount  of  the 
note.  So,  in  Grant  v.  Vaughan,  3  Burr.  1516,  1  Black.  Rep.  785,  a  bill 
of  exchange  payable  to  bearer  was  lost,  and  the  finder  paid  it  to  a 
grocer,  for  teas,  and  took  the  change.  There  the  court  laid  stress  on 
the  facts  that  the  holder  came  by  the  bill  bona  fide,  and  in  the  course  of 
trade,  and  for  a  full  and  fair  consideration,  and  that,  though  he  and 
the  real  owner  were  equally  innocent,  yet  he  was  to  be  preferred,  for 
the  sake  of  commerce  and  confidence  in  negotiable  paper.  Again,  in 
Peacock  v.  Rhodes,  1  Doug.  633,  a  bill  of  exchange,  with  a  blank  in- 
dorsement, was  stolen  and  negotiated  to  a  person  who  took  it  in  the 
way  of  his  trade,  for  cloth  sold  and  cash  for  the  balance,  and  he  was 
held  entitled  to  hold  it.  Lord  Mansfield  placed  reliance  on  the  cir- 
cumstance that  it  was  received  in  the  course  of  trade.  It  was  "by  rea- 
son of  the  course  of  trade,  which  creates  a  property  in  the  assignee  or 
bearer,"  that  Holt,  C.  J.  (1  Salk.  126,  Anon.),  held  that  the  owner  of 
a  bank  bill,  which  was  lost  and  transferred  by  the  finder  to  C,  for  a 
valuable  consideration,  could  not  maintain  an  action  against  C. 


Oh.  2)  HOLDER    IN    DUE    COURSE.  843 

It  will  not  be  necessary  to  go  further  in  support  of  the  principle 
which  uniformly  pervades  the  cases  upon  this  point,  and  I  shall  con- 
clude with  the  case  of  Collins  v.  Martin,  1  Bos.  &  Pull.  648,  in  which  it 
was  decided  that  if  bills  of  exchange,  indorsed  in  blank,  be  deposited 
with  a  banker,  to  be  received  when  due,  and  the  banker  raises  money 
on  them,  by  pledging  them  to  C,  and  then  becomes  bankrupt,  C.  could 
not  be  sued  by  the  real  owner,  as  he  took  them  innocently,  without 
knowledge  of  the  previous  circumstances.  But  it  is  to  be  observed  that 
C.  there  advanced  money  to  the  banker,  on  the  credit  of  the  bills,  and, 
as  Chief  Justice  Eyre  observed  in  that  case,  "If  it  can  be  proved  that 
the  holder  gave  no  value  for  the  bill,  then,  indeed,  he  is  in  privity  with 
the  first  holder,  and  affected  by  all  that  will  affect  him." 

In  short,  I  have  not  been  able  to  discover  a  case  in  which  the  holder 
of  negotiable  paper,  fraudulently  transferred  to  him,  was  deemed  to 
have  as  good  a  title,  in  law  or  equity,  as  the  true  owner,  unless  he  re- 
ceived it,  not  only  without  notice,  but  in  the  course  of  business,  and 
for  a  fair  and  valuable  consideration  given  or  allowed  on  his  part,  on 
the  strength  of  that  identical  paper.  It  is  the  credit  given  to  the  paper, 
and  the  consideration  bona  fide  paid  on  receiving  it,  that  entitles  the 
holder,  on  grounds  of  commercial  policy,  to  such  extraordinary  pro- 
tection, even  in  cases  of  the  most  palpable  fraud.  It  is  an  exception 
to  the  general  rule  of  law,  and  ought  not  to  be  carried  beyond  the  ne- 
cessity that  created  it. 

1  shall  accordingly  declare  that  the  defendants  J.  &  I.  Coddington 
are  not  entitled  to  the  notes  or  the  proceeds  thereof,  as  against  the 
plaintiff,  who  was  the  lawful  owner  of  them  when  they  were  transfer- 
red to  those  defendants,  inasmuch  as  they  did  not  receive  the  notes  in 
the  course  of  business,  nor  in  payment,  in  whole  or  in  part,  of  any  then 
existing  debt,  nor  for  cash  or  property  advanced,  or  debt  created,  or 
responsibility  incurred  on  the  credit  of  the  notes.  And  I  shall  direct 
that  it  be  referred  to  a  master  to  compute  the  amount  of  the  said  notes, 
with  interest  thereon  from  the  times  they  were  respectively  payable,  to 
the  time  of  making  the  report,  and  that  all  the  defendants  in  the  amend- 
ed bill,  or  some  or  one  of  them,  pay  to  the  plaintiff  the  sum  that  shall 
be  reported  as  the  amount  of  the  said  notes,  with  interest,  as  afore- 
said, within  30  days  after  the  master  shall  have  made  and  filed  his  re- 
port, and  notice  thereof,  and  of  this  decree,  or  that  the  plaintiff  may 
have  execution  therefor,  against  all  or  either  of  the  said  defendants, 
according  to  the  course  and  practice  of  the  court.     *     *     *  2 

2  Affirmed  20  Johns.  637,  11  Am.  Dec.  342  (1S22). 


344  NEGOTIATION.  (Part  2 

BANK  OF  SANDUSKY  v.  SCOVILLE  et  al. 
(Supreme  Court  of  New  York,  1840.    24  Wend.  115.) 

This  was  an  action  of  assumpsit,  tried  at  the  Erie  circuit  in  January, 
1839,  before  Hon.  Nathan  Dayton,  one  of  the  circuit  judges. 

The  action  was  on  a  note  for  $500,  dated  May  11,  1837,  made  by  the 
defendant  Scoville,  payable  60  days  after  date,  at  the  Bank  of  Buffalo, 
to  the  order  of  the  defendant  Barton,  and  indorsed  by  him  and  the  de- 
fendant Mooney.  The  defense  was  usury.  It  was  an  accommodation 
note,  which  had  been  discounted  at  an  usurious  rate  of  interest  by 
Henry  D.  Ward,  a  broker  in  Buffalo,  and  by  him  negotiated  to  the 
plaintiffs.  Ward,  in  his  deposition,  testified  that  he  passed  the  note  to 
and  it  was  discounted  by  the  plaintiffs  in  June,  1837,  to  extinguish  a 
debt  due  by  the  witness  to  the  plaintiffs;  and  again  he  said  the  note 
»vas  discounted  by  the  plaintiff's  for  his  benefit,  and  the  avails  went  so 
far  to  discharge  his  liability  to  them.  The  plaintiffs  had  no  knowl- 
edge of  the  usury.  The  judge  ruled  that  the  plaintiffs  were  bona  fide 
holders,  and  entitled  to  recover.  Exception.  Verdict  for  plaintiffs. 
Defendants  move  for  a  new  trial. 

Bronson,  J.  The  note  was  transferred  before  the  usury  act  of  1837 
took  effect ;  the  plaintiff's  received  it  in  good  faith,  without  any  notice 
of  the  usurv ;  and  the  only  question  is  whether  they  paid  a  valuable 
consideration.     1  Rev.  St.  772,  §  5. 

I  think  they  did.  It  is  not  the  case  of  a  note  received  in  security 
for  a  precedent  debt,  without  parting  with  anything  at  the  time.  The 
note  was  discounted  by  the  plaintiffs  for  the  benefit  of  Ward,  to  ex- 
tinguish his  debt,  and  the  avails  went  to  discharge  his  liability  to  the 
bank.  I  cannot  understand  this  language  as  meaning  less  than  that 
the  proceeds  of  the  note  were  actually  applied  to  the  use  of  Ward.  It 
is  the  same  thing,  substantially,  as  though  Ward  had  first  received  the 
money  and  then  paid  it  over  to  the  plaintiffs,  or,  indeed,  to  any  other 
creditor.  If  Ward's  liability  was  discharged,  his  debt  extinguished, 
it  is  impossible  to  deny  that  the  plaintiffs,  in  effect,  parted  with  their 
money,  and  that  Ward  received  it.  In  Bank  of  Salina  v.  Babcock  and 
Others,  21  Wend.  499,  the  old  notes  were  charged  over  and  canceled 
by  the  bank  ;  and  although  not  actually  given  up,  we  held  that  the  bank 
was  a  bona  fide  holder  for  value  of  the  new  note  which  had  been  dis- 
counted to  take  up  the  old  ones.  The  principle  of  that  case  is,  I  think, 
decisive  in  favor  of  the  plaintiffs. 

We  were  referred  by  the  counsel  for  the  defendants  to  the  case  of 
Ypsilanti  Bank  v.  Martin  and  Others,  decided  on  the  argument  at  July 
term,  1839.  I  have  looked  into  the  papers  in  that  case,  and  it  does  not 
appear  that  the  bank  had  parted  with  the  proceeds  of  the  note,  by  ei- 
ther paying  over  the  money  to  Stevens  &  Co.,  or  applying  it  in  satis- 


Ch.  2)  HOLDER    IN    DUE    COURSE.  345 

faction  of  their  debt.    We  thought  the  plaintiffs  had  not  made  out  that 
they  had  in  any  way  paid  value  for  the  note,  and  on  that  ground  the 
report  of  the  referee  was  set  aside. 
New  trial  denied. 


TRADERS'  BANK  OF  ROCHESTER  v.  BRADNER  et  al. 

(Supreme  Court  of  New  York,  General  Term,  1864.    43  Barb.  379.) 

The  action  is  against  Lester  Bradner  and  Lewis  W.  Carroll,  makers, 
as  copartners  under  the  firm  name  of  Bradner  &  Carroll,  and  the  other 
defendants  as  acceptors,  as  copartners  under  the  firm  name  of  Lowrey, 
Strang  &  Co.,  of  a  draft  of  $17,000,  dated  February  6,  1862,  payable 
90  days  after  date,  to  the  order  of  D.  Lowrey,  indorsed  by  him,  ac- 
cepted by  the  drawees  and  delivered  by  Lowrey  to  the  plaintiff  as  col- 
lateral security  for  nine  drafts  held  by  plaintiff,  to  which  he  was  a  par- 
ty, in  consideration  of  plaintiff's  agreement  to  extend  the  time  of  pay- 
ment of  the  nine  drafts  until  the  maturity  of  the  draft  in  suit.  The 
draft  in  suit  had  been  delivered  to  the  plaintiff  in  breach  of  faith  by 
Lowrey  and  without  any  authority  on  his  part  from  the  defendants. 
The  court  directed  a  verdict  for  the  plaintiff,  to  which  the  defendants 
excepted,  and  the  exception  was  directed  to  be  argued  in  the  first  in- 
stance at  the  general  term.* 

James  C.  Smith,  J.  *  *  *  At  the  time  when  the  bank  received 
the  draft  in  suit,  which  was  between  the  19th  and  29th  days  of  March, 
it  held  nine  other  drafts,  previously  discounted  by  it,  seven  of  which, 
amounting  to  $17,000,  were  drawn  by  Lowrey,  on  Lowrey,  Strang  & 
Co.,  and  accepted  by  them,  and  the  other  two,  amounting  to  $4,000, 
were  drawn  by  Bradner  &  Carroll,  on  Lowrey,  Strang  &  Co.,  to  the  or- 
der of  Lowrey,  and  accepted  by  the  drawees.  Of  these  nine  drafts,  one 
was  to  mature  on  the  29th  of  March,  one  on  the  9th  of  May,  and  the 
others  on  different  days  between  those  dates.  The  draft  in  suit  was 
transferred  to  the  plaintiff  as  collateral  security  for  the  payment  of  the 
nine  drafts  above  mentioned,  and  the  plaintiff',  in  consideration  of  such 
transfer,  expressly  agreed  that  it  would  not  sue  Lowrey,  or  Lowrey, 
Strang  &  Co.,  upon  either  of  said  drafts,  until  the  maturity  of  draft 
thus  transferred.  The  judge,  at  the  circuit,  held  that  this  agreement 
for  forbearance  was  a  valuable  consideration  within  the  meaning  of  the 
rule  protecting  the  holder  of  negotiable  paper ;  and  I  am  of  opinion 
the  decision  is  correct. 

It  is  insisted  by  the  defendants  that,  as  the  plaintiff  received  the 
draft  as  collateral  security  to  a  pre-existing  debt,  it  is  not  a  holder  for 
value  according  to  the  law  as  settled  by  the  adjudications  of  the  courts 

3  The  statement  of  facts  is  abridged.  The  arguments  of  counsel  and  part 
of  the  opinion  are  omitted. 


346  NEGOTIATION.  (Part  2: 

of  this  state.  As  I  understand  the  numerous  reported  cases  bearing 
upon  this  question,  they  estabhsh  the  following  propositions:  (1)  The 
holder  of  commercial  paper,  who  has  received  it  for  an  antecedent  debt, 
either  as  a  security  for  payment,  or  as  a  nominal  payment,  without 
parting  with  any  security,  property  or  thing  of  legal  value,  or  giving 
any  new  consideration,  is  not  a  holder  for  a  valuable  consideration. 
Coddington  v.  Bay,  20  Johns.  637,  11  Am.  Dec.  343 ;  Stalker  v.  Mc- 
Donald, 6  Hill,  93,  40  Am.  Dec.  389 ;  Farrington  v.  Frankfort  Bank, 
24  Barb.  554.  (2)  If,  however,  he  has  paid  value  for  the  paper,  or  on 
the  credit  thereof  has  relinquished  some  available  security  or  valuable 
right,  or  has  expressly  assumed  some  new  legal  obligation,  he  is  a  hold- 
er for  value,  although  the  paper  is  available  to  him  as  security  for  a 
pre-existing  debt.  Bank  of  Salina  v.  Babcock,  21  Wend.  499  ;  Bank  of 
St.  Albans  V.  GilHland,  23  Wend.  311,  35  Am.  Dec.  566;  Bank  of  San- 
dusky V.  Scoville,  24  Wend.  115  ;  Mohawk  Bank  v.  Corey,  1  Hill,  513  ; 
Youngs  V.  Lee,  18  Barb.  187,  affirmed  12  N.  Y.  551 ;  White  v.  Spring- 
field Bank,  3  Sandf.  222 ;  Meads  v.  Merchants'  Bank,  25  N.  Y.  143, 
82  Am.  Dec.  331. 

Tested  by  these  rules,  the  agreement  of  the  plaintiff  to  give  time  up- 
on the  drafts  held  by  it  was  clearly  a  valuable  consideration.  Not  only 
was  it  a  valid  consideration  to  support  the  transfer,  but  it  created  a  new 
equity  between  the  original  parties,  and,  as  it  suspended  the  legal  rem- 
edy of  the  plaintiff,  the  latter  could  not  be  restored  to  as  good  condi- 
tion as  it  was  in  before  the  transfer.  It  operated  like  a  new  loan  of 
the  sums  due  upon  the  drafts,  until  the  maturity  of  the  new  security. 
The  transaction  was  substantially  the  same  as  if  the  old  drafts,  to  the 
amount  of  $17,000,  had  been  paid  and  canceled,  and  the  sum  paid  had 
been  loaned  upon  the  new  draft.  Although  the  plaintiff  did  not  give 
up  the  old  drafts,  it  parted  with  its  right  of  action  upon  them  until  the 
maturity  of  the  new  one,  and  assumed  the  risk  of  loss  by  the  insolven- 
".y  of  Lowrey  and  his  firm,  in  the  meantime.  And  if  the  agreement  to 
give  time  included  the  drafts  drawn  by  Bradner  &  Carroll,  they  were 
thereby  released  from  their  obligation  upon  such  drafts,  as,  on  the  face 
of  the  paper,  they  were  sureties  for  the  acceptors,  and  it  does  not  ap- 
pear that  they  consented  to  the  extension. 

The  defendants'  counsel  cites  Wardell  v.  Howell,  9  Wend.  170,  and 
Francia  v.  Joseph,  3  Edw.  Ch,  182,  as  authorities  for  the  position  that 
the  agreement  to  give  time  does  not  constitute  a  valuable  considera- 
tion. But  I  think  they  are  not  decisive  of  the  question.  In  Wardell 
v.  Howell  the  plaintiffs  had  sued  one  Hughes  on  a  note  of  $178. 
Hughes  offered  the  plaintiffs  that,  if  they  would  stop  the  suit,  he  would 
pay  the  costs  and  turn  out  a  note  in  his  possession,  indorsed  by  the  de- 
fendants, for  $150,  as  collateral  security  for  the  note  they  held  against 
him.  The  plaintiffs  acceded  to  his  proposition;  he  paid  the  costs  and 
delivered  the  note  in  question  to  them ;  and  they  gave  him  a  receipt 
acknowledging  that  they  had  received  the  note,  which,  when  paid,  was 


Ch.  2)  HOLDER  IN  DUE  COURSE.  347 

to  apply  on  their  note  against  him.  There  was  no  express  agreement 
to  extend  the  time  of  payment;  and  none  could  be  presumed,  as  the 
agreement  was  meiely  that  the  note  should  take  effect  as  security. 
Gahn  v.  Niemcewicz,  11  Wend.  320;  Williams  v.  Townsend,  1  Bosw. 
•±11.  It  would  have  been  otherwise,  perhaps,  if  the  parties  had  intend- 
ed the  note  to  operate  as  a  conditional  payment,  at  the  time  of  the 
transfer.  Myers  v.  Welles,  5  Hill,  463 ;  Fellows  v.  Prentiss,  3  Denio, 
513,  45  Am.  Dec.  4S4,  3  Am.  h.  Cas.  430.  But,  by  the  terms  of  the 
receipt,  it  was  not  to  be  applied  until  paid.  This  view  of  the  case  was 
undoubtedly  taken  by  the  court.  Justice  Sutherland,  delivering  the 
opinion,  said  that  the  prior  indebtedness  of  Hughes,  and  the  discon- 
tinuing the  suit  against  him,  did  not  constitute  a  valuable  considera- 
tion against  the  indorser,  under  the  circumstances  of  the  case.  But 
he  did  not  suggest  that  there  was  an  agreement  to  extend  the  time 
express  or  implied ;  nor  is  there  an  allusion  in  the  case  to  the  effect  of 
such  an  agreement  by  way  of  constituting  a  valuable  consideration  in 
the  sense  of  the  commercial  rule.  The  case  of  Francia  v.  Joseph  was 
decided  by  Vice  Chancellor  McCoun,  so  far  as  this  point  is  concerned, 
mainly  upon  a  misapprehension,  as  I  conceive,  of  the  ruling  in  War- 
dell  v.  Howell.  The  decision  is  entitled  to  great  respect,  but  as  it 
stands  alone,  and  is  not  binding  upon  this  court  at  General  Term,  we 
may  properly  consider  the  question  as  an  open  one. 

The  plaintiff  is  to  be  regarded  as  a  holder  for  value  to  the  full 
amount  of  the  draft  in  suit.  As  has  already  been  observed,  it  assumed 
by  its  agreement  the  risk  of  loss  by  reason  of  all  the  parties  to  the 
drafts  becoming  insolvent  during  the  period  for  which  the  credit  was 
extended.  If  such  insolvency  had  occurred,  the  bank  would  be  re- 
garded as  having  paid  the  full  amount  of  the  draft.  The  result  is  the 
same  if  the  transaction  is  treated  as  a  payment  of  $17,000  upon  the 
•original  drafts,  and  a  loan  of  that  amount  upon  the  draft  in  suit. 

I  am  of  opinion  the  motion  for  a  new  trial  should  be  denied. 

Ordered  accordingly.* 

4  "The  law  is  well  settled  that  the  acceptance  of  such  a  note,  on  time, 
though  not  received  as  an  absolute  payment  of  the  original  debt,  suspends  the 
right  of  action  on  the  original  debt  until  the  note  becomes  due,  or  is  dishon- 
ored. Putnam  v.  Lewis,  S  Johns.  389 ;  5  Term  R.  513 ;  Edwards  on  Bills  and 
Promissory  Notes,  197,  199,  200;  1  Bing.  100.  The  debt  from  Aguew  to  the 
plaintiff  being  due,  and  the  plaintiff,  at  the  time  of  surrendering  the  old  note, 
having  the  right  to  enforce  its  payment  presently,  and  which  right  he  relin- 
quished by  receiving  the  note  In  suit,  and  his  power  to  collect  the  original 
debt  from  Agnew  being  suspended  until  the  note  in  suit  should  mature,  he 
certainly  parted  with  value,  which  constitutes  a  sufficient  consideration  to 
make  the  plaintiff  a  bona  fide  holder  of  the  note  in  suit.  Burns  v.  Rowland, 
40  Barb.  369.  It  is  true  the  plaintiff  had  Agnew's  indorsement  upon  the  note 
in  suit ;  but  this  was  only  a  contingent  liability  at  the  end  of  six  months,  and 
the  plaintiff  was  bound  to  protest  the  note  to  charge  him."  Mason,  J.,  in 
-Pratt  V.  Comau,  37  N.  Y.  440,  443. 


348  NEGOTIATION.  (Part  2 

MOORE  V.  RYDER. 

(Court  of  Appeals  of  New  York,  1S75.    65  N.  Y.  438.) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme  Court 
in  the  Third  Judicial  Department,  affirming  a  judgment  in  favor  of 
plaintiff,  entered  upon  a  decision  of  the  court  upon  trial  without  a  jury. 

This  action  was  brought  upon  a  draft  drawn  by  J.  W.  Landen,  as 
agent  of  the  Cooper's  Falls  Iron  Company,  upon  defendant,  James  M. 
Ryder,  and  accepted  by  him  for  the  purpose  stated  in  the  opinion  of 
Earl,  C,  wherein  may  be  found  a  sufficient  statement  of  the  facts. ^ 

E.\RL,  C.  John  W.  Landen  was  agent  of  the  Cooper's  Falls  Iron 
Company,  and  as  such  agent,  on  the  1st  day  of  October,  1868,  he  drew 
the  draft  in  suit  on  the  defendant,  Ryder,  who  accepted  the  same.  The 
draft  was  made,  accepted  and  delivered  to  Landen  mainly  for  the  spe- 
cial purpose  of  paying  certain  drafts  of  the  iron  company  which  had 
been  previously  accepted  by  Ryder  for  its  accommodation,  and  which 
were  then  held  by  the  Jefferson  County  Bank.  Landen,  however,  did 
not  take  up  the  iron  company's  drafts,  but  transferred  and  delivered 
the  draft  in  suit  to  the  plaintiff,  who  took  the  same  without  any  knowl- 
edge of  the  purpose  for  which  it  was  made  and  accepted.  At  the  time 
of  the  transfer  to  the  plaintiff  the  iron  company  was  indebted  to  him 
and  Burnham,  under  the  firm  name  of  Moore  &  Burnham,  $723.35 ; 
to  plaintiff  and  Kingsbury,  under  the  firm  name  of  Moore  &  Kings- 
bury, $272.53 ;  and  to  plaintiff  individually,  $110.56 — all  the  debts  be- 
ing past  due.  The  plaintiff  received  the  draft  in  payment  of  these 
debts,  and  assumed  to  pay  to  his  partners,  Burnham  and  Kingsbury, 
their  respective  shares  of  the  debts.  Upon  these  facts  the  judge  at 
Special  Term  found,  as  a  conclusion  of  law,  that  plaintiff  was  a  bona 
fide  holder  of  the  draft  for  value,  and  entitled  to  recover  against  the 
acceptor,  and  an  exception  to  this  finding  presents  the  only  question 
for  our  consideration. 

This  draft,  having  been  fraudulently  diverted  from  the  object  for 
which  it  was  made  and  accepted,  can  be  enforced  against  the  accom- 
modation acceptor  only  by  a  bona  fide  holder  for  value.  This  has  been 
so  thoroughly  settled  by  repeated  adjudications  in  this  state  as  to  need 
no  further  discussion.  The  only  difficulty  in  this  and  similar  cases  is 
to  determine  what  is  a  parting  with  value  within  the  meaning  of  the 
rule.  A  mere  precedent  debt  does  not  make  a  party  taking  such  a  draft 
a  holder  for  value,  whether  the  draft  be  taken  in  payment  of  the  debt 
or  as  collateral  security  therefor.  Coddington  v.  Bay,  20  Johns.  637, 
11  Am.  Dec.  342  ;  Wardell  v.  Howell,  9  Wend.  170;  Payne  v.  Cutler, 
13  Wend.  605 ;  Stalker  v.  McDonald,  6  Hill,  93,  40  Am.  Dec.  389 ; 
Farrington  v.  Frankfort  Bank,  24  Barb.  555 ;    Huff  v.  Wagner,  63 

5  The  argiiments  of  counsel,  and  the  opinion  of  Gray,  C,  who  placed  the  re- 
versal on  another  ground,  are  omitted. 


Ch.  2)  HOLDER    IN    DUE    COURSE.  349 

Barb.  215 ;   Lawrence  v.  Clark,  36  N.  Y.  128 ;    Pratt  v.  Conian,  37  N. 
Y.  440 ;   Weaver  v.  Barden,  49  N.  Y.  286. 

The  law  enables  a  bona  fide  holder  of  negotiable  paper,  which  has 
been  fraudulently  obtained,  diverted  or  used,  to  recover  thereon  only 
to  protect  him  against  loss,  upon  the  principle  that,  when  one  of  two 
innocent  parties  must  suffer  by  the  fraud  or  wrong  of  a  third  person, 
the  one  who  put  it  in  the  power  of  such  third  person  to  commit  the 
fraud  or  wrong  must  bear  the  loss.  In  case  the  holder  of  such  paper 
has  not  parted  with  any  value,  or  incurred  any  binding  obligation,  or 
changed  his  position  to  his  detriment  on  the  faith  thereof,  he  cannot 
recover  thereon  against  the  party  defrauded  or  wronged. 

In  this  case,  plaintiff  gave  up  no  security  and  parted  with  no  value 
when  he  received  the  draft.  But  it  is  claimed  that  he  extended  the 
time  of  payment  upon  the  debt  until  the  maturity  of  the  draft,  and 
that  his  extension  makes  him  a  holder  for  value.  I  cannot  assent  to 
this.  There  was  no  agreement  to  extend  the  time  of  payment,  and 
the  receipt  by  plaintiff  of  this  paper  fraudulently  diverted  would  fur- 
nish no  consideration  for  such  an  agreement.  If  the  rule  were  other- 
wise, then,  in  all  cases  where  negotiable  paper  fraudulently  diverted  is 
received  in  payment  of  a  precedent  debt  past  due,  there  would  be  such 
an  extension  of  time  as  would  make  the  taker  a  holder  for  value.  The 
paper  taken  must  have  some  time  to  run  or  the  taker  cannot  be  a  bona 
fide  holder,  and  the  claim  is  that,  when  such  paper  is  taken  in  payment 
of  a  precedent  debt  past  due,  there  is  such  a  necessary  extension  of  the 
time  of  payment  of  the  debt  as  to  make  the  taker  a  holder  for  value. 
If  this  claim  be  well  founded,  the  rule  that  one  who  takes  negotiable 
paper  which  has  been  fraudulently  diverted  in  payment  of  a  precedent 
debt  cannot  enforce  the  same  against  the  party  wronged  by  the  fraud 
is  of  no  practical  value;  and  yet  the  rule  has  been  enforced  in  many 
cases.  Rosa  v.  Brotherson,  10  Wend.  86 ;  Payne  v.  Cutler,  Lawrence 
V.  Clark,  and  other  cases  above  cited. 

It  is  further  claimed  that  the  assumption  by  plaintiff  to  pay  his  part- 
ners, Burnham  and  Kingsbury,  their  shares  of  the  demands  against  the 
iron  company  which  were  paid  by  the  draft  transferred  to  him,  makes 
him  a  holder  within  the  rule.  He  did  not  in  fact  pay  his  partners,  and 
so  far  as  the  case  shows  they  did  not  call  upon  him  for  payment. 
While  they  could  adopt  and  enforce  such  a  promise  made  upon  a  val- 
uable consideration  for  their  benefit,  within  the  rule  laid  down  in  the 
case  of  Lawrence  v.  Fox,  20  N.  Y.  268,  they  did  not  do  it,  and  until 
they  did  adopt  it,  or  in  some  way  claim  the  benefit  of  it  and  accept  the 
new  debtor  in  place  of  the  old  one  as  their  principal  debtor,  the  origi- 
nal parties  to  the  promise  could  rescind  or  modify  it;  and  the  obliga- 
tion of  the  promisor  to  the  party  for  whom  the  promise  was  made  re- 
mained imperfect.  If  they  should  adopt  the  promise,  they  would  have 
to  adopt  the  instrumentalities  by  which  it  was  obtained ;  and  the  plain- 
tiff could  defend  against  them  upon  the  ground  that  he  was  induced  to 
make  the  promise  by  fraud. 


350  NEGOTIATION.  (Part  2 

I  am  also  of  the  opinion  that  the  mere  promise  of  the  transferee  of 
such  paper  docs  not  make  him  a  holder  for  value,  for  the  reason  that  the 
promise  is  not  binding,  and  cannot,  therefore,  in  a  legal  sense,  subject 
him  to  loss.  Weaver  v.  Harden,  49  N.  Y.  286,  291,  and  cases  cited. 
The  promise  is  no  more  binding  than  it  would  have  been  if  it  had  been 
made  to  pay  a  certain  sum  of  money  at  some  future  time  to  the  fraudu- 
lent negotiator  of  the  paper.  That  such  a  promise  made  the  transferee 
a  holder  for  value  within  the  meaning  of  the  rule  no  one  would  claim. 

In  any  event  plaintiff  could  only  be  a  bona  fide  holder  for  value  to 
the  extent  of  the  shares  of  his  partners  in  the  debts  which  he  had  as- 
sumed to  pay.  Stalker  v.  McDonald,  6  Hill,  93,  40  Am.  Dec.  389; 
Huff  v.  Wagner,  63  Barb.  215. 

The  judgment  should  therefore  be  reversed,  and  new  trial  granted ; 
costs  to  abide  event. 

Judgment  reversed. 


CURRIE  et  al.  v.  MISA. 
(Court  of  Exchequer  Chamber,  1875.    10  L.  R.  Exch.  Cas.  153.) 

Action  by  the  plaintiffs  as  bearers  of  a  check  drawn  by  defendant  on 
his  bankers,  Barnett,  Hoare  &  Co.,  payable  to  Lizardi  &  Co.,  or  bearer, 
payment  of  which  had  been  refused  by  the  drawee  in  compliance  with 
the  defendant's  instructions.  The  defendant  for  the  sum  of  £1,999.  3s. 
to  be  paid  the  14th  February,  1873,  had  purchased  of  Lizardi  &  Co. 
drafts  on  their  correspondent  in  Cadiz.  On  the  13th  Lizardi  &  Co. 
delivered  to  the  plaintiffs  the  following  instrument : 

"London,  14th  February,  1873. 

"M.  IMisa,  Esq.,  41,  Crutched  Friars:  Please  to  pay  to  Messrs. 
Glynn,  Mills  &  Co.,  or  bearer,  the  sum  of  nineteen  hundred  and  ninety 
pounds  three  shillings,  for  bills  negotiated  to  you  last  post. 

"il,999.  3s.  F.  De  Lizardi  &  Co." 

This  instrument  was  stamped  as  a  bill  of  exchange  payable  on  de- 
mand, although  it  was  postdated.  At  this  time  Lizardi  &  Co.  were 
indebted  to  the  plaintiffs,  their  bankers,  in  the  sum  of  about  i83,500. 
and  were  insolvent.  On  the  14th  the  defendant  was  notified  that  this 
instrument  was  in  the  hands  of  the  plaintiffs,  and  delivered  to  them 
the  check  upon  which  this  action  is  brought,  receiving  from  the  plain- 
tiffs the  instrument  above  set  forth.  The  plaintiffs  credited  the  check 
on  account  of  Lizardi  &  Co.'s  indebtedness  to  the  plaintiffs.  Before 
the  check  was  paid  by  the  drawee,  the  defendant,  learning  of  Lizardi 
&  Co.'s  failure,  stopped  its  payment.  Subsequently  the  drafts  pur- 
chased of  Lizardi  &  Co.  were  dishonored  by  the  drawee  in  Cadiz. 

It  was  contended  on  behalf  of  the  defendant  at  the  trial  that  there 
was  a  total  failure  of  consideration  as  between  the  defendant  and 
Lizardi  for  the  check  sued  on,  and  that  the  plaintiffs  were  not  holders 
thereof  for  value ;   but  the  learned  judge  ruled  upon  the  above  facts 


Ch.  2)  HOLDER    IN    DUE    COURSE  351 

(neither  party  desiring  that  any  question  should  be  left  to  the  jury) 
that  the  plaintiffs  were  entitled  to  recover,  and  directed  the  jury  to 
find  a  verdict  for  the  plaintiffs  for  £2,090.,  the  amount  of  the  check 
and  interest  thereon,  and  a  verdict  for  that  amount  was  thereupon 
entered,  with  leave  to  move  to  enter  a  nonsuit. 

The  Court  of  Exchequer  refused  a  rule,  and  the  defendant  ap- 
pealed.^ 

The  judgment  of  the  court  (Keating,  Lush,  Quain,  and  Arch- 
ibald, JJ. ;   Lord  Coleridge,  C.  J.,  dissenting)  was  delivered  by 

Lush,  J.  This  is  an  action  on  a  check,  dated  the  14th  of  Febru- 
ary, 1873,  drawn  by  the  defendant  on  Messrs.  Barnett,  Hoare  &  Co., 
for  payment  of  £1,999.  3s.  to  Lizardi  &  Co.  or  bearer.  The  material 
plea  is  the  fifth,  which  alleges  that  there  never  was  any  consideration 
for  the  defendant's  making  or  paying  the  check,  and  that  the  plain- 
tiffs have  always  held  the  same  without  having  given  any  consideration. 

We  think  it  must  be  assumed  on  the  facts  stated  in  the  case  that^ 
if  the  action  had  been  brought  by  Lizardi,  the  defendant  would  have 
had  a  good  answer  to  it,  on  the  ground  either  of  fraud  or  failure  of 
consideration,  it  matters  not  which.  The  only  question  therefore  is 
whether,  under  the  circumstances  stated,  the  plaintiffs  are  to  be  con- 
sidered the  holders  of  the  check  for  value. 

The  material  facts  bearing  on  this  question  may  be  briefly  stated. 
The  defendant  had  purchased  of  Lizardi  &  Co.  bills  on  Cadiz,  which 
were  delivered  to  him  on  the  11th  of  February,  and  which,  according 
to  the  usual  course  of  business,  were  to  be  paid  for  on  the  next  post 
day,  the  14th.  Lizardi  was  at  this  time  largely  indebted  to  the  plain- 
tiffs, who  were  his  bankers,  on  both  his  drawing  account  and  a  loan 
account,  and  he  had  for  several  days  previously  to  and  again  on  the 
12th  of  February  been  pressed  for  payment  or  further  security.  On 
the  13th  he  paid  in  various  checks  on  account  of  the  balance,  and  at 
the  same  time  handed  to  the  plaintiffs  the  document  set  out  in  para- 
graph 13  of  the  case,  which  is  designated  a  "bill." 

On  the  morning  of  the  14th  notice  of  this  "bill,"  described  as  ly- 
ing due  at  the  plaintiffs',  was  left  at  the  defendant's  office,  and  shortly 
afterwards  the  check  in  question  was  paid  in  by  the  defendant  to  the 
plaintiffs'  bank,  and  the  "bill"  given  up  to  him  in  exchange  for  it. 
The  amount  of  the  check  was,  together  with  the  other  checks  paid  in 
by  Lizardi,  entered  to  the  credit  of  Lizardi's  account,  and  a  large 
balance  still  remained  owing  to  the  plaintiffs.  Soon  after  paying  in 
the  check  the  defendant  heard  that  Lizardi  had  stopped  payment,  and 
he  at  once  instructed  his  bankers  not  to  honor  the  check.  In  conse- 
quence of  this  the  check  was  returned  from  the  clearing  house  in  the 
after  part  of  the  day,  and  on  the  following  morning  (the  15th)  it  was 
entered  in  the  plaintiffs'  books  to  the  debit  of  Lizardi's  account. 

6  The  dissenting  opinion  of  Lord  Coleridge,  C.  J.,  is  omitted.  The  state- 
ment of  facts  is  written  by  the  editors.  The  judgment  was  affirmed  on  another 
ground  In  1  App.  Cas.  554  (1876). 


352  NEGOTIATION.  (Part  2 

The  court  below,  in  giving  judgment  for  the  plaintiffs,  proceeded, 
partly  at  least,  upon  the  special  circumstance  that  the  check  was  given 
to  take  up  the  so-called  "bill,"  and  considered  that  this  of  itself  formed 
a  sufficient  consideration  to  entitle  the  plaintiffs  to  recover.  The  argu- 
ment before  us.  however,  was  addressed  almost  entirely  to  the  broader 
question,  namely,  whether  an  existing  debt  formed  of  itself  a  sufficient 
consideration  for  a  negotiable  security  payable  on  demand,  so  as  to 
constitute  the  creditor  to  whom  it  was  paid  a  holder  for  value.  As  this 
is  a  question  of  great  and  general  importance,  and  as  our  opinion  upon 
it  is  in  favor  of  the  plaintiffs,  we  do  not  think  it  necessary  to  say 
more,  with  reference  to  the  special  circumstance  adverted  to,  than 
that  we  are  not  prepared  to  dissent  from  the  view  taken  upon  this 
question  by  the  court  below. 

It  will,  of  course,  be  understood  that  our  judgment  is  based  upon 
what  was  admitted  in  the  argument,  namely,  that  the  check  was  re- 
ceived by  the  plaintiffs  bona  fide,  and  without  notice  of  any  infirmity 
of  title  on  the  part  of  Lizardi.  We,  therefore,  for  the  purpose  of  the 
argument,  regard  the  so-called  "bill"  as  merely  an  authority  to  the 
defendant  to  pay  the  amount  to  Lizardi's  bankers,  instead  of  paying 
it  to  him,  and  treat  the  transaction  as  if  the  check  had  been  paid  to 
Lizardi,  and  he  had  paid  it  to  the  plaintiffs,  not  in  order  that  he  might 
draw  upon  it,  but  that  it  should  be  applied  pro  tanto  in  discharge  of 
his  overdrawn  account. 

It  was  not  disputed  on  the  argument,  nor  could  it  be,  that  if  in- 
stead of  a  check  the  security  had  been  a  bill  or  note  payable  at  a  subse- 
quent date,  however  short,  the  plaintiffs'  title  would  have  been  unim- 
peachable. This  has  been  established  by  many  authorities,  both  in 
this  country  and  in  the  American  courts.  It  has  been  supposed  to  rest 
on  the  ground  that  the  taking  of  a  negotiable  security  payable  at  a 
future  day  implied  an  agreement  by  the  creditor  to  suspend  his  reme- 
dies during  that  period,  and  that  this  constituted  the  true  consideration 
which,  it  is  alleged,  the  law  requires  in  order  to  entitle  the  creditor  to 
the  absolute  benefit  of  the  security.  The  counsel  for  the  defendant 
accordingly  contended  that  where  the  security  is  a  check  payable  on 
demand,  inasmuch  as  this  consideration  is  wanting,  the  holder  gains 
no  independent  title  of  his  own,  and  has  no  better  right  to  the  security 
than  the  debtor  himself  had. 

We  should  be  sorry  if  we  were  obliged  to  uphold  a  distinction  so 
refined  and  technical,  and  one  which  we  believe  to  be  utterly  at  vari- 
ance with  the  general  understanding  of  mercantile  men.  And  upon 
consideration  we  are  of  opinion  that  it  has  no  foundation  either  in 
principle  or  upon  authority. 

Passing  by  for  the  present  the  consideration  of  what  is  the  true 
ground  on  which  the  delivery  or  indorsement  of  a  bill  or  note  pavable 
at  a  future  date  is  held  to  give  a  valid  title  to  a  creditor  in  respect  of 
a  pre-existing  debt,  and  assuming  that  it  is  the  implied  agreement  to 
suspend,  it  does  not  follow  that  the  legal  element  of  consideration  is 


Oh.  2)  HOLDER    IN    DUE    COURSE.  353 

entirely  absent  where  the  security  is  payable  immediately.  The  giving 
time  is  only  one  of  many  kinds  of  what  the  law  calls  consideration. 
A  valuable  consideration,  in  the  sense  of  the  law,  may  consist  either 
in  some  right,  interest,  profit,  or  benefit  accruing  to  the  one  party,  or 
some  forbearance,  detriment,  loss,  or  responsibility  given,  suffered, 
or  undertaken  by  the  other.  Com.  Dig.  Action  on  the  Case,  Assump- 
sit, B,  1-15. 

The  holder  of  a  check  may  either  cash  it  immediately,  or  he  may 
hold  it  over  for  a  reasonable  time.  If  he  cashes  it  immediately,  he 
is  safe.  The  maker  of  the  check  cannot  afterwards  repudiate,  and 
claim  back  the  proceeds  any  more  than  he  could  claim  back  gold  or 
bank  notes  if  the  payment  had  been  made  in  that  way  instead  of  by 
check.  This  was  decided  in  Watson  v.  Russell,  3  B.  &  S.  34,  31  L. 
J.  (Q.  B.)  304,  with  which  we  entirely  agree.  In  very  many — per- 
haps in  the  great  majority  of — cases  checks  are  not  presented  till  the 
following  day,  especially  where  they  are  crossed,  and  this  usage  is  so 
far  recognized  by  law  that  the  drawer  cannot  complain  of  its  not 
having  been  presented  before,  even  though  the  banker  stop  payment 
in  the  interval.  The  loss  in  such  a  case  falls  on  the  drawer  of  the 
check,  and  not  on  the  holder. 

It  cannot,  we  think,  be  said  that  a  creditor  who  takes  a  check  on 
account  of  a  debt  due  to  him,  and  pays  it  into  his  banker  that  it  might 
be  presented  in  the  usual  course,  instead  of  getting  it  cashed  immedi- 
ately, does  not  alter  his  position,  and  may  not  be  greatly  prejudiced 
if  his  title  could  then  be  questioned,  or  that  the  debtor  does  not,  or 
may  not,  gain  a  benefit  by  the  holding  over.  If  this  subject  were 
worth  pursuing  it  would  not,  we  think,  be  difficult  to  show  that  there 
is  no  sound  distinction  between  the  two  kinds  of  securities  of  which 
we  have  been  treating.  In  the  course  of  the  argument  it  was  put  to 
the  learned  counsel  for  the  defendant  whether  a  debtor  who  gave 
his  own  check  in  payment  of  a  pre-existing  debt  could  defend  an  ac- 
tion upon  it  on  the  ground  that  the  creditor  was  not  a  holder  for  value, 
and  Mr.  Watkin  Williams  admitted  that  his  argument  must  go  to  that 
extent,  and  yet  it  has  always  been  the  practice  to  sue  in  such  a  case 
on  the  check  as  well  as  on  the  original  debt,  and  no  such  defense  has, 
as  far  as  we  are  aware,  ever  been  attempted  to  be  set  up,  certainly  not 
successfully. 

But  it  is  useless  to  dilate  on  this  point,  for,  in  truth,  the  title  of  a 
creditor  to  a  bill  given  on  account  of  a  pre-existing  debt,  and  payable 
at  a  future  day,  does  not  rest  upon  the  implied  agreement  to  suspend 
his  remedies.  The  true  reason  is  that  given  by  the  Court  of  Common 
Pleas  in  Belshaw  v.  Bush,  11  C.  B.  191,  22  L-  J.  C.  P.  24,  as  the  foun- 
dation of  the  judgment  in  that  case,  namely,  that  a  negotiable  se- 
curity given  for  such  a  purpose  is  a  conditional  payment  of  the  debt, 
the  condition  being  that  the  debt  revives  if  the  security  is  not  realized. 
This  is  precisely  the  effect  which  both  parties  intended  the  security  to 
Sm.&M.B.&N.— 23 


354  NEGOTIATION.  (Part  2 

have,  and  the  doctrine  is  as  appHcable  to  one  species  of  negotiable 
security  as  to  another — to  a  check  payable  on  demand,  as  to  a  running 
bill  or  a  promissory  note  payable  to  order  or  bearer,  whether  it  be  the 
note  of  a  country  bank  which  circulates  as  money,  or  the  note  of  the 
debtor,  or  of  any  other  person.  The  security  is  offered  to  the  creditor, 
and  taken  by  him  as  money's  worth,  and  justice  requires  that  it  should 
be  as  truly  his  property  as  the  money  which  it  represents  would  have 
been  his  had  the  payment  been  made  in  gold  or  a  Bank  of  England 
note.  And,  on  the  other  hand,  until  it  has  proved  unproductive,  the 
creditor  ought  not  to  be  allowed  to  treat  it  as  a  nullity,  and  to  sue  the 
debtor  as  if  he  had  given  no  security.  The  books  are  not  without  au- 
thorities in  favor  of  this  view,  although  the  point  has  not,  as  far  as 
we  are  aware,  been  directly  decided.  Story  lays  it  down  in  his  work 
on  Promissory  Notes  (section  186)  that  a  pre-existing  debt  is  equally 
available  as  a  consideration  as  is  a  present  advance  or  value  given  for 
the  note,  without  suggesting  any  distinction  between  a  note  payable 
after  date  and  one  payable  on  demand ;  and  the  cases  of  Poirier  v. 
Morris,  2  E.  &  B.  89,  22  L.  J.  Q.  B.  313,  Watson  v.  Russell,  3  B.  & 
S.  34,  31  L.  J.  Q.  B.  304,  before  cited,  Whistler  v.  Forster,  14  C. 
B.  (N.  S.)  248,  32  L.  J.  C.  P.  161,  and  others,  contain  clear  expres- 
sions of  opinion  the  same  way. 

On  the  part  of  the  defendant  the  case  of  Crofts  v.  Beal,  11  C.  B. 
172,  20  L.  J.  C.  P.  186,  was  strongly  relied  on,  where  it  was  held  that 
J.  promissory  note  given  by  a  surety  for  payment  on  demand  without 
any  new  consideration  was  nudum  pactum.  It  is  sufficient  to  say  of 
vhat  case  that  the  note  was  payable  to  the  plaintiff,  and  not  to  order  or 
bearer,  and  was  not,  therefore,  a  negotiable  security.  De  la  Chaumette 
V.  Bank  of  England,  9  B.  &  C.  208.  appears  at  first  sight  to  be  more 
in  point ;  but  there,  although  it  appeared  as  between  the  plaintiff  and 
O..  by  whom  the  bank  note  in  question  was  remitted,  that  the  state 
of  account  was  in  favor  of  the  plaintiff,  it  is  not  really  so,  for  the  note 
had  not  been  remitted  in  payment,  but  merely  for  collection  as  agent, 
and  the  court  held  that  under  these  circumstances  the  plaintiff  had 
no  better  title  than  O. 

For  these  reasons  we  are  of  opinion  that  a  creditor  to  whom  a  ne- 
gotiable security  is  given  on  account  of  a  pre-existing  debt  holds  it 
by  an  indefeasible  title,  whether  it  be  one  payable  at  a  future  time  or 
on  demand,  and  that,  therefore,  the  judgment  of  the  court  below  ought 
to  be  affirmed. 

My  Brother  Quain,  who  concurs  in  the  judgment,  desires  to  add 
that  he  does  not  adopt  all  the  reasoning  as  to  consideration. 


Ch.  2)  HOLDER    IN    DUE    COURSE.  355 

BROOKLYN  CITY  &  N.  R.  CO.  v.  NATIONAL  BANK  OF  THE 

REPUBLIC. 
(Supreme  Court  of  United  States,  1880.     102  U.  S.  14,  26  L.  Ed.  61.) 

Error  to  the  Circuit  Court  of  the  United  States  for  the  Southern 
District  of  New  York. 

This  was  an  action  by  the  National  Bank  of  the  RepubHc  of  New 
York  against  the  Brooklyn  City  &  Newtown  Railroad  Company,  as 
maker  of  a  promissory  note  for  $5,000,  which  had  been  made  by  the 
company  payable  to  one  of  its  officers  and  by  him  indorsed  and  deliv- 
ered to  Hutchinson  &  Ingersoll,  a  firm  of  note  brokers,  for  sale  for 
the  benefit  of  the  company.  Hutchinson  &  Ingersoll  without  authority 
pledged  the  note,  together  with  other  paper,  to  the  plaintiff  as  col- 
lateral security  for  the  repayment  of  a  cash  advance  of  $36,000  made 
by  the  plaintiff  to  them  on  June  19,  1873.  On  July  11,  1873,  the 
plaintiff  loaned  Hutchinson  &  Ingersoll  $10,000.  On  July  22,  1873, 
Hutchinson  &  Ingersoll  agreed  (antedating  the  agreement  to  June 
19th)  that  all  collateral  which  had  theretofore  been  deposited  with  the 
plaintiff,  including  the  $5,000  note,  should  be  held  by  the  plaintiff  as 
collateral  to  the  loan  of  July  11th,  and  any  other  loans  which  the  plain- 
tiff might  make.  Subsequently  the  $36,000  loan  was  paid,  but  $5,- 
136.68  remained  due  on  the  $10,000  loan,  and  the  plaintiff  claims  to 
be  a  holder  for  value  by  virtue  of  his  position  as  pledgee  of  the  $5,000 
note  as  security  for  this  balance  of  $5,136.68.  The  plaintiff  had  no 
knowledge  of  the  breach  of  trust  by  Hutchinson  &  Ingersoll  in  pledg- 
ing the  note.^ 

Mr.  Justice  Harlan.  *  *  *  'pj-jg  ^ext  proposition  involves  the 
right  of  the  railroad  company  to  show  as  against  the  bank,  that  the 
note  was  executed  and  delivered  to  Hutchinson  &  Ingersoll  for  the 
purpose  only  of  raising  money  upon  it  for  the  company,  and  that, 
consequently,  they  had  no  authority  to  pledge  it  as  collateral  security 
for  their  own  indebtedness  to  the  bank.  It  will  have  been  observed, 
from  the  statement  of  facts,  that  the  note  in  suit  was  among  those 
pledged  to  the  bank  as  security  for  the  call  loan  of  $36,000,  made 
June  19,  1873 ;  that  Howes,  Hyatt  &  Co.,  whose  notes  had  been 
pledged  as  security  for  the  call  loan  of  $10,000,  made  June  19, «  1873, 
having  become  insolvent,  Hutchinson  &  Ingersoll,  July  22,  1873,  at 
the  request  of  the  bank,  executed  the  writing,  dated  June  19,  1873, 
whereby  they  pledged  all  securities,  bonds,  stocks,  things  in  action, 
or  other  property  theretofore  deposited  with  the  bank,  whether  specif- 
ically or  not,  as  security  for  the  payment  of  any  and  every  indebted- 
ness, liability,  or  engagement  held  by  the  bank,  for  which  they  were, 

7  The  statement  of  facts  is  written  by  the  editors.  The  arguments  of 
counsel,  part  of  the  opinion  of  Harlan,  J.,  and  the  concurring  opinion  of  Clif- 
ford, J.,  are  omitted.    Miller  and  Field,  JJ.,  dissented. 

8  Obviously  this  should  be  July  11. 


356  NEGOTIATION.  (Part  2 

or  should  become  in  any  way  liable.  Although,  therefore,  the  call 
loan  of  $36,000  was  extinguished,  without  resorting  to  the  note  in 
suit,  that  note,  under  the  agreement  made  July  23,  1873,  stood  pledged 
as  collateral  security,  also,  for  the  $10,000  call  loan  of  July  11,  1873. 

The  bank,  we  have  seen,  received  the  note,  before  its  maturity,  in- 
dorsed in  blank,  without  any  express  agreement  to  give  time,  but 
without  notice  that  it  was  other  than  ordinary  business  paper,  or  that 
there  was  any  defence  thereto,  and  in  ignorance  of  the  purposes  for 
which  it  had  been  executed  and  delivered  to  Hutchinson  &  Ingersoll. 
Did  the  bank,  under  these  circumstances,  become  a  holder  for  value, 
and  as  such  entitled,  according  to  the  recognized  principles  of  com- 
mercial law,  to  be  protected  against  the  equities  or  defenses  which 
the  railroad  company  may  have  against  the  other  parties  to  the  note? 

This  question  was  carefully  considered,  though,  perhaps,  it  was  not 
absolutely  necessary  to  be  determined,  in  Swift  v.  Tyson,  16  Pet.  1, 
10  L.  Ed.  865.  After  stating  that  the  law  respecting  negotiable  in- 
struments was  not  the  law  of  a  single  country  only,  but  of  the  com- 
mercial world,  the  court,  speaking  by  Mr.  Justice  Story,  said:  "And 
we  have  no  hesitation  in  saying  that  a  pre-existing  debt  does  consti- 
tute a  valuable  consideration  in  the  sense  of  the  general  rule  already 
stated  as  applicable  to  negotiable  instruments.  Assuming  it  to  be  true 
(which,  however,  may  well  admit  of  some  doubt  from  the  generality 
of  the  language)  that  the  holder  of  a  negotiable  instrument  is  unaffected 
with  the  equities  between  antecedent  parties,  of  which  he  has  no  no- 
tice, only  where  he  receives  it  in  the  usual  course  of  trade  and  busi- 
ness for  a  valuable  consideration,  before  it  becomes  due,  we  are  pre- 
pared to  say  that  receiving  it  in  payment  of  or  as  security  for  a  pre- 
existing debt  is  according  to  the  known  usual  course  of  trade  and  busi- 
ness. And  why,  upon  principle,"  continued  the  court,  "should  not  a 
pre-existing  debt  be  deemed  such  a  valuable  consideration?  It  is  for 
the  benefit  and  convenience  of  the  commercial  world  to  give  as  wide 
an  extent  as  practicable  to  the  credit  and  circulation  of  negotiable 
paper,  that  it  may  pass  not  only  as  security  for  new  purchases  and 
advances,  made  upon  the  transfer  thereof,  but  also  in  payment  of  and 
as  security  for  pre-existing  debts.  The  creditor  is  thereby  enabled  to 
realize  or  to  secure  his  debt,  and  thus  may  safely  give  a  prolonged 
credit,  or  forbear  from  taking  any  legal  steps  to  enforce  his  rights. 
The  debtor,  also,  has  the  advantage  of  making  his  negotiable  securi- 
ties of  equivalent  value  to  cash.  But  establish  the  opposite  conclusion, 
that  negotiable  paper  cannot  be  applied  in  payment  of  or  as  security 
for  pre-existing  debts,  without  letting  in  all  the  equities  between  the 
original  and  antecedent  parties,  and  the  value  and  circulation  of  such 
securities  must  be  essentially  diminished,  and  the  debtor  driven  to 
the  embarrassment  of  making  a  sale  thereof,  often  at  a  ruinous  dis- 
count, to  some  third  person,  and  then  by  circuity  to  apply  the  proceeds 
to  the  payment  of  his  debts.  What,  indeed,  upon  such  a  doctrine, 
would   become   of    that   large   class    of   cases    where   new   notes    are 


Ch.  2)  HOLDER    IN    DUE    COURSE.  357 

given  by  the  same  or  by  other  parties,  by  way  of  renewal  or  security 
to  banks,  in  lieu  of  old  securities  discovinted  by  them  which  have  ar- 
rived at  maturity?  Probably  more  than  one-half  of  all  bank  transac- 
tions in  our  country,  as  well  as  those  of  other  countries,  are  of  this 
nature.  The  doctrine  would  strike  a  fatal  blow  at  all  discounts  of 
negotiable  securities  for  pre-existing  debts." 

After  a  review  of  the  English  cases,  the  court  proceeded :  "They 
directly  establish  that  a  bona  fide  holder,  taking  a  negotiable  note  in 
payment  of  or  as  security  for  a  pre-existing  debt,  is  a  holder  for  a 
valuable  consideration,  entitled  to  protection  against  all  the  equities 
between  the  antecedent  parties." 

The  opinion  in  that  case  has  been  the  subject  of  criticism  in  some 
courts,  because  it  seemed  to  go  beyond  the  precise  point  necessary  to 
be  decided,  when  declaring  that  the  bona  fide  holder  of  a  negotiable 
note,  taken  as  collateral  security  for  an  antecedent  debt,  was  protected 
against  equities  existing  between  the  original  or  antecedent  parties. 
The  brief  dissent  of  Mr.  Justice  Catron  was  solely  upon  that  ground, 
which  renders  it  quite  certain  that  the  whole  court  was  aware  of  the 
extent  to  which  the  opinion  carried  the  doctrines  of  the  commercial 
law  upon  the  subject  of  negotiable  instruments  transferred  or  deliv- 
ered as  security  for  antecedent  indebtedness.  In  the  judgment  of 
this  court,  as  then  constituted  (Mr.  Justice  Catron  alone  excepted), 
the  holder  of  a  negotiable  instrument,  received  before  maturity,  and 
without  notice  of  any  defense  thereto,  is  unaffected  by  the  equities  or 
defenses  of  antecedent  parties,  equally  whether  the  note  is  taken  as 
collateral  security  for  or  in  payment  of  previous  indebtedness.  And 
we  understand  the  case  of  McCarty  v.  Roots,  21  How.  432,  16  L-  Ed. 
162,  to  affirm  Swift  v.  Tyson,  upon  the  point  now  under  consideration. 
It  was  there  said :  "]S[or  does  the  fact  that  the  bills  were  assigned  to 
the  plaintiff  as  collateral  security  for  a  pre-existing  debt  impair  the 
plaintiff's  right  to  recover."  21  How.  438  (16  L-  Ed.  162).  "The 
delivery  of  the  bills  to  the  plaintiff  as  collateral  security  for  a  pre- 
existing debt,  under  the  decision  of  Swift  v.  Tyson,  was  legal."  21 
How.  439  (16  L.  Ed.  162). 

It  may  be  remarked  in  this  connection  that  the  courts  holding  a 
different  rule  have  uniformly  referred  to  an  opinion  of  Chancellor 
Kent  in  Bay  v.  Coddington,  5  Johns.  Ch.  (N.  Y.)  54,  9  Am.  Dec.  268, 
reaffirmed  in  Coddington  v.  Bay,  20  Johns.  (N.  Y.)  637,  11  Am.  Dec. 
342.  There  is,  however,  some  reason  to  believe  that  the  views  of  that 
eminent  jurist  were  subsequently  modified.  In  the  later  editions  of 
his  Commentaries  (volume  3,  p.  81,  note  b),  prepared  by  himself, 
reference  is  made  to  Stalker  v.  McDonald,  6  Hill  (N.  Y.)  93,  40  Am. 
Dec.  389,  in  which  the  principles  asserted  in  Bay  v.  Coddington  were 
re-examined  and  maintained  in  an  elaborate  opinion  by  Chancellor 
Walworth,  who  took  occasion  to  say  that  the  opinion  in  Swift  v.  Ty- 
son was  not  correct  in  declaring  that  a  pre-existing  debt  was,  of  itself, 
and  without  other  circumstances,  a  sufficient  consideration  to  entitle 


358  NEGOTIATION.  (Part  2 

the  bona  fide  holder,  without  notice,  to  recover  on  the  note,  when  it 
might  not,  as  between  the  original  parties,  be  valid.  But  Chancellor 
Kent  adds:  "Mr.  Justice  Story,  on  Promissory  Notes  (page  215, 
note  1),  repeats  and  sustains  the  decision  in  Swift  v.  Tyson,  and  I  am 
inclined  to  concur  in  that  decision  as  the  plainer  and  better  doctrine." 
Of  course  it  did  not  escape  his  attention  that  the  court  in  Swift  v. 
Tyson  declared  the  equities  of  prior  parties  to  be  shut  out  as  well 
when  the  note  was  merely  pledged  as  collateral  security  for  a  pre- 
existing debt  as  when  transferred  in  payment  or  extinguishment  of 
such  debt. 

According  to  the  very  general  concurrence  of  judicial  authority  in 
this  country  as  well  as  elsewhere,  it  may  be  regarded  as  settled  in  com- 
mercial jurisprudence — there  being  no  statutory  regulations  to  the  con- 
trary— that  where  negotiable  paper  is  received  in  payment  of  an  ante- 
cedent debt,  or  where  it  is  transferred  by  indorsement,  as  collateral 
security  for  a  debt  created,  or  a  purchase  made,  at  the  time  of  transfer. 
or  the  transfer  is  to  secure  a  debt,  not  due,  under  an  agreement  ex- 
press or  to  be  clearly  implied  from  the  circumstances,  that  the  col- 
lection of  the  principal  debt  is  to  be  postponed  or  delayed  until  the 
collateral  matured,  or  where  time  is  agreed  to  be  given  and  is  actually 
given  upon  a  debt  overdue,  in  consideration  of  the  transfer  of  nego- 
tiable paper  as  collateral  security  therefor,  or  where  the  transferred 
note  takes  the  place  of  other  paper  previously  pledged  as  collateral  se- 
curity for  a  debt,  either  at  the  time  such  debt  was  contracted  or  before 
it  became  due — in  each  of  these  cases  the  holder  who  takes  the  trans- 
ferred paper,  before  its  maturity,  and  without  notice,  actual  or  other- 
wise, of  any  defense  thereto,  is  held  to  have  received  it  in  due  course 
of  business,  and,  in  the  sense  of  the  commercial  law,  becomes  a  holder 
for  value,  entitled  to  enforce  payment,  without  regard  to  any  equity 
or  defense  which  exists  bet^veen  prior  parties  to  such  paper. 

Upon  these  propositions  there  seems  at  this  day  to  be  no  substantial 
conflict  of  authority.  But  there  is  such  conflict  where  the  note  is 
transferred  as  collateral  security  merely,  without  other  circumstances, 
for  a  debt  previously  created.  •  One  of  the  grounds  upon  which  some 
courts  of  high  authority  refuse,  in  such  cases,  to  apply  the  rule  an- 
nounced in  Swift  v.  Tyson,  is  that  transactions  of  that  kind  are  not 
in  the  usual  and  ordinary  course  of  commercial  dealings.  But  this 
objection  is  not  sustained  by  the  recognized  usages  of  the  commercial 
world,  nor,  as  we  think,  by  sound  reason.  The  transfer  of  negotiable 
paper  as  security  for  antecedent  debts  constitutes  a  material  and  an 
increasing  portion  of  the  commerce  of  the  country.  Such  transactions 
have  become  very  common  in  financial  circles.  They  have  grown  out 
of  the  necessities  of  business,  and,  in  these  days  of  great  commercial 
activity,  they  contribute  largely  to  the  benefit  and  convenience  both  of 
debtors  and  creditors.  Mr.  Parsons,  in  his  treatise  on  the  Law  of 
Promissory  Notes  and  Bills  of  Exchange,  discusses  the  general  ques- 
tion of   the  transfer  of  negotiable  paper   under  three  aspects — one. 


Ch.  2)  HOLDER    IN    DUE    COURSE.  359 

where  the  paper  is  received  as  collateral  security  for  antecedent  debts. 
We  concur  with  the  author  "that,  when  the  principles  of  the  law  mer- 
chant have  established  more  firmly  and  unreservedly  their  control  and 
their  protection  over  the  instruments  of  the  merchant,  all  of  these 
transfers  (not  affected  by  peculiar  circumstances)  will  be  held  to  be 
regular,  and  to  rest  upon  a  valid  consideration."  1  Parsons,  Notes 
and  Bills  (2d  Ed.)  218. 

Another  ground  upon  which  some  courts  have  declined  to  sanction 
the  rule  announced  in  Swift  v.  Tyson  is  that  upon  the  transfer  of 
negotiable  paper  merely  as  collateral  security  for  an  antecedent  debt 
nothing  is  surrendered  by  the  indorsee — that  to  permit  the  equities  be- 
tween prior  parties  to  prevail  deprives  him  of  no  right  or  advantage 
enjoyed  at  the  time  of  transfer,  imposes  upon  him  no  additional  bur- 
dens, and  subjects  him  to  no  additional  inconveniences. 

This  may  be  true  in  some,  but  it  is  not  true  in  most,  cases,  nor,  in 
our  opinion,  is  it  ever  true  when  the  note,  upon  its  delivery  to  the 
transferee,  is  in  such  form  as  to  make  him  a  party  to  the  instrument, 
and  impose  upon  him  the  duties  which,  according  to  the  commercial 
law,  must  be  discharged  by  the  holder  of  negotiable  paper  in  order  to 
fix  liability  upon  the  indorser. 

The  bank  did  not  take  the  note  in  suit  as  a  mere  agent  to  receive  the 
amount  due  when  it  suited  the  convenience  of  the  debtor  to  make  pay- 
ment. It  received  the  note  under  an  obligation,  imposed  by  the  com- 
mercial law,  to  present  it  for  payment,  and  give  notice  of  nonpayment, 
in  the  mode  prescribed  by  the  settled  rules  of  that  law.  We  are  of 
opinion  that  the  undertaking  of  the  bank  to  fix  the  liability  of  prior 
parties,  by  due  presentation  for  payment  and  due  notice  in  case  of 
nonpayment — an  undertaking  necessarily  implied  by  becoming  a  party 
to  the  instrument — was  a  sufficient  consideration  to  protect  it  against 
equities  existing  between  the  other  parties,  of  which  it  had  no  notice. 
It  assumed  the  duties  and  responsibilities  of  a  holder  for  value,  and 
should  have  the  rights  and  privileges  pertaining  to  that  position.  The 
correctness  of  this  rule  is  apparent  in  cases  like  the  one  now  before  us. 
The  note  in  suit  was  negotiable  in  form,  and  was  delivered  by  the 
maker  for  the  purpose  of  being  negotiated.  Had  it  been  regularly  dis- 
counted by  the  bank,  at  any  time  before  maturity,  and  the  proceeds 
either  placed  to  the  credit  of  Hutchinson  &  Ingersoll,  or  applied  di- 
rectly to  the  discharge,  pro  tanto,  of  any  one  of  the  call  loans  previously 
made  to  them,  it  would  not  be  doubted  that  the  bank  would  be  pro- 
tected against  the  equities  of  prior  parties.  Instead  of  procuring  its 
formal  discount,  Hutchinson  &  Ingersoll  used  it  to  secure  the  ultimate 
payment  of  their  own  debt  to  the  bank.  At  the  time  the  written  agree- 
ment of  July  22,  1873,  was  executed,  by  which  this  note,  with  others, 
was  pledged  as  security  for  any  debt  then  or  thereafter  held  against 
them,  the  bank  had  the  right  to  call  in  the  $10,000  loan;  that  is,  to 
require  immediate  payment.  The  securities  upon  which  that  loan 
rested  had  become,  in  part,  worthless,  and  it  is  evident  that  but  for  the 


360  NEGOTIATION.  (Part  2 

deposit  of  additional  collateral  securities  the  bank  would  have  called 
in  the  loan,  or  resorted  to  its  rightful  legal  remedies  for  the  enforce- 
ment of  payment.  It  was,  under  the  circumstances,  the  duty  of  the 
debtors  to  make  such  payment,  or  to  secure  the  debt.  It  was  important 
to  them,  and  was  in  the  usual  course  of  commercial  transactions,  to 
furnish  such  security.  If  the  bank  was  deceived  as  to  the  real  owner- 
ship of  the  paper,  or  as  to  the  purposes  of  its  execution  and  delivery 
to  Hutchinson  &  Ingersoll,  it  was  because  the  railroad  company  in- 
trusted it  to  those  parties  in  a  form  which  indicated  that  the  latter 
were  its  rightful  holders  and  owners,  with  absolute  power  to  dispose 
of  it  for  any  purpose  they  saw  proper. 

Our  conclusion,  therefore,  is  that  the  transfer,  before  maturity,  of 
negotiable  paper,  as  security  for  an  antecedent  debt  merely,  without 
other  circumstances,  if  the  paper  be  so  indorsed  that  the  holder  be- 
comes a  party  to  the  instrument,  although  the  transfer  is  without  ex- 
press agreement  by  the  creditor  for  indulgence,  is  not  an  improper 
use  of  such  paper,  and  is  as  much  in  the  usual  course  of  commercial 
business  as  its  transfer  in  payment  of  such  debt.  In  either  case,  the 
bona  fide  holder  is  unaffected  by  equities  or  defenses  between  prior  par- 
ties, of  which  he  had  no  notice.  This  conclusion  is  abundantly  sus- 
tained by  authority.  A  different  determination  by  this  court  would,  we 
apprehend,  greatly  surprise  both  the  legal  profession  and  the  com- 
mercial world.  See  Bigelow's  Bills  and  Notes,  502  et  seq. ;  1  Daniel. 
Neg.  Inst.  (2d  Ed.)  c.  25,  §§  820-833;  Story,  Promissory  Notes  (7th 
Ed.  by  Thorndyke)  §§  186,  195;  1  Parsons.  Notes  and  Bills  (2d  Ed.) 
218,  c.  6,  §  4;  and  Redfield  &  Bigelow's  Leading  Cases  upon  Bills  of 
Exchange  and  Promissory  Notes,  where  the  authorities  are  cited  by 
the  authors.    *    *    * 

Mr.  Justice  Bradley.  I  concur  in  the  judgment  rendered  in  this 
case,  and  in  most  of  the  reasons  given  in  the  opinion.  But,  in  refer- 
ence to  the  consideration  of  the  transfer  of  the  note  as  collateral  se- 
curity, I  do  not  regard  the  obligation  assumed  by  the  indorsee  (the 
bank),  to  present  the  note  for  payment  and  give  notice  of  nonpayment, 
as  the  only,  or  the  principal,  consideration  of  such  transfer.  The  true 
consideration  was  the  debt  due  from  the  indorsers  to  the  indorsee,  and 
the  obligation  to  pay  or  secure  said  debt.  Had  any  other  collateral 
security  been  given,  as  a  mortgage,  or  a  pledge  of  property,  it  would 
have  been  equally  sustained  by  the  consideration  referred  to,  namely, 
the  debt  and  the  obligation  to  pay  it  or  to  secure  its  payment.  If  the 
indorsers  had  assigned  a  mortgage  for  that  purpose,  the  title  of  the 
bank  to  hold  the  mortgage  would  have  been  indubitable.  In  that  case 
prior  equities  of  the  mortgagor  might  have  prevailed  against  the  title 
of  the  bank ;  because  a  mortgage  is  not  a  commercial  security,  and  its 
transfer  for  any  consideration  whatever  does  not  cut  off  prior  equities. 
But  the  bona  fide  transfer  of  commercial  paper  before  maturity  does 
cut  off  such  equities  ;  and  every  collateral  is  held  by  the  creditor  by  such 
title  and  in  such  manner  as  appertain  to  its  nature  and  qualities.     Se- 


Cb.  2)  HOLDER    IN    DUE    COURSE.  361 

curity  for  the  payment  of  a  debt  actually  owing  is  a  good  considera- 
tion, and  sufficient  to  support  a  transfer  of  property.  When  such 
transfer  is  made  for  such  purpose,  it  has  due  effect  as  a  complete  trans- 
fer, according  to  the  nature  and  incidents  of  the  property  transferred. 
When  it  is  a  promissory  note  or  bill  of  exchange,  it  has  the  effect  of 
giving  absolute  title  and  of  cutting  off  prior  equities,  provided  the  ordi- 
nary conditions  exist  to  give  it  that  effect.  If  not  transferred  before 
maturity  or  in  due  course  of  business,  then,  of  course,  it  cannot  have 
such  effect.  But  I  think  it  is  well  shown  in  the  principal  opinion  that 
a  transfer  for  the  purpose  of  securing  a  debt  is  a  transfer  in  due 
course.  And  that  really  ends  the  argument  on  the  subject. 
Judgment  affirmed. 


SUTHERLAND  v.  MEAD  et  al. 

(Supreme  Court,  Appellate  Division,  First  Department,  1903.    80  App.  Div.  103, 

SO  N.  Y.  Supp.  504.) 

Appeal  by  the  defendants,  Charles  H.  Mead  and  another,  from  an 
order  of  the  Supreme  Court,  made  at  the  New  York  Special  Term 
and  entered  in  the  office  of  the  clerk  of  the  county  of  New  York  on 
the  6th  day  of  November,  1902,  denying  the  said  defendants'  motion  to 
vacate  and  set  aside  a  judgment  theretofore  entered  against  them  in 
this  action,  or  to  modify  the  said  judgment  by  reducing  the  recovery  to 
the  sum  of  $150.'* 

Hatch,  J.  This  action  was  brought  to  recover  upon  a  promissory 
note  made  by  the  defendant  Deshong,  upon  which  the  appellants  were 
accommodation  indorsers.  It  appeared  upon  the  hearing  of  the  motion 
that  the  defendant  Palleske  was  indebted  to  the  appellants  upon  a 
promissory  note  for  the  sum  of  $1,000  ;  that  as  such  note  was  about 
falling  due,  and  on  the  loth  day  of  April,  1902,  Palleske  requested  the 
appellants  to  accept  in  payment  of  such  note  the  promissory  note  ex- 
ecuted by  Deshong,  set  forth  in  the  complaint  in  the  action ;  that  they 
refused  so  to  accept  the  same  unless  Palleske  could  procure  it  to  be 
discounted,  and  would  deliver  the  proceeds  thereof  to  the  appellants, 
and  for  such  purpose  the  appellants  indorsed  said  note  in  their  firm 
name,  and  the  defendant  Palleske  took  the  same,  and  agreed  to  return 
the  proceeds  thereof  to  the  appellants.  Instead  of  discounting  the  note, 
Palleske  transferred  the  same  to  the  plaintiff  in  the  action,  who  paid 
thereon  the  sum  of  $150  cash,  and,  as  further  consideration,  took  and 
held  the  same  as  collateral  security  for  an  indebtedness  then  due  and 
owing  by  Palleske  to  the  plaintiff  in  a  sum  exceeding  $3,000,  the  whole 
of  which  still  remains  due  and  unpaid. 

This  action  was  brought  by  the  plaintiff  to  enforce  the  note.  All  of 
the  defendants  made  default  in  answering.     Judgment  was  thereupon 

8  Part  of  the  opinion  is  omitted. 


362  NEGOTIATION.  (Part  2 

entered  by  the  plaintiff  for  the  full  amount  secured  to  be  paid  by  the 
note,  with  interest.  Thereafter  the  accommodation  indorsers,  the  ap- 
pellants herein,  made  a  motion  *  *  *  to  set  aside  the  judgment,  or, 
in  the  alternative,  to  modify  the  same  by  reducing  the  recovery  upon 
the  note  in  suit  to  the  sum  of  $150,  with  interest  thereon  from  the  day 
of  its  date.  This  motion  was  based  upon  the  facts  and  circumstances 
connected  with  the  delivery  of  the  note  to  Palleske,  as  has  been  pre- 
viously stated,  and  also  upon  an  affidavit  made  by  the  plaintiff  in  the 
action  that  he  had  only  paid  to  Palleske  for  the  note  $150  in  cash,  and 
held  the  same  as  collateral  security  for  the  payment  of  a  pre-existing 
debt.  It  was  made  to  appear  by  the  moving  papers  that  the  appellants 
herein  were  ignorant  of  the  consideration  paid  by  the  plaintiff'  for  the 
note  prior  to  the  time  when  the  application  was  made  to  open  the  de- 
fault when  the  affidavit  was  read.  Upon  learning  these  facts,  the  ap- 
pellants caused  an  answer  to  be  prepared,  setting  up  the  facts  and  cir- 
cumstances connected  with  the  delivery  of  the  note,  the  indorsement 
by  the  appellants,  the  fraudulent  diversion  of  the  same  by  Palleske, 
and  the  consideration  paid  therefor  by  the  plaintiff.  This  motion,  upon 
these  papers,  coming  on  to  be  heard,  was  denied,  and  from  the  order 
entered  thereon  this  appeal  is  taken.    *    *    * 

It  is  said,  however,  that  the  negotiable  instruments  law  has  changed 
the  rule  in  respect  to  what  constitutes  consideration  for  a  promissory 
note ;  it  being  claimed  that  a  pre-existing  indebtedness  is  a  good  con- 
sideration, and  renders  the  holder  thereof  a  holder  for  value  of  a  note 
taken  as  security  therefor,  as  against  accommodation  indorsers,  even 
though  the  note  has  been  fraudulently  diverted  from  the  purpose  for 
which  it  was  given,  and  the  indorsers  have  received  no  value.  Since 
1822,  when  Coddington  v.  Bay,  20  Johns.  637,  11  Am.  Dec.  343,  was 
decided,  it  has  been  the  settled  law  of  this  state  that  accommodation 
makers  or  indorsers  of  negotiable  paper  were  not  liable  to  a  holder 
thereof,  where  the  same  had  been  fraudulently  diverted  from  the  pur- 
pose for  which  it  was  made,  or  the  indorsement  given,  and  the  holder 
had  received  it  solely  as  collateral  security  for  an  antecedent  debt. 
Comstock  V.  Hier,  73  N.  Y.  269,  29  Am.  Rep.  142.  In  other  words, 
the  suretv  bas  the  right  to  impose  such  liabilty  upon  his  obligation  as 
he  sees  fit,  and  he  is  not  to  be  made  liable  outside  the  terms  of  his  en- 
gagement in  the  case  of  negotiable  paper  except  for  the  benefit  of  a 
bona  fide  holder,  who  parted  with  value  and  was  misled  to  his  prejudice. 
United  States  Nat.  Bank  v.  Ewing,  131  N.  Y.  506,  30  N.  E.  501,  27 
Am.  St.  Rep.  615.  Whatever  may  have  been  the  rule  with  respect  to 
this  question  in  other  jurisdictions,  it  has  been  the  law  of  this  state, 
uniformly  enforced  during  this  period  of  time,  and  still  is  the  law  un- 
less the  negotiable  ijT^truments  law  (Laws  1897,  c.  612)  has  changed 
the  same.  Section  51  of  such  act  provides:  "Value  is  any  considera- 
tion sufficient  to  support  a  simple  contract.  An  antecedent  or  pre-ex- 
isting debt  constitutes  value ;  and  is  deemed  "^uch  whether  the  instru- 
ment is  payable  on  demand  or  at  a  future  time." 


Ch.  2)  HOLDER    IN    DUB    COURSE.  363 

Standing  alone,  this  provision  has  not  changed  the  existing  law.  It 
was  always  the  law  of  this  state  that  a  consideration  sufficient  to  sup- 
port a  simple  contract  constituted  a  good  consideration  for  the  instru- 
ment. This  declaration,  therefore,  upon  this  subject  added  nothing 
whatever  to  the  law  as  it  existed  and  had  existed  from  time  immemo- 
rial. So,  also,  an  antecedent  or  pre-existing  debt  constituted  value 
and  was  sufficient  in  consideration  of  an  instrument,  either  negotiable 
or  otherwise,  as  between  the  parties  thereto.  Moreover,  it  was  always 
the  law  that  the  actual  payment  and  discharge  of  a  pre-existing  debt 
constituted  the  same  a  valuable  consideration  for  the  transfer  of  com- 
mercial paper  and  shut  off  prior  equities  existing  against  it.  Such  was 
the  rule  announced  in  Coddington  v.  Bay  supra,  and  has  since  been 
enforced  by  the  courts  of  this  state.  Mayer  v.  Heidelbach,  133  N.  Y. 
332,  25  N.  E.  416,  9  L.  R.  A.  850;  Spring  Brook  Chemical  Co.  v. 
Dunn,  39  App.  Div.  130,  57  N.  Y.  Supp.  100;  Blair  v.  Hagemeyer, 
26  App.  Div.  219,  49  N.  Y.  Supp.  965.  There  is  nothing  contained 
in  this  enactment,  therefore,  which  has  changed  the  rule  of  law  respect- 
ing the  consideration  of  commercial  paper  as  it  had  previously  existed, 
and  the  language  of  the  statute  is  quite  insufficient  to  annul  the  rule 
which  has  obtained  with  respect  to  the  fraudulent  diversion  of  com- 
mercial paper  as  against  accommodation  indorsers  thereon.  Such  rule, 
therefore,  cannot  be  considered  as  changed,  unless  it  be  by  virtue  of 
the  other  provisions  of  the  statute  showing  that  such  defense  is  cut 
off  and  indicating  a  clear  intent  to  change  the  rule. 

Section  52  of  the  negotiable  instruments  law  defines  what  constitutes 
a  holder  for  value:  "Where  value  has  at  any  time  been  given  for  the 
instrument,  the  holder  is  deemed  a  holder  for  value  in  respect  to  all 
parties  who  became  such  prior  to  that  time."  And  by  section  55  (as 
amended  by  Laws  1898,  c.  336)  an  accommodation  party  is  made  liable 
on  the  instrument  to  a  holder  for  value,  although  such  holder  at  the 
time  of  taking  the  instrument  knew  him  to  be  only  an  accommoda- 
tion party.  Section  91  defines  a  holder  in  due  course  to  be  a  person 
who  has  taken  the  instrument  under  the  following  conditions :  "(1) 
That  it  is  complete  and  regular  upon  its  face;  (2)  that  he  became  the 
holder  of  it  before  it  was  overdue,  and  without  notice  that  it  had  been 
previously  dishonored,  if  such  was  the  fact;  (3)  that  he  took  it  in 
good  faith  and  for  value;  (4)  that  at  the  time  it  was  negotiated  to 
him  he  had  no  notice  of  any  infirmity  in  the  instrument  or  defect  in 
the  title  of  the  person  negotiating  it."  Section  94  defines  when  the 
title  is  defective  in  the  person  who  has  negotiated  the  instrument,  as 
follows :  "When  he  obtained  the  instrument,  or  any  signature  thereto, 
by  fraud,  duress  or  force  and  fear,  or  other  unlawful  means,  or  for 
an  illegal  consideration,  or  when  he  negotiates  it  in  breach  of  faith, 
or  under  such  circumstances  as  amount  to  a  fraud."  Section  95  pro- 
vides that  the  holder  must  have  "actual  knowledge  of  the  infirmity  or 
defect,  or  knowledge  of  such  facts  that  his  action  in  taking  the  instru- 
ment amounted  to  bad  faith."     Bv  section  96  the  rights  of  a  holder  in 


364  NEGOTIATION.  (Part  2 

due  course  are  defined  to  be :  "A  holder  in  due  course  holds  the  instru- 
ment free  from  any  defect  of  title  of  prior  parties,  and  free  from  de- 
fenses available  to  prior  parties  among  themselves,  and  may  enforce 
payment  of  the  instrument  for  the  full  amount  thereof  against  all  par- 
ties liable  thereon."  By  section  98  it  is  provided :  "Every  holder  is 
deemed  prima  facie  to  be  a  holder  in  due  course ;  but  when  it  is  shown 
that  the  title  of  any  person  who  has  negotiated  the  instrument  was 
defective,  the  burden  is  on  the  holder  to  prove  that  he  or  some  person 
under  whom  he  claims  acquired  the  title  as  a  holder  in  due  course." 

It  is  evident  from  these  provisions  that  the  Legislature  did  not  in- 
tend to  wipe  out  the  defenses  to  a  promissory  note  where  the  same 
had  been  procured  from  the  maker  by  fraud,  or  where  the  indorse- 
ment had  been  given  for  a  specific  purpose,  and  a  fraudulent  diversion 
of  the  paper  had  been  had.  If  the  holder  took  the  same  with  notice 
of  such  facts  or  circumstances  as  charged  him  with  notice,  or  if  he 
parted  with  no  value,  it  constitutes  a  good  defense  to  such  note.  As 
the  definition  of  value  for  a  promissory  note  has  not  added  anything 
to  the  law  upon  that  subject  beyond  such  as  was  previously  recognized, 
we  ought  not  to  conclude  that  the  Legislature  intended  to  change  the 
rule  with  respect  thereto,  nor  to  permit  frauds  to  be  perpetrated  there- 
under. When  the  Legislature  defines  a  defective  title  it  states  in  ex- 
press terms  that  a  fraudulent  diversion  is  such.  All  of  these  sections  can 
be  harmonized  in  their  entirety,  without  any  subtle  refinement  of  rea- 
soning, by  construing  section  51  to  mean  that  to  constitute  an  anteced- 
ent or  pre-existing  debt  a  valuable  consideration  in  support  of  a  prom- 
issory note,  that  had  been  fraudulently  diverted,  as  valid  in  the  hands 
of  a  bona  fide  holder,  the  latter  must  have  canceled,  and  in  legal  efifect 
paid  and  discharged,  the  antecedent  or  pre-existing  debt.  By  still  hold- 
ing the  debt  he  in  fact  parts  with  no  value.  It  was  not  intended  there- 
by that,  where  a  debt  continued  to  remain  in  existence  and  enforceable 
as  such,  and  the  note  is  taken  as  collateral  security  for  its  payment, 
such  debt  undischarged  constitutes  a  valuable  consideration,  or  the 
holder  of  the  note  one  in  due  course  as  against  the  accommodation 
maker  or  indorser,  w'ho  has  been  defrauded  by  the  negotiation  of  the 
instrument.  We  are  not  to  impute  to  the  Legislature  an  intent  to 
change  a  rule  of  law  which  has  existed  in  uniform  course  of  enforce- 
ment for  over  three-quarters  of  a  century,  without  a  clear  and  une- 
quivocal expression  so  to  do.  The  rules  of  law  which  have  been  laid 
down  in  England  covering  such  question,  or  the  reasons  assigned  for 
a  different  rule  in  other  jurisdictions  in  this  country,  do  not  furnish 
controlling  reasons  for  changing  the  law  of  this  state  so  as  to  bring 
it  into  harmony  with  such  views,  in  face  of  the  fact  that  in  the  com- 
mercial center  of  this  country  these  rules  have  been  applied  for  this 
length  of  time  without  damage  to  business  interests  or  harm  to  com- 
mercial usages,  and  during  its  operation  a  period  of  commercial  ac- 
tivity and  prosperity  has  existed  heretofore  unknown  in  the  world's 
history. 


Ch.  2)  HOLDER    IN    DUE    COURSE.  365 

We  may  take  judicial  notice  that  the  commission  appointed  to  revise 
and  codify  the  statutes  was  created  in  the  main  to  codify  existing  laws 
and  not  make  new  rules ;  and  certainly  it  was  never  intended  that  set- 
tled usages  in  respect  of  commercial  paper,  founded  upon  decisions 
covering  a  period  of  80  years  and  uniform  in  application,  should  be 
overthrown  in  the  construction  of  ambiguous  and  obscure  expressions 
used  by  such  a  body.  The  harmony  of  these  provisions  of  the  statute 
is  in  no  measure  disturbed  by  a  construction  which  causes  them  to 
read  that  an  antecedent  and  pre-existing  debt  must  be  paid  and  dis- 
charged in  order  to  constitute  the  holder  of  commercial  paper,  which 
has  been  fraudulently  diverted,  a  bona  fide  holder  and,  as  such,  capable 
of  enforcing  the  same  as  against  the  accommodation  maker  or  indorser. 
Merely  taking  such  paper  as  collateral  security  for  the  payment  of  a 
pre-existing  or  antecedent  debt  does  not  constitute  such  debt  value 
within  the  meaning  of  this  statute.  This  matter  does  not  seem  to  have 
been  the  subject  of  discussion,  beyond  that  had  at  Special  Term  in  the 
case  of  Brewster  v.  Shrader,  26  Misc.  Rep.  480,  57  N.  Y.  Supp.  606, 
where  a  different  rule  was  laid  down.  The  authority  cited  therefor 
in  the  opinion  is  contained  in  the  reviser's  note  by  the  author  of  the 
lays^  (see  Crawf.  Neg.  Inst.  Law,  30)  in  which  it  is  stated  that  section 
51  was  designed  to  change  the  rule  in  Coddington  v.  Bay,  supra,  and 
the  opinion  of  the  late  James  W.  Eaton,  Esq.,  instructor  upon  the  law 
of  bills  and  notes  in  the  Albany  Law  School,  wherein  he  says  in  his 
published  edition  of  the  negotiable  instruments  law  (Eaton  &  Greene, 
Neg.  Inst.  Law,  43),  in  referring  to  section  51 :  "It  is  to  be  inferred 
that  the  above  statute  extends  the  New  York  rule  to  include  instru- 
ments given  merely  as  collateral  security." 

We  are  not  disposed  to  adopt  this  construction  of  the  law.  Settled 
principles  ought  not  to  be  overturned  by  imputing  a  legislative  intent 
where  the  language  upon  which  it  is  based  is  equivocal  in  expression 
and  when  the  language  used  which  it  is  claimed  changes  the  rule  may 
be  naturally  harmonized  with  the  decisions  of  the  courts  which  have 
settled  the  law  plainly  and  conclusively  and  with  respect  to  which  com- 
mercial dealings  have  been  governed  in  this  state  for  over  eighty  years. 
But,  even  though  we  should  be  wrong  in  our  construction  of  this  stat- 
ute, nevertheless  it  does  not  change  the  rule  of  law  to  be  applied  in  the 
particular  case.  As  we  have  seen,  by  section  98,  above  quoted,  the 
burden  is  placed  upon  the  holder  of  every  promissory  note  fraudulently 
diverted  to  show  that  he,  or  some  person  under  whom  he  claims,  ac- 
quired title  thereto  as  a  holder  in  due  course.  Nothing  which  appears 
in  these  papers  tends  to  controvert  the  fact  that  the  note  in  question  was 
fraudulently  diverted.  The  proof  upon  such  subject,  submitted  in  the 
moving  papers,  is  clear  and  unequivocal.  The  answer  sets  it  up  as  a 
defense.  Before  the  plaintiff,  therefore,  could  recover,  he  must  show 
that  he  or  some  person  under  whom  he  claims  acquired  the  paper  in 
due  course  and  without  knowledge  of  any  infirmity  attending  upon  it. 
Under  the  pleadings  an  issue  of  fact  upon  this  question  may  be  pre- 


366  NEGOTIATION.  (Part  2 

scnted,  and  these  appellants  are  not  to  be  made  to  suffer  through  the 
fraud  that  has  been  perpetrated  upon  them  if  the  plaintiff  had  notice 
of  such  fact,  and  the  appellants  ought  to  have  an  opportunity  to  be 
heard  upon  this  subject.    *    *    *    Order  reversed.^" 


GROCERS'  BANK  v.  PENFIELD. 

(Court  of  Appeals  of  New  York,  1S77.    G9  N.  Y.  502,  25  Am.  Rep.  231.) 
See  ante,  p.  273,  for  a  report  of  the  case. 


ALLAIRE  V.  HARTSHORNE. 

(Court  of  Errors  and  Appeals  of  Now  Jersey,  1S47.     21  N.  J.  Lnw.  0G5,  47 

Am.  Dec.  175.) 

Green,  C.  J.  ^^  *  *  *  The  third  and  last  error  relied  upon  for 
reversal  is  that  the  judge  charged  the  jury  "that,  if  they  believed  any 
consideration  passed  of  any  value  from  the  said  Richard  S.  Hartshorne 
to  the  said  Pettis  for  the  note,  they  should  find  in  favor  of  the  plain- 
tiff for  the  whole  principal  and  interest  of  said  note,"  and  that  the  jury 
found  accordingly. 

The  action  is  by  the  indorsee  against  the  maker  of  a  promissory  note. 
The  note  was  given  by  Allaire  to  Pettis,  for  a  specific  purpose,  viz.,  the 
renewal  of  an  acceptance  by  Allaire  of  a  draft  of  Pettis  for  $1,500, 
given  in  payment  of  iron  sold  and  delivered  by  Pettis  to  Allaire.  The 
note  was  not  so  appropriated  by  Pettis,  but  was  indorsed  to  Harts- 
horne as  collateral  security  for  a  check  of  Thomas  Hegeman  for  $750 
(as  is  conceded  by  both  parties),  and  also  (as  is  insisted  by  the  plain- 
tiff) to  secure  a  debt  of  $100,  previously  due  from  Pettis  to  Hartshorne. 

Hartshorne  is  a  bona  fide  holder  of  the  note  for  value,  and  is  en- 
titled to  all  the  immunity  and  protection  which  that  character  can  give. 
But  he  holds  the  note,  it  is  not  denied,  as  collateral  security  for  a  less 
amount  than  purports  to  be  due  upon  its  face.  The  question  presented 
is  simply  this :  In  an  action  by  a  bona  fide  holder  of  a  promissory 
note,  who  received  it  as  collateral  security   for  a  less  sum  than  the 

10  Accord:  Roseman  v.  Mahouy,  8G  App.  Div.  377,  83  N.  Y.  Supp.  749 
(1903) ;   Rank  v.  Waydell,  103  App.  Div.  25,  92  N.  Y.  Supp.  666  (1905). 

Contra:  Brewster  v.  Shrader,  26  Misc.  Rep.  480.  57  N.  Y.  Supp.  606  (lSr.9); 
Payne  v.  Zell.  98  Va.  294.  :>6  S.  E.  379  (1900)  ;  Brooks  v.  Sullivan,  129  N  C 
190.  39  S.  E.  822  (1901) ;  Manufacturing  Oo.  v.  Summers.  143  N.  C.  102.  55 
S.  E.  .^>22  (1906),  semble;  Wilkius  v.  Usher,  123  Ky.  696,  97  S.  \Y.  37  (1907), 
semble.  See.  also.  In  re  Hopper-Morgan  Co.  (D.  C.)  154  Fed.  249  (1907) ; 
Id.  CD.  C.)  156  Fed.  525  (1907);  Am.  Bank  v.  McConib,  105  Va.  473.  54  S  E. 
14  (1906). 

11  The  facts  sufficiently  appear  in  the  opinion,  all  of  which  except  that  part 
relating  to  the  third  assignment  of  error,  together  with  the  statement  of  the 
case,  is  omitted. 


Ch.  2)  HOLDER  IN  DUB  COURSE.  3G7 

amount  due  upon  the  note,  the  note  being  without  consideration  and 
invaHd  as  between  the  original  parties,  can  the  holder  recover  more 
than  the  amount  which  he  had  advanced,  or  for  which  the  note  is  held 
as  security?  I  speak  not  now  of  the  rights  of  a  bona  fide  purchaser 
of  a  note.  It  is  admitted  that  the  plaintiff  obtained  the  note  in  ques- 
tion, not  as  a  purchaser,  but  that  it  was  transferred  to  him  as  security 
merely,  for'  a  specific  sum,  less  than  the  amount  of  the  note. 

For  the  purpose  of  this  inquiry,  it  may  be  assumed  that  the  plaintiff 
has  shown  a  clear  right  to  recover  upon  the  note  in  question  the  sum 
of  $1,150,  with  interest.  He  claims  no  more  as  due  to  himself.  He 
admits  that  for  the  amount  recovered  beyond  that  sum  he  stands  as 
trustee  for  the  party  really  entitled  to  the  money.  As  between  the 
original  parties,  Allaire  and  Pettis,  the  note  is  worthless.  It  was  given 
to  Pettis  for  a  specific  purpose,  and  by  him  misappropriated.  He  gave 
no  value  for  it.  If  the  suit  were  in  his  name,  no  recovery  could  be 
had.  Hartshorne,  as  a  bona  fide  holder  for  value  without  notice,  may 
recover  the  amount  due  him  upon  the  note.  But  shall  he  have  judg- 
ment for  the  surplus  beyond  his  claim?  If  he  do,  then  by  the  judg- 
ment of  this  court  Allaire  is  compelled  to  pay  money  which  it  is  con- 
ceded he  is  not  bound  in  law  to  pay,  and  which  is  due  to  no  one.  Not 
due  to  Pettis ;  in  his  hands  the  note  is  valueless.  Not  due  to  Harts- 
horne ;  he  does  not  pretend  to  have  a  claim  to  it. 

The  judgment  then  is  rendered  against  the  defendant  for  an  amount 
which  he  is  not  bound  to  pay,  in  favor  of  the  plaintiff  who  disavows  all 
claim  to  the  surplus,  after  satisfying  his  demand,  to  be  held  in  trust, 
either  for  a  party  who  in  his  own  name  never  could  recover,  or  in 
trust  for  the  defendant  himself.  And  not  only  does  Hartshorne  thus 
recover  money  which  he  does  not  claim ;  not  only  is  Allaire  compelled 
to  pay  money  which  he  does  not  owe ;  but  he  pays  it  under  circum- 
stances which  preclude  all  possibility  of  effectual  redress. 

Suppose  the  money  recovered  upon  this  judgment — how  is  Allaire 
to  be  indemnified  ?  Can  he  file  a  bill  in  equity,  or  institute  proceedings 
at  law  to  recover  back  from  Hartshorne  money  which  he  has  recovered 
of  Allaire  himself  upon  verdict  and  judgment?  He  might  indeed  look 
to  Pettis  for  the  misappropriation  of  the  note ;  but  Pettis  is  bankrupt. 

But  admitting  that  either  a  court  of  law  or  of  equity  may  interfere 
to  protect  the  rights  of  Allaire;  to  what  protection  is  he  entitled? 
What  sum  shall  be  retained?  Was  the  note  taken  and  held  by  the 
plaintiff  to  secure  $1,150,  as  was  insisted  by  him — or  only  $750,  as  ad- 
mitted by  the  defendant?  This  is  a  point  upon  which  there  is  con- 
flicting evidence,  and  upon  which  the  parties  were  entitled  to  the  ver- 
dict of  a  jury. 

The  justice  and  right  of  the  case  manifestly  require  that  judgment 
should  be  rendered  only  for  the  amount  actually  advanced  by,  or  se- 
cured to,  Allaire,  upon  the  transfer  of  the  note  to  him.  Is  such  a  judg- 
ment open  to  any  valid  objection?  Is  it  in  violation  of  legal  principle, 
or  in  conflict  with  authority? 


368  NEGOTIATION.  (Part  2 

It  is  said  in  the  first  place  that  the  note  is  a  unit,  that  a  recovery  upon 
it  is  an  entire  thing,  and  that  different  recoveries  cannot  be  had  upon 
the  same  note,  by  different  claimants  against  the  same  party.  The 
principle  is  sound,  but  it  assumes  as  true  the  very  question  in  dispute. 
If  there  be  a  further  valid  claim  by  Pettis  upon  this  note,  it  is  not 
denied  that  judgment  should  be  rendered  for  the  whole  amount  due. 
But  that  is  the  very  fact  in  dispute,  and  which  Allaire  insists  that  he 
should  have  been  permitted  on  the  trial  to  disprove. 

The  true  distinction  is  clearly  stated  by  Lord  Kenyon,  in  Wiffen  v. 
Roberts,  and  has  been  repeatedly  recognized  in  the  later  cases.  If  the 
note  is  valid  as  between  the  original  parties,  if  the  amount  of  the  note 
is  actually  due  from  the  defendant  to  any  party  (no  matter  to  whom), 
the  indorsee,  though  he  has  not  given  the  full  value,  may  yet  recover 
the  whole,  and  retain  the  overplus  above  the  sum  claimed  by  him,  as 
trustee  for  the  party  beneficially  entitled.  And  this  upon  the  plainest 
principles  of  justice.  The  defendant  owes  the  whole  debt.  It  is  im- 
material to  him  in  whose  name  the  recovery  is  had.  The  legal  owner- 
ship of  the  note  is  in  the  plaintiff ;  he  is  entitled  to  recover  all  that  is 
due  upon  it;  no  injustice  is  done  to  any  party.  But  where  the  note, 
as  between  the  original  parties,  is  without  consideration,  either  as  being 
accommodation  paper,  or  as  having  been  misappropriated,  there  a  bona 
fide  indorsee  for  value  will  recover  upon  it  only  the  amount  he  has 
actually  paid,  provided  there  be  no  other  party  in  interest.  Wiffen  v. 
Roberts,  1  Esp.  261;  Jones  v.  Hibbert,  2  Stark.  204;  Williams  v. 
Smith,  2  Hill,  301. 

It  is  said  that  in  Wiffen  v.  Roberts,  and  in  Jones  v.  Hibbert,  the  note 
was  an  accommodation  note,  transferred  to  the  indorsee  with  knowl- 
edge of  its  character.  But  that  circumstance  surely  does  not  impair 
the  force  of  the  authorities  upon  the  point  in  question.  In  each  case, 
as  in  the  present,  the  paper  was  invalid  as  between  the  original  parties, 
for  want  of  consideration.  It  was  held  available  in  the  hands  of  the 
indorsee  for  the  amount  actually  advanced  by  him,  and  for  no  more. 

The  case  of  Williams  v.  Smith  was  (like  the  present)  a  case  of  the 
misappropriation  of  the  note  by  the  party  in  whose  hands  it  was 
placed  for  a  special  purpose.  The  case  differed  from  this,  in  that  the 
action  was  brought  both  against  the  makers  and  indorsers.  Here  the 
payee  is  not  a  party  to  the  suit;  and  it  is  objected  that  his  rights,  as 
against  Allaire,  should  not  be  concluded  in  a  suit  to  which  he  is  not  a 
party.  The  answer  to  this  objection  is  obvious.  He  stands  in  the 
position  of  every  indorser,  liable  to  have  his  rights  affected  in  an  action 
brought  by  the  indorsee.  The  indorsee  is  the  legal  owner  of  the  note, 
and  the  rights  of  all  previous  indorsers  are  liable  to  be  affected  and 
concluded  by  his  acts.  If  the  indorser  retains  an  interest  in  the  note, 
the  indorsee  is  his  trustee  and  representative,  with  full  power  to  con- 
clude the  rights  of  the  indorser,  but  liable  for  any  abuse  of  his  trust. 

It  is  said  again  that  the  indorsee  may  recover  the  full  amount  where- 
ever  there  is  some  person  to  receive  the  overplus;  that  in  Williams  v. 


Ch.  2)  HOLDER    IN    DUE    COURSE.  369 

Smith  the  indorser  being  a  defendant  in  the  suit,  there  was  not  one  to 
receive  the  overplus,  other  than  the  defendant;  and  that  therefore  that 
case  is  no  authority  in  the  present.  The  true  statement  of  the  prin- 
ciple is  that  the  plaintiff  can  recover,  beyond  the  amount  actually  due  to 
himself,  only  where  there  is  some  person,  other  than  the  defendant, 
entitled  to  receive  the  overplus.  1  Saund.  PI.  &  Ev.  280 ;  Pierson  v. 
Dunlop,  Cowp.  571. 

That  we  apprehend  to  be  precisely  the  position  of  the  present  case. 
If  the  plaintiff  recovers  beyond  the  amount  due  him,  there  is  no  person 
entitled  to  the  surplus  but  the  defendant  himself. 

The  rule  that  the  bona  fide  holder  of  accommodation  paper  shall  re- 
cover, in  an  action  against  the  maker,  only  the  amount  actually  ad- 
vanced, is  well  settled.  Edwards  v.  Jones,  7  Car.  &  P.  633,  2  Mees. 
&  W.  413 ;  Robins  v.  Maidstone,  4  Ad.  &  El  N.  S.  811 ;  Chitty  on 
Bills  (8th  Ed.)  81;  Sedgwick  on  Damages,  241.  The  principle  is  ap- 
plicable to  the  present  case. 

The  instruction  to  the  jury  was  erroneous.  The  defendant  was  en- 
titled to  show  that  as  between  himself  and  Pettis  the  note  was  without 
consideration,  that  the  plaintiff  paid  only  part  value  for  it,  and  upon 
such  proof  the  verdict  should  be  for  the  amount  actually  due  the  plain- 
tiff, and  no  more. 

The  judgment  must  be  reversed,  and  the  record  remitted  to  be  pro- 
ceeded in  according  to  law. 

In  this  opinion  the  court  unanimously  concurred,  except  that  the 
chancellor  declined  expressing  any  opinion  upon  the  second  error  as- 
signed. 

Judgment  reversed.^^ 


GAUE  V.  WILLIS. 

(Supreme  Court  of  Pennsylvania,  1856.    26  Pa.  259.) 

This  was  an  action  on  a  promissory  note,  by  Benjamin  B.  Willis 
against  Frederick  Gaul,  the  maker.  William  C.  Rudman,  on  behalf 
of  the  defendant,  filed  an  affidavit  of  defense,  as  follows:  "This  de- 
ponent, being  anxious  to  borrow  money,  requested  Frederick  Gaul,  the 
drawer,  to  lend  him  a  note  of  $2,000,  now  sued  upon  in  this  case,  which 
he  consented  to  do,  and  did  without  any  consideration  whatever,  and 
solely  for  the  accommodation  of  the  deponent;  that  the  said  note,  so 
loaned  by  the  said  Frederick  Gaul,  was  placed  by  the  deponent  in  the 
hands  of  his  broker,  who,  as  deponent's  agent,  and  for  deponent's  use, 
on  or  about  the  day  of  the  date  thereof,  negotiated  it  for  the  sum  of 
$1,820  and  no  more,  being  at  the  usurious  rate  of  11/2  per  cent,  per 
month  on  the  face  of  the  note,  which  sum  his  said  broker  paid  over  to 

12  Accord:  Brown  v.  James,  SO  Neb.  475,  114  N.  W.  591  (1908). 
Sm.&  M.B.&  N.— 24 


2,70  NEGOTIATION.  (Part  2 

deponent,  deducting  his  commissions,  and  the  same  was  used  by  this 
deponent,  and  this  deponent  beheves  and  expects  to  be  able  to  prove 
on  the  trial  of  this  cause  that  the  plaintiff  obtained  the  said  note  at 
the  said  usurious  rate  at  or  about  the  date  thereof."  And  also  a  sup- 
plemental affidavit  as  follows:  "That  the  promissory  note  sued  upon 
was  discounted  for  the  said  William  C.  Rudman  by  Messrs.  Drexel  & 
Co.,  and  by  them  passed  to  the  plaintiff  at  the  time  and  rate  specified  in 
the  original  affidavit  of  defense  in  this  case,  as  this  affirmant  is  in- 
formed and  truly  believes  and  expects  to  be  able  to  prove  on  the  trial 
of  this  cause." 

The  court  rendered  a  judgment  for  the  plaintiff,  and  the  prothono- 
tary  liquidated  the  amount  due  at  $2. 022.601  o.  It  was  assigned  for 
error  that  the  court  erred  in  entering  judgment  for  the  plaintiff 
below.^^ 

Lkwis,  C.  J.  Frederick  Gaul,  the  defendant  below,  loaned  his  note 
to  William  C.  Rudman.  for  the  purpose  of  enabling  the  latter  to  raise 
monev  by  the  sale  of  it.  The  note  was  drawn  in  the  usual  form  of 
negotiable  instruments,  and  expressed  on  its  face  to  have  been  given 
for  "value  received,"  although  there  was  in  fact  no  debt  due  from  Gaul 
to  Rudman.  Rudman  indorsed  the  note,  and  sold  it  to  Drexel  &  Co. 
They,  in  turn,  disposed  of  it  to  Benjamin  B.  Willis,  at  a  discount 
equal  to  li/o  per  cent,  per  month.  Neither  Drexel  &  Co.  nor  Willis 
had  any  knowledge  of  the  purpose  for  which  the  note  was  given.  They 
had  a  right  to  put  faith  in  the  representation,  on  the  face  of  the  paper, 
that  it  was  given  for  a  valuable  consideration.  As  against  the  parties 
who  made  that  representation  the  note  must  be  held  to  be  as  they 
represented  it.  This  is  a  principle  of  equity  applicable  to  all  business 
transactions;  but  it  is  so  indispensable,  in  the  transfer  of  negotiable 
securities,  that  a  party  to  such  an  instrument  cannot  be  received,  even 
after  a  release,  to  give  evidence  to  invalidate  it  in  the  hands  of  a  bona 
fide  holder,  on  the  ground  of  usury,  or  for  any  other  cause  touching 
the  original  consideration.  Walton  v.  Shelly,  1  T.  R.  300 ;  Grifiith  v. 
Reford,  1  Rawle,  196. 

This  brings  us  to  the  question:  Is  Benjamin  B.  Willis  a  bona  fide 
holder?  If  he  participated  in  any  contrivance  to  evade  the  statute 
against  usury,  he  would  not  be  a  purchaser  in  good  faith.  But  we 
have  .already  seen  that  he  had  no  notice  whatever  of  the  purpose  for 
which  the  note  was  made.  He  neither  loaned  nor  intended  to  loan 
money  to  Rudman  or  to  Gaul.  He  had  no  transaction  of  any  kind  with 
them,  or  with  either  of  them.  His  dealings  were  with  Drexel  &  Co. 
There  was  no  intention  on  the  part  of  the  latter  to  borrow,  and  no 
engagement  to  return  the  money  received,  or  any  part  of  it,  or  to  pay 
any  sum  whatever  for  the  use  of  it.  Now  was  there  any  intention  on 
the  part  of  Willis  to  lend  money  to  them?  It  was  a  clear  purchase  of 
the  security,  and  nothing  else.     Had  he  a  right  to  purchase  it  at  a 

IS  Arguments  of  counsel  are  omitted- 


Ch.  2)  HOLDER  IN  DUE  COURSE.  37t 

greater  discount  than  6  per  cent.  ?  That  he  had  was  fully  settled  bo 
long  ago  as  1785.  Wycoff  v.  Longhead,  2  Dall.  92,  1  h-  Ed.  303; 
Musgrove  v.  Gibbs,  1  Dall.  216,  1  L.  Ed.  107. 

Although  the  period  of  credit  given  on  the  instrument  is  usually 
spoken  of  in  fixing  upon  the  discount,  it  is  not  the  only  element  that 
enters  into  the  calculation.  The  value  of  the  security  is  determined 
by  the  present  responsibility  of  the  parties  bound  for  it,  the  proba- 
bilities of  their  continued  ability  to  pay,  and  their  character  for  punc- 
tuality in  meeting  their  engagements.  As  the  parties  to  the  sale  of  the 
security  were  competent  to  manage  their  own  affairs,  their  agreement 
fixing  the  value  of  the  note,  when  fairly  made,  is  as  binding  as  any_ 
other  contract.  It  is  true  that  if  the  note  was  absolutely  void  there 
might  be  an  insuperable  obstacle  to  a  recovery  on  it,  however  fairly 
acquired.  But  in  this  particular  the  English  statutes  against  usury 
differ  from  our  own.  The  former  declared  that  all  securities  made  in 
violation  of  them  were  "utterly  void."  13  Eliz.  c.  8 ;  3  Hen.  VII,  c.  5 ; 
13  Geo.  Ill,  c.  63.  The  latter  contains  no  such  provision.  The  result 
was  that  the  English  courts  were  bound  to  declare  that  all  such  se- 
curities were  absolutely  void  even  in  the  hands  of  innocent  purchasers. 
But  in  this  state  the  law  has  always  been  that  even  between  the  original 
parties  such  securities  are  valid  for  the  real  debt  and  legal  interest. 
The  excess  cannot  be  recovered  by  one  who  participated  in  the  con- 
trivance to  evade  the  statute,  because  he  has  no  right  to  recover  at  law 
what  the  law  prohibits  him  from  contracting  for  or  receiving.  But  as 
an  innocent  purchaser  of  such  a  security  violates  no  law,  he  of  course 
is  entitled  to  recover  the  amount  which,  on  the  face  of  the  instrument 
appears  to  be  due. 

The  district  court  was  therefore  correct  in  giving  judgment  for  the 
plaintiff. 

Judgment  affirmed.^* 


HILTON  v.  WARING  et  al. 

(Supreme  Court  of  Wisconsin,  1858.     7  Wis.  492.) 

The  complaint  states,  on  information  and  belief:  That  on  3d  day 
of  August,  1855,  at  Berlin,  in  the  county  of  Marquette,  the  defend- 
ants made  their  promissory  note  in  writing,  whereby  they  promised  to 
pay  Enos  Beall  or  order  $1,288.92,  for  value  received,  by  the  1st  day 
of  March,  1857,  and  then  and  there  delivered  the  same  to  said  Beall. 
That  on  the  15th  day  of  April,  1856,  at  Berlin,  Beall  made  his  promis- 
sory note  payable  to  the  plaintiff  or  order,  on  the  1st  day  of  June,  1856,^ 
for  $537.22  at  12  per  cent,  interest.  That  the  said  Enos  Beall,  on  the 
said  15th  day  of  April,  1856,  at  Berlin,  aforesaid,  in  writing,  assigned 

1*  Contra:  Clark  v.  Sisson.  22  N.  Y.  312  (1800).  See  Alexander  v.  Hazelrigg,. 
97  S.  W.  353,  29  Ky.  Law  Key.  1212  (190(j),  post,  p.  447,  and  note  60,  p.  449. 


372  NEGOTIATION.  (Part  2 

and  delivered  the  said  promissory  note  of  said  defendants,  George  D 
Waring  and  Elliot  Reed  to  the  plaintiff,  as  collateral  security  for  the 
payment  of  the  said  sum  of  $537.22,  and  interest  at  the  rate  of  12  per 
cent,  per  annum,  according  to  the  conditions  of  the  said  promissory 
note,  made  and  delivered  by  the  said  Enos  Beall  to  the  plaintiff,  on 
the  said  loth  day  of  April,  1856.  That  the  said  defendant  George  D. 
Waring  had  notice,  and  the  plaintiff  believes  that  Elliot  Reed  also  had 
notice,  of  the  assignment  to  the  plaintiff  as  collateral  security  of  said 
promissory  note,  made  and  delivered  by  them  to  the  said  Enos  Beall, 
before  the  maturity  thereof. 

The  plaintiff,  upon  his  knowledge,  says :  That  he  is  now  the  lawful 
owner  and  holder  of  the  said  promissory  note,  made  and  delivered  by 
the  said  Enos  Beall  to  the  plaintiff,  on  the  15th  day  of  April,  1856,  at 
Berlin,  aforesaid,  whereby  on  the  1st  day  of  June,  1856,  he  promised 
to  pay  to  the  plaintiff,  or  his  order,  the  sum  of  $537.22  and  interest, 
at  the  rate  of  12  per  cent,  per  annum  for  value  received,  and  that  the 
said  Enos  Beall  is  justly  indebted  to  him  thereupon  in  the  sum  of  $537.- 
22,  principal,  together  with  interest  thereon  from  the  15th  day  of 
April,  1856.  That,  though  the  said  promissory  note,  made  and  deliv- 
ered by  the  said  defendants  to  the  said  Enos  Beall,  and  by  the  said 
Enos  Beall  assigned  and  delivered  to  the  plaintiff,  became  due  before 
the  commencement  of  this  action,  yet  they,  the  said  defendants,  have 
not  paid  the  same  to  the  plaintiff",  or  any  part  thereof. 

And  the  plaintiff  further  says  that  he  is  now  the  lawful  holder  of 
the  said  promissory  note  of  the  defendants,  made  and  delivered  by 
them  to  the  said  Enos  Beall  on  the  3d  day  of  August,  1855,  and  by  the 
said  Enos  Beall,  as  aforesaid,  on  the  15th  day  of  April,  1856,  assigned 
to  the  plaintiff'  as  collateral  security,  and  that  the  defendants  are  in- 
debted to  him,  by  virtue  of  said  assignment  and  delivery  by  said  Enos 
Beall  of  said  note  of  defendants,  thereupon  in  the  sum  of  $1,288.92, 
principal,  together  with  interest  thereon  from  the  1st  day  of  March, 
1857.    Whereupon  the  plaintiff'  demands  judgment,  etc. 

The  defendant  demurred  to  the  complaint,  on  the  ground,  first,  that 
it  did  not  set  forth  facts  sufficient  to  sustain  a  cause  of  action;  and, 
second,  for  that  it  appears  on  the  face  of  the  complaint,  that  there  is 
a  defect  of  parties  thereto,  viz. :  That  Enos  Beall  is  a  necessary  party 
defendant  to  the  action.  The  demurrer  was  sustained,  and  the  plain- 
tiff appealed. 

Cole,  J.  The  objections  taken  to  the  complaint  by  the  demurrer, 
are :  (1)  That  it  appears  upon  the  face  thereof  that  the  same  does  not 
state  facts  sufficient  to  constitute  a  good  cause  of  action;  and  (2)  for 
that  it  appears  upon  the  face  thereof  that  there  is  a  defect  of  parties 
defendant  in  this :  It  appears  upon  the  face  of  the  complaint  that  Enos 
Beall  is  a  necessary  party  defendant. 

We  do  not  deem  it  necessary  to  say  more,  in  answer  to  the  first  ob- 
jection taken  to  the  complaint,  than  to  remark  that  in  our  opinion  the 
complaint  does  state  facts  sufficient  to  constitute  a  cause  of  action. 


Ch.  2)  HOLDER    IN    DUE    COURSE.  373 

Perhaps  the  complaint  unnecessarily  sets  forth  the  interest  which  Hil- 
ton, as  pledgee,  has  in  the  note  of  the  defendants.  Being  the  bona  fide 
holder  of  that  note,  he  might  undoubtedly  have  brought  his  action 
upon  it,  and  recovered  judgment  for  the  amount  due  thereupon,  re- 
gardless of  any  interest  the  pledgor,  Beall,  might  have  in  the  proceeds 
after  the  payment  of  the  note  which  he  had  given  to  Hilton.  But  the 
fact  that  the  complaint  does  disclose  the  true  nature  of  the  transac- 
tion, and  that  Hilton  took  this  note  as  collateral  security  for  the  one 
which  Beall  had  given  him,  by  no  means  renders  the  complaint  bad. 

Neither  can  we  conceive  that  it  was  necessary  to  make  Beall  a  party 
to  this  action.  It  appears  he  had  given  a  note  to  the  appellant  for 
$537.22,  and  to  secure  the  payment  of  it  had  turned  out  the  note  upon 
which  the  suit  was  brought,  as  collateral  security.  What  earthly  ne- 
cessity could  there  be  of  making  him  a  party  to  this  action?  None 
whatever.  He  had  a  residuary  interest  in  the  note,  to  be  sure ;  for, 
if  Hilton  realized  more  than  his  debt  from  the  security,  he  would  be 
compelled  to  account  to  Beall  for  the  overplus.  But  it  was  not  neces- 
sary that  he  should  be  a  party  to  the  action  to  collect  the  amount  of 
the  respondent's  note.  All  the  interest  he  had  in  that  matter  was  that 
they  should  pay  their  note  with  the  least  unnecessary  delay. 

The  order  of  the  circuit  court  sustaining  the  demurrer  must  be  re- 
versed, and  the  cause  remanded  to  the  circuit  court  for  further  pro- 
ceedings according  to  law.^^ 

15  Accord:  Petrie  v.  Miller,  57  App.  Div.  17,  67  N.  Y.  Supp.  1042  (1901), 
where  the  plaintiff  was  the  indorsee  of  the  payee,  taking  the  instrnment  as 
collateral  to  a  pre-existing  debt  of  the  paj^ee.  But  see  Mersick  v.  Alderman, 
77  Conn.  634.  60  Atl.  109  (1905). 

In  Black  V.  Bank,  96  Md.  399,  416,  417,  54  Atl.  88  (1902),  the  court  said: 
"Section  45  provides  that,  where  value  has  at  any  time  been  given  for  the  in- 
strument, the  holder  is  deemed  a  holder  for  value  in  respect  to  all  parties  who 
became  such  prior  to  that  time.  But,  apart  from  these  considerations,  the  plea 
states  a  case  which  does  not  disentitle  the  plaintiff  to  recover,  since  it  alleges 
that  the  Botes  were  delivered  by  the  association  to  the  Old  Town  Bank,  'as 
collateral  security  for  advances  to  be  made  by  it  to  the  association';  and  in 
Maitland  v.  Citizens'  Bank,  40  Md.  562,  17  Am.  Rep.  020,  it  is  said  that  'every 
person  is  within  the  rule,  and  entitled  to  the  protection  of  a  bona  fide  holder 
for  value,  who  has  received  the  note  in  payment  of  a  precedent  debt,  or  has 
taken  it  as  collateral  security  for  a  precedent  debt,  or  for  future  as  well  as 
past  advances.'  The  Old  Town  Bank,  therefore,  as  well  as  the  plaintiff,  is  pre- 
sumed to  be  a  holder  for  value ;  and  in  Cover  v.  Myers,  75  ]\Id.  419,  23  Atl. 
850,  32  Am.  St.  Rep.  394.  the  court  said:  'Where  a  negotiable  instrument  is 
originally  infected  with  fraud,  invalidity,  or  illegality,  the  title  of  the  original 
holder  being  destroyed,  the  title  of  every  subsequent  holder  which  reposes  on 
that  foundation,  and  no  other,  falls  with  it.  But  if  any  subsequent  holder 
takes  tlie  instrument  in  good  faith,  and  for  value,  before  maturity,  he  is  enti- 
tled to  recover  on  it ;  and  so  any  person  taking  title  under  him  may  recover, 
notwithstanding  such  latter  holder  may  have  knowledge  of  the  infirmities  of 
the  instrument;  and  all  that  is  required  of  the  holder  in  such  case  is  that  it  be 
proved  that  he,  or  some  preceding  holder  or  indorsee,  under  whom  he  claims, 
acquired  title  to  the  paper  before  maturity,  bona  fide,  and  for  value.'  And  this 
view  of  the  law  has  since  been  formulated  in  section  77  of  article  13." 

See,  also,  Jennings  v.  Carlucci  (Sup.)  87  N.  Y.  Surp.  475  (1904) ;  Rogers  v. 
Morton,  46  Misc.  Rep.  494,  95  N.  Y.  Supp.  49  (1905) ;  Rosenthal  v.  Freedman, 
53  Misc.  Rep.  595,  103  N.  Y.  Supp.  714  (1907). 


374  NEGOTIATION.  (Part  2 

ATLAS  BANK  v.  DOYLE. 

rSupreme  Court  of  Rhode  Island,  1868.    9  R.  I.  76,  98  Am.  Dec.  368,  11  Am. 

Rep.  219.) 

Assumpsit  on  the  check  of  the  defendant  on  D.  W.  Vaughan  &  Co. 
for  $2,000,  payable  to  bearer,  and  dated  June  17,  1867.  At  the  trial 
of  the  case  before  Mr.  Justice  Potter,  with  a  jury,  at  the  March  term 
of  this  court,  186S,  the  plaintiffs  produced  the  check  in  suit  and  there 
rested  their  case.  The  defendant  then  called  Thomas  H.  Brownell, 
who  testified  that  he  was  cashier  of  the  Atlas  Bank  during  the  year 
1867,  and  as  such  cashier,  received  the  check  in  suit  from  Edward  J. 
Gushing  as  collateral  security  towards  Cushing's  indebtedness  to  the 
bank,  and  that  he  paid  out  no  money  on  the  check.  On  being  asked, 
in  cross-examination,  if  the  check  of  Edward  J.  Gushing,  dated  June 
18,  1867,  for  $2,000  on  the  Atlas  Bank  was  not  paid  on  account  of  the 
check  in  suit,  he  replied  that  it  was  not. 

The  defendant's  counsel  then  moved  that  the  case  be  sent  to  an 
auditor  to  ascertain  the  state  of  the  account  between  Gushing  and  the 
bank,  claiming  that  the  check  in  suit  having  been  loaned  by  the  de- 
fendant to  Gushing  without  consideration,  and  by  said  Gushing  pledged 
to  the  plaintiff's  as  collateral  security  for  his  indebtedness  to  them,  the 
plaintiff's  could  not  maintain  this  action  without  proof  of  such  indebt- 
edness. 

This  motion  the  judge  overruled,  and  instructed  the  jury  that  the 
plaintiffs  might  maintain  their  action  and  recover  upon  the  money 
counts  in  their  declaration,  without  reference  to  the  question  whether 
Gushing  was  or  was  not  indebted  to  the  plaintiffs.  Under  these  in- 
structions, the  jury  having  returned  a  verdict  for  the  plaintiffs  for  $2,- 
106,  the  amount  of  the  check  and  interest,  the  defendant  now  moved 
for  a  new  trial  upon  the  ground  of  error  in  law  in  said  instruction. 

Potter,  J.  Of  the  general  right  of  the  pledgee  to  collect  notes  and 
securities  pledged  to  him  there  can  be  no  doubt.  If  he  could  collect 
only  the  amount  for  which  the  paper  was  pledged,  this  would  render 
two  suits  necessary  to  collect  the  whole  amount  of  the  note  pledged. 
The  pledgee  can  collect  the  whole,  and  account  to  the  pledgor  for  the 
surplus  over  his  debt. 

But  with  paper  known  to  be  accommodation  paper  the  case  is  dif- 
ferent. If,  in  this  case,  the  pledgee  could  collect  the  whole  of  the  mak- 
er, he  could  be  obliged  to  pay  the  surplus  over  his  own  claim  to  the 
pledgor,  who  would  be  in  his  turn  liable  to  repay  such  surplus  to  the 
maker.  We  think,  therefore,  that  in  case  of  accommodation  paper 
pledged  the  pledgee  can  recover  of  the  maker  only  the  amount  of  the 
debt  due  him  from  the  pledgor.  Jones  v.  Hibbert,  2  Starkie,  304,  3 
Eng.  Gom.  Law,  356;  Ghicopee  Bank  v.  Ghapin,  8  Mete.  (Mass.)  40; 
Ghitty  on  Bills,  81 ;   Wiffin  v.  Roberts,  1  Esp.  261. 


Ch.  2)  HOLDER  IN  DUE  COURSE.  375 

On  the  trial  of  the  case,  the  defendant  claimed  that  the  burden  of 
proof  (it  being  a  pledge)  was  on  the  plaintiffs  to  show  the  amount  of 
the  defendant's  indebtedness ;  and  the  plaintiffs,  at  the  hearing  before 
us,  claimed  that  the  defendant  was  obliged  to  prove  that  the  debt  for 
which  the  note  was  pledged  as  collateral  had  been  paid  wholly  or  in 
part. 

The  holder  of  commercial  paper  is  presumed  to  be  a  holder  for  val- 
ue; that  is,  until  the  contrary  be  shown.  In  the  present  case,  it  was 
proved  that  the  defendant's  check  (payable  to  bearer)  was  pledged  by 
Gushing,  to  whom  it  was  given,  to  the  plaintiffs  for  his  (Cushing's) 
indebtedness.  This  shows  a  valuable  consideration,  and  makes  the 
plaintiff's  holders  for  value,  even  if  the  indebtedness  be  fluctuating. 
Byles  on  Bills,  side  page  123 ;  Heywood  v.  Watson,  4  Bing.  496 ;  Chit- 
tv  on  Bills,  side  page  85 ;  Woodruff  v.  Hayne,  1  C.  &  P.  600 ;  1  Starkie, 
483. 

It  is  generally  sufficient  for  the  holder  of  such  paper  to  present  it; 
and  it  is  held  to  be  prima  facie  evidence  that  he  is  a  holder  for  value 
and  to  the  amount  expressed.  The  burden  of  proof  is  indeed  on  the 
plaintiff  to  prove  a  valuable  consideration,  but  by  presenting  the  paper 
he  makes  a  prima  facie  case;  that  is,  a  case  sufficient  to  justify  a  ver- 
dict for  him  if  the  defendant  does  not  rebut  it.  But  if  the  defendant 
does  produce  evidence  to  rebut  this  presumption,  the  burden  is  still  on 
the  plaintiff,  taking  all  the  testimony  together,  to  show  a  valuable  con- 
sideration by  a  preponderance  of  evidence  on  his  side.  Burnham  v. 
Allen,  1  Gray  (Mass.)  500;  Delano  v.  Bartlett,  6  Gush.  (Mass.)  366 
(which  criticises  and  explains  1  Gush.  [Mass.]  170);  Powers  v.  Rus- 
sel,  13  Pick.  (Mass.)  69,  76. 

But  if  the  defendant,  not  disputing  the  original  consideration,  takes 
some  new  ground  of  defense,  for  example,  payment,  failure  of  consid- 
eration, and  the  like,  then  the  burden  is  on  him  to  prove  this  matter  of 
avoidance.  Delano  v.  Bartlett,  supra;  3  Phillips  on  Evidence,  side 
page  161. 

In  the  present  case,  therefore,  it  would  be  sufficient  for  the  plaintiffs 
in  the  first  instance  to  produce  their  check  to  the  jury,  which  would  en- 
title them  to  a  verdict  for  the  face  of  it,  unless  the  defendant  produced 
evidence  to  show  that  the  amount  of  the  indebtedness  was  either  orig- 
inally less  or  had  been  reduced  by  payment.  If  he  does  so,  then,  tak- 
ing all  the  evidence  together,  the  burden  of  proof  would  return  on  the 
plaintiffs  to  show  themselves  entitled  to  recover  the  face  of  the  check. 
Ghitty  on  Bills,  side  page  638,  note  "c." 

A  new  trial  will  be  granted,  on  the  defendant's  filing  an  affidavit 
that  he  has  evidence  to  show  that  the  amount  of  Gushing's  indebted- 
ness to  the  plaintiffs  was  less  than  the  amount  of  the  check.^^ 

19  Accord:    Mersick  v.  Alderman,  77  Codu.  634,  60  Atl.  109  (1905),  sembla 


376  NEGOTIATION.  (Part  2 

LAY  V.  WISSMAN. 
(Supreme  Court  of  Iowa,   1873.     36  Iowa,  305.) 

Action  upon  a  promissory  note  for  $150  executed  by  defendant  to 
J.  L.  Cory  and  W.  G.  Stone,  and  by  them  indorsed  without  recourse. 
The  defendant  answered  under  oath,  denying  that  he  signed  the  note 
sued  on ;  denying  that  plaintiff  is  a  bona!  fide  holder  thereof ;  alleging 
that  the  same  was  obtained  by  fraud,  without  any  consideration,  and 
that  plaintiff  paid  therefor  only  the  sum  of  $80.  Trial  by  the  court. 
Judgment  for  plaintift.  Defendant  appeals.  The  material  facts  are 
stated  in  the  opinion. ^^ 

Day,  J.  *  *  *  It  appears  from  the  evidence  that  the  payee  of 
the  note  procured  it  fraudulently  and  without  consideration,  and  that 
the  plaintiff  paid  $80  therefor,  without  any  knowledge  of  the  circum- 
stances attending  its  execution.  A  question  is  presented  as  to  the 
amount  plaintift"  is  entitled  to  recover;  whether  the  amount  of  the 
note,  or  the  sum  paid  therefor  with  interest. 

It  is  an  elementary  principle  that  the  equities  existing  between  the 
maker  and  the  payee  cannot  be  set  up  against  the  indorsee  in  the  ordi- 
nary course  of  business,  for  a  valuable  consideration,  in  good  faith, 
and  before  maturity. 

There  is  some  confusion  and  uncertainty  in  the  authorities  as  to 
whether  one  who  purchases  a  note  for  less  than  its  face  can  be  con- 
sidered a  bona  fide  holder.  Bailey  v.  Smith,  14  Ohio  St.  396,  84  Am. 
Dec.  385,  and  cases  cited.  In  this  state,  however,  the  rule  is  settled 
that  one  who  purchases  a  note  at  a  discount  may  be  a  bona  fide  holder 
and  entitled  to  recover  thereon.  Sully  v.  Goldsmith,  33  Iowa,  397. 
And  this  view  has  the  support  of  both  principle  and  authority.  Bailey 
V.  Smith,  supra ;  Gould  v.  Legee,  5  Duer  (N.  Y.)  270.  The  amount  of 
the  consideration  paid  may  become  important  in  determining  whether 
the  holder  is  a  bona  fide  indorsee. 

Where  a  note  for  $300,  on  a  responsible  person,  and  nearly  due,  was 
sold  for  $5,  it  was  held  that  the  indorsee  was  not  a  holder  in  good  faith 
for  value,  and  that  he  could  not  recover  thereon,  the  note  being  with- 
out consideration.  De  Witt  v.  Perkins,  22  Wis.  473.^^  The  amount 
of  consideration  paid  becomes  an  important  element,  in  connection  with 
the  responsibility  of  the  maker,  the  rate  of  interest,  the  time  of  matur- 
ing, and  the  circumstance  of  the  transfer  in  determining  the  bona  fides 
of  the  holder.  And  if  he  is  not  a  purchaser  in  good  faith,  he  takes 
the  note  subject  to  the  equities  growing  out  of  the  note,  existing  be- 
tween the  maker  and  the  payee.  When,  however,  the  consideration 
paid,  and  the  other  circumstances  of  the  purchase,  show  that  the  in- 

17  Part  of  the  opinion  is  omitted. 

18  See.  also,  Smith  v.  .Tansen.  32  NeTi.  125.  10  N.  W.  .^>37.  41  Am.  Rep.  (1881); 
rtcNaniara  v.  Jose.  28  Wash.  461,  68  Pac.  903  (1902) ;  Lassas  v.  McCarty,  47 
Or.  474.  84  Pac.  76  (1906). 


Ch.  2)  HOLDER    IN    DUE    COURSE.  377 

dorsee  is  a  bona  fide  holder,  in  the  usual  course  of  business,  there  is 
no  logical  principle  upon  which  his  recovery  from  the  maker  can  be 
reduced  below  the  amount  of  the  note. 

The  defense  that  a  note  has  been  obtained  fraudulently  or  without 
consideration  does  not  avail  against  a  bona  fide  holder.  If,  however, 
the  recovery  of  such  holder  may  be  Hmited  to  the  amount  paid,  it  is 
apparent  that  the  defense  does  avail ;  for  without  such  defense  he 
would  recover  the  amount  evidenced  by  the  note. 

There  is  a  class  of  cases  in  which  the  holder  has  been  allowed  to  re- 
cover only  the  amount  advanced  upon  the  note.  But  it  is  believed  that 
they  will  nearly,  if  not  quite,  all  be  found  to  be  cases  in  which  the 
holder  is  not  a  purchaser  in  the  ordinary  course  of  business.  Thus  in 
Allaire  v.  Hartshorne,  21  N.  J.  Law,  665,  47  Am.  Dec.  175,  cited  in 
1  Pars,  on  Notes  and  Bills,  p.  191,  note  1,  the  note  was  deposited  with 
the  holder  as  collateral  security  for  a  pre-existing  debt.  The  plaintiff 
was  the  owner  of  the  note  only  to  the  extent  of  the  debt  secured.  If 
he  had  recovered  more,  he  would  have  held  the  surplus  in  trust  for 
the  payee.  But  the  payee  was  not  entitled  to  recover;  the  note,  as 
between  him  and  the  maker,  being  invalid.  Hence  it  was  held,  and 
very  properly,  that  the  holder  could  recover  only  the  amount  of  his 
debt.  The  same  principle  is  involved  in  Williams  v.  Smith,  2  Hill  (N. 
Y.)  301;  Youngs  v.  Lee,  18  Barb.  (N.  Y.)  187;  Cardwell  v.  Hicks, 
37  Barb.  (N.  Y.)  458;  Chicopee  Bank  v.  Chapin,  8  Mete.  (Mass.)  40. 
In  Hubbard  v.  Chapin,  2  Allen  (Mass.)  328,  a  note  was  given  upon  an 
illegal  consideration  to  one  Stone,  for  the  benefit  of  Mallory.  Stone 
indorsed  the  note  to  the  plaintiff,  who  paid  but  a  small  sum  thereon, 
and  agreed  to  pay  the  balance  to  Mallory.  It  was  claimed  that,  before 
paying  the  balance  to  Mallory,  he  had  knowledge  of  the  illegality  of 
the  consideration.  It  was  held  that,  if  he  did  acquire  such  knowledge, 
he  could  recover  of  the  maker  only  the  sum  paid  before  he  obtained 
information  of  the  failure  of  consideration.  This  case  falls  under  the 
same  principle  as  those  before  cited. 

It  is  essential  to  the  utility  of  commercial  paper,  as  a  medium  of  ex- 
change, that  the  parties  dealing  with  it,  so  long  as  they  act  in  good 
faith,  should  be  allowed  to  regulate  its  value  by  the  responsibility  of 
the  parties  bound  thereby,  and  all  the  circumstances  attending  the 
transfer ;  and  it  would  very  much  lessen  the  usefulness  of  such  paper, 
if  the  purchaser  for  less  than  its  face,  in  the  ordinary  course  of  busi- 
ness, holds  it,  pro  tanto,  subject  to  the  defenses  which  the  maker  may 
have  against  the  payee. 

We  hold,  therefore,  that  the  court  did  not  err  in  rendering  judgment 
for  the  amount  of  the  note.  This  holding  is  in  accord  with  the  general 
current  of  decision  in  this  state,  upon  the  subject  of  commercial  paper. 
See  Dickerman  v.  Day,  31  Iowa,  444,  7  Am.  Rep.  156 ;  Loomis  &  Le- 
roy  v.  Metcalf  &  Fuller,  30  Iowa,  382 ;  Sully  v.  Goldsmith,  32  lowi, 
397 ;   National  Bank  of  Michigan  v.  Green,  33  Iowa,  140. 

Affirmed. 


378  NEGOTIATION.  (Part  2 

MANN  et  al.  v.  SECOND  NAT.  BANK  OF  SPRINGFIELD, 

OHIO. 
(Supreme  Court  of  Kansas,  1883.    30  Kan.  412,  1  Pac.  579.) 

This  was  an  action  on  a  negotiable  promissory  note.  Trial  by  jury. 
The  court  instructed  the  jury  peremptorily  to  find  for  the  plaintiff,  and 
of  this  defendants  complain.  The  note  was  given  in  payment  of  a 
Champion  harvester  and  cord  binder.  In  the  sale  of  this  machine  a 
warranty  was  given,  and  the  defense  was  a  breach  of  the  warranty, 
and  therefore  a  failure  of  the  consideration.  Upon  the  trial  testimony 
was  offered  in  support  of  this  defense,  and  finally  it  was  admitted  that 
the  defendants  were  entitled  to  a  verdict,  unless  the  plaintiff  was  a  pur- 
chaser of  the  note  for  a  good  and  valuable  consideration  before  ma- 
turity, without  notice  of  the  failure  of  the  warranty.  The  note  was  in 
form  to  the  order  of  Amos  Whitely,  president.  It  was  due  January 
1,  1S82,  was  indorsed  and  transferred  to  plaintiff  bank  by  way  of  dis- 
count. At  the  time  of  discount  no  money  was  paid  directly  to  the 
machine  company,  but  the  amount  of  the  discount,  $142.14,  was  cred- 
ited to  the  account  of  the  machine  company.  At  that  time  and  since, 
up  to  the  time  of  the  commencement  of  this  action,  the  machine  com- 
pany carried  an  average  balance  of  several  thousand  dollars  in  the 
bank.     Judgment  for  plaintiff.     Defendants  alleged  error.^* 

Brewer,  J.  It  will  be  observed  that  the  bank  in  fact  paid  nothing 
to  the  company  at  the  time  of  the  discount.  It  simply  credited  the 
company  on  its  books  with  the  amount  of  the  discount,  and  thereby  en- 
larged the  company's  account  with  the  bank.  It  is  not  a  case  in  which 
the  company's  account  was  overdrawn,  and  in  wdiich  it  was  indebted 
to  the  bank,  which  indebtedness  was  reduced  by  the  amount  of  the  dis- 
count. On  the  contrary,  the  bank  owed  the  company,  and  it  simply,  by 
the  discount,  increased  the  amount  of  this  indebtedness — an  indebted- 
ness which  continued  until  after  suit  was  brought  and  the  bank  had 
full  notice  of  the  defense.  Now,  conceding  that  the  bank  was  a  bona 
fide  holder,  that  it  acquired  title  in  the  first  instance  without  any  notice 
of  any  infirmity,  to  what  extent  is  it  protected?  The  general  rule  in 
such  cases  is  that  a  bona  fide  holder  is  protected  to  the  amount  he  has 
paid  or  lost  by  virtue  of  the  discount.  In  the  case  of  Dresser  v.  Con- 
struction Co.,  93  U.  S.  92,  23  L.  Ed.  815,  it  was  held  that  a  bona  fide 
holder  of  negotiable  paper  purchased  before  its  maturity,  upon  an  un- 
executed contract  on  which  part  payment  only  had  been  made,  when 
he  received  notice  of  fraud  and  a  prohibition  to  pay,  is  protected  only 
to  the  amount  paid  before  the  receipt  of  such  notice.  In  the  opinion, 
which  covers  simply  that  point,  the  authorities  are  fully  cited,  and  the 
conclusion  reached  is  the  unanimous  opinion  of  the  court.  In  Bank  v. 
Valentine,  18  Hun  (N.  Y.)  417,  it  is  held  that  the  mere  discounting  of 

i»The  statement  of  facts  is  abridged  from  the  opinion,  part  of  wliich,  to- 
gether  with  the  arguments  of  counsel,  is  omitted. 


Ch.  2)  HOLDER    IN    DUE    COURSE.  379 

a  note  and  giving  a  party  credit  on  the  books  of  the  bank  for  the 
amount  thereof  does  not  constitute  the  bank  a  holder  for  value.  A 
similar  proposition  is  laid  down  in  Dougherty  Bros.  &  Co.  v.  Bank. 
93  Pa.  227,  39  Am.  Rep.  750. 

We  do  not  cite  the  various  cases  in  suppport  of  the  general  proposi- 
tion, for  they  are  fully  cited  and  discussed  in  the  opinion  of  the  court 
in  93  U.  S.  92,  23  L.  Ed.  815,  supra.  The  proposition  rests  on  the 
plainest  principles  of  justice,  and  in  no  manner  impairs  the  desired 
negotiability  and  security  of  commercial  paper.  Whenever  the  holder 
is  a  bona  fide  holder,  he  has  a  right  to  claim  protection,  but  protection 
only  to  the  extent  he  has  lost  or  been  injured  by  the  acquisition  of  the 
paper.  If  he  has  parted  with  value,  either  by  a  cash  payment  or  the 
cancellation  of  a  debt,  or  giving  time  on  a  debt,  or  in  any  other  man- 
ner, to  that  extent  he  has  a  right  to  claim  protection ;  but  when  he  has 
parted  with  nothing  there  is  nothing  to  protect.  A  mere  promise  to 
pay  is  no  payment.  He  may  rightfully  say  to  the  party  from  whom 
he  purchased :  "The  paper  you  have  given  me  is  valueless,  and  there- 
fore I  am  under  no  obligations  to  pay."  And  if  the  paper  be,  in  fact, 
valueless,  payment  cannot  be  compelled.  Now,  the  relation  of  a  bank 
to  its  depositor  is  simply  that  of  debtor.  The  bank  owes  the  depositor 
so  much.  If  the  deposit  is  valueless,  its  obligation  to  pay  is  without 
consideration,  and  it  may  decline  to  pay.  There  is  nothing  in  the  rela- 
tion of  a  bank  to  its  depositor  which  takes  its  obligation  to  its  depositor 
out  of  the  general  rule  of  debtor  to  creditor. 

The  case  of  Bank  v.  Crawford,  2  Cin.  Rep.  125,  cited  by  defendant 
in  error,  is  a  case  in  which  the  depositor's  account  was  overdrawn,  and 
the  discount,  therefore,  was  practically  the  payment  of  an  antecedent 
debt.  And  in  such  a  case,  the  bank  having  taken  the  paper  in  payment 
of  an  antecedent  debt,  was  entitled  to  protection  to  the  amount  of  such 
debt.  Draper  v.  Cowles,  27  Kan.  484.  We  therefore  think  that  the 
bank,  having  paid  nothing  at  the  time  of  its  discount,  having  simply 
increased  its  debt  to  the  depositor,  the  machine  company,  and  that  debt 
remaining  unpaid  at  the  time  suit  was  brought,  and  it,  having  received 
actual  notice  of  the  infirmity  of  this  paper,  cannot  claim  the  protection 
of  a  bona  fide  holder  for  value. 

We  see  nothing  in  the  case  of  Railroad  Co.  v.  Bank.  102  U.  S.  14, 
26  L.  Ed.  61,  w'hich  conflicts  with  this  conclusion.  At  least  there  is 
nothing  in  the  decision  as  applicable  to  the  facts  of  that  case  which  con- 
flicts, nor  in  the  illustrations  made  by  the  learned  judge  who  wrote  the 
opinion  of  the  court.  And  while  there  are  some  expressions  in  that 
opinion  which  may  seem  to  conflict,  we  do  not  understand  that  the 
court  means  in  any  way  to  overrule  the  prior  case  in  93  U.  S.  92,  23 
L.  Ed.  815,  supra.  We  think,  therefore,  the  district  court  erred,  in  its 
peremptory  instructions,  to  find  for  the  plaintiff,  that  the  judgment 
must  be  reversed,  and  the  case  remanded  for  a  new  trial.    *    *    *  20 

20  Accord:  Citizens'  Bank  v.  Cowles,  ISO  N.  Y.  346,  73  N.  E.  33.  105  Am.  St. 
Rep.  765  (1905);  Albany  Bank  v.  Ice  Co.,  92  App.  Div.  47,  86  N.  Y.  Supp.  773 


380  NEGOTIATION.  (Part  2 

SECTION   2.— NOTICE 


BROWN  V.  DAVIES. 
(Court  of  King's  Bench,  1789.     3  Term  R.  SO.) 

This  was  an  action  by  the  indorsee  of  a  promissory  note  against  the 
maker. 

The  plaintiff,  at  the  trial  before  Lord  Kenyon  at  the  last  sittings  at 
Guildhall,  rested  his  case  upon  the  proof  of  the  maker's  and  payee's 

(1904);  Consolidated  Banli  v.  Kirkland,  99  App.  Div.  121,  91  N.  Y.  Supp.  353 
(1904) ;  National  Bank  v.  Foley.  54  Misc.  Rep.  12G,  103  N.  Y.  Supp.  553  (1907)  ; 
Citv  P.ank  v.  Green.  130  Iowa.  384.  106  N.  W.  942  (190*5)  ;  McNight  v.  Parsons, 
130  Iowa.  390,  113  N.  W.  858,  22  L.  R.  A.  (N.  S.)  718.  125  Am.  St.  Rep.  2U5 
(1907) :    Hodge  v.  Smith.  130  Wis.  326.  110  N.  W.  192  (1907). 

Contra:  Ex  parte  Richdale,  19  Ch.  Div.  409  (C.  A.  1881).  See,  also.  Na- 
tional Bank  v.  Silke,  [1890]  1  Q.  B.  435  (C.  A.):  Royal  Bank  v.  Tottenham, 
[1894]  2  Q.  B.  715  (C.  A.);  Capital  Bank  v.  Gordon,  [1903]  A.  C.  240;  Blake  v. 
Hamilton  Bank,  79  Ohio  St.  189,  87  N.  E.  73,  20  L.  R.  A.  (N.  S.)  290,  128  Am. 
St.  Rep.  684  (1908). 

Compare  Commercial  Bank  v.  Bank,  132  Iowa,  706,  109  N.  W.  198  (1907) ; 
Fayette  Bank  v.  Summers.  105  Va.  689,  54  S.  E.  862.  7  L.  R.  A.  (N.  S.)  694 
(190G),  cases  where  the  bank  did  not  give  credit,  but  took  for  collection. 

"It  is  claimed  on  the  part  of  the  defendants  that  because  there  was  a 
balance  to  the  credit  of  the  Delanceys  at  the  plaintiff  bank  of  more  than  the 
amount  of  the  note  in  suit  on  the  respective  dates — .June  28.  1904.  June  29, 
1904.  April  20,  1905.  and  May  1.  1905— as  found  by  tlie  trial  court,  therefore 
the  plaintiff  did  not  purchase  and  pay  for  the  note  June  28,  1904.  In  other 
words,  that  the  amount  of  the  note  stood  to  the  credit  of  the  Delanceys  at 
the  bank  without  being  drawn  out  by  them.  But  it  is  undisputed  that  such 
balances  were  subject  to  check,  and  simply  stated  the  balances  on  Delanceys' 
account  at  the  respective  dates  mentioned,  and  had  nothing  to  do  with  the 
note  in  suit,  and  that  such  balances  varied  from  time  to  time  and  were  at 
times  overdrawn.  The  facts  stated  make  it  certain,  not  only  that  the  plain- 
tiff purchased  the  note  and  placed  the  amount  thereof  to  the  credit  of  the  De- 
lanceys in  their  bank  account,  less  the  discount,  June  28,  1904,  but  also  that 
the  Delanceys  drew  out  of  the  bank  to  their  own  use  the  whole  of  the  amount 
so  placed  to  their  credit  prior  to  the  time  when  the  plaintiff  first  learned  that 
the  defendants  claimed  to  have  a  defense  to  the  note.  Such  being  the  facts, 
there  can  be  no  question  but  what  the  plaintiff  became  the  owner  and  holder 
of  the  note  in  due  course  and  in  good  faith  and  for  value  before  maturity, 
and  hence  is  entitled  to  the  protection  of  the  law  merchant,  even  If  the  de- 
fendants might  have  successfullv  defended  against  the  vendors  of  the  stal- 
lion." Xorthfield  Bank  v.  Arndt,  132  Wis.  3S:i  112  N.  W.  451,  453,  12  L.  R.  A. 
CN.  S.)  82  (1907). 

"The  evidence  showed  that  the  amount  of  the  note  was  placed  to  the  cred- 
it of  Haas  in  the  appellant  bank,  and  that  soon  thereaftei'.  and  on  the 
strength  of  the  credit,  the  bank  obligated  itself  to  honor  a  check  drawn  on 
Haas  for  $1,000.  Notwithstanding  this  last  transaction,  it  is  claimed  by  the 
appellee  that  appellant  paid  nothing  for  the  note  until  after  it  had  notice  of  its 
infirmities.  The  giving  of  credit  alone  would  create  the  relation  of  debtor  and 
creditor  between  the  bank  and  Haas,  and  nothing  more,  and  the  bank  would 
not  thereby  become  a  bona  fide  holder  within  the  meaning  of  the  law.  City 
Deposit  Bank  v.  Green,  130  Iowa,  384,  106  N.  W.  942.  But,  if  it  was  true  that 
the  bank  had  assumed  a  legal  obligation  to  another  on  the  faith  of  the  de- 
posit or  credit,  it  became  thereby  a  purchaser  for  value.  Leach  v.  Hill.  106 
Iowa.  171.  76  N.  W.  667."  Montrose  v.  Claussen,  137  Iowa,  73,  76,  114  N.  W. 
547,  548  (1908). 

See,  also,  Mehlinger  v.  Harriman,  185  Mass.  245,  70  N.  E.  51  (1904). 


Ch.  2)  HOLDER    IN    DUE    COURSE.  381 

handwriting.  The  note  appeared  upon  the  face  of  it  to  have  been 
drawn  on  the  6th  of  October  1788,  payable  to  Sandal  or  order,  and  to 
have  become  due  on  the  13th  of  November.  It  had  Sandal's  indorse- 
ment upon  it,  and  had  been  noted  for  nonpayment.  Whereupon  the 
defendant's  counsel  offered  to  prove  these  facts :  That  Sandal,  having- 
indorsed  it  in  blank,  delivered  it  to  Taddy,  by  whom  it  had  been  noted 
for  nonpayment.  That  on  the  6th  of  December  Sandal,  having  been 
paid  by  the  defendant,  the  maker  of  the  note,  took  it  up  from  Taddy. 
and  afterwards,  without  the  knowledge  or  consent  of  the  defendant, 
negotiated  it  to  the  plaintiff.  But  his  Lordship  being  of  opinion  that, 
unless  knowledge  was  brought  home  to  this  plaintiff,  it  would  make 
no  difference  between  these  parties,  rejected  the  evidence,  and  the 
plaintiff  had  a  verdict. 

Le  Mesurier  moved  in  this  term  for  a  rule  to  show  cause  why  there 
should  not  be  a  new  trial,  in  order  to  let  the  defendant  into  proof  of 
the  above  facts,  and  cited  a  case  of  Banks  v.  Colwell  of  Launceston 
Spring  Assizes,  1788,  before  Mr.  Justice  Buller.  That  was  an  action 
by  the  indorsee  of  a  promissory  note,  payable  on  demand,  against  the 
maker.  The  defendant  there  was  admitted  to  give  evidence  that  the 
note  had  been  indorsed  to  the  plaintiff  a  year  and  a  half  afterwards, 
and  to  impeach  the  consideration  by  showing  that  it  had  originally 
been  given  for  smuggled  goods,  and  that  payments  had  been  made  up- 
on it  at  several  times.  But  though  no  privity  was  brought  home  to 
the  plaintiff,  Mr.  Justice  Buller  was  clearly  of  opinion  that  he  ought 
to  be  nonsuited ;  for  he  said  it  had  been  repeatedly  ruled  at  Guildhall 
that  wherever  it  appears  that  a  bill  or  note  has  been  indorsed  over 
some  time  after  it  is  due,  which  is  out  of  the  usual  course  of  trade, 
that  circumstance  throws  such  a  suspicion  upon  it  that  the  indorsee 
must  take  it  upon  the  credit  of  the  indorser,  and  must  stand  in  the 
situation  of  the  person  to  whom  it  was  payable,  and  here  it  appeared 
that  the  consideration  was  illegal.  Therefore  he  nonsuited  the  plain- 
tiff. The  principle  of  that  case  cannot  be  distinguished  from  the 
present,  according  to  which  the  plaintiff  must  stand  in  the  situation 
of  Sandal  with  respect  to  the  defendant,  and  consequently  was  not  en- 
titled to  recover. 

Erskine  now  showed  cause,  contending  that  there  was  no  evidence 
offered  to  show  that  the  plaintiff  knew  the  note  to  have  been  satis- 
fied ;  neither  was  there  any  circumstance  attending  it,  which  might 
reasonably  lead  a  prudent  man  to  suspect  that  it  had ;  one  or  other  of 
which  was  essentially  necessary  to  disqualify  the  plaintiff  from  main- 
taining his  action.  For  he  had  paid  a  valuable  consideration  for  the 
note  to  the  original  payee  in  whose  hands  it  might  properly  be  sup- 
posed to  be.  And  this  objection  does  not  lie  in  the  defendant's  mouth, 
whose  negligence,  in  not  taking  up  the  bill,  when  he  satisfied  Sandal, 
had  left  it  in  the  power  of  the  latter  to  deceive  an  innocent  third  per- 
son. ^^ 

21  Part  of  the  argument  is  omitted. 


382  NEGOTIATION.  (Part  2 

Lord  Kenyon,  C.  J.  I  think  this  matter  ought  to  be  further  inquired 
into.  It  did  not  strike  me  at  the  trial  that  there  was  this  suspicious 
circumstance  on  the  face  of  the  note;  for,  if  it  appeared  to  have  been 
noted  for  nonpayment  at  the  time  the  plaintiff  received  it,  that  ought 
to  have  awakened  his  suspicion,  and  led  him  to  make  further  inquiries 
into  the  goodness  of  the  note. 

AsHHURST,  J.  I  think  the  rule  laid  down  by  my  Brother  Buller,  in 
the  case  in  Cornwall,  is  a  very  safe  and  proper  one:  That,  where  a 
note  is  overdue,  that  alone  is  such  a  suspicious  circumstance  as  makes 
it  incumbent  on  the  party  receiving  it  to  satisfy  himself  that  it  is  a 
good  one ;  otherwise  much  mischief  might  arise. 

Duller,  J.  There  is  this  distinction  between  bills  indorsed  before 
and  after  they  become  due.  If  a  note  indorsed  be  not  due  at  the  time, 
it  carries  no  suspicion  whatever  on  the  face  of  it,  and  the  party  re- 
ceives it  on  its  own  intrinsic  credit.  But  if  it  is  overdue,  though  I 
do  not  say  that  by  law  it  is  not  negotiable,  yet  certainly  it  is  out  of  the 
common  course  of  dealing,  and  does  give  rise  to  suspicion.  Still 
stronger  ought  that  suspicion  to  be  when  it  appears  on  the  face  of  the 
note  to  have  been  noted  for  nonpayment,  v/hich  was  the  case  here. 
But  generally,  when  a  note  is  due,  the  party  receiving  it  takes  it  on 
the  credit  of  the  person  who  gives  it  to  him.  Upon  this  ground  it  was 
that,  in  the  case  in  Cornwall,  I  held  that  the  defendant,  who  was  the 
maker,  was  entitled  to  set  up  the  same  defense  that  he  might  have  done 
against  the  original  payee;  and  the  same  doctrine  has  been  often  rule! 
at  Guildhall.  A  fair  indorsee  can  never  be  injured  by  this  rule;  for, 
if  the  transaction  be  a  fair  one,  he  will  still  be  entitled  to  recover. 
But  it  may  be  a  useful  rule  to  detect  fraud  whenever  that  has  been 
practised.  [Upon  Lord  Kenyon's  appearing  to  dissent  from  the  gen- 
erality of  the  doctrine  held  by  ^Ir.  Justice  Buller,  he  proceeded  to  ob- 
serve:] My  Lord  thinks  I  have  gone  rather  too  far  in  something  that 
I  have  said,  but  it  is  to  be  observed  that  I  am  speaking  of  cases  where 
the  note  has  been  indorsed  after  it  became  due,  when  I  consider  it  as 
a  note  newly  drawn  by  the  person  indorsing  it. 

Lord  Kenyon,  C.  J.  I  agree  with  that,  with  the  addition  of  this 
circumstance:  That  it  appears  on  the  face  of  the  note  to  have  been 
dishonored,  or  if  knowledge  can  be  brought  home  to  the  indorsee  that 
it  have  been  so.  But  I  should  think  otherwise  if  no  notice  can  be  fixed 
on  the  party;  at  least  I  am  not  prepared  to  go  that  length  at  present. 

Grose.  J.  If  collusion  should  be  proved  between  the  defendant 
and  Sandal,  then  the  former  will  not  be  entitled  to  set  up  this  objection. 
But  at  present  I  am  pi  opinion  that  a  new  trial  ought  to  be  granted. 

Rule  absolute. 


Ch.  2)  HOLDER    IN    DUE    COURSE.  383^ 

BAROUGH  V.  WHITE. 

(Court  of  King's  Beuch,  1S25.    4  Barn.  &  C.  325.) 

Assumpsit  by  the  plaintiff  as  indorsee  of  a  promissory  note  made  by 
the  defendant  for  i300.  with  interest  payable  to  one  J.  Arnitt,  or  his 
order,  on  demand.  At  the  trial  before  Abbott,  C.  J.,  at  the  London 
sittings,  after  Easter  term,  the  plaintiff  proved  the  handwriting  of  the 
drawer  and  indorser  of  the  note,  and  also  that  he  had  bought  and  paid 
for  goods  for  Arnitt  to  a  considerable  amount  before  the  note  was 
indorsed,  but  did  not  give  any  direct  evidence  of  the  consideration 
given  by  him  for  the  note.  For  the  defendant  evidence  was  tendered 
of  declarations  made  by  Arnitt  when  he  was  the  holder  of  the  note, 
showing  that  he  gave  no  value  for  it  to  the  maker ;  and  the  case  of 
Banks  v.  Colwell,  cited  in  Brown  v.  Davis,  3  T.  R.  80,  was  relied  on. 
The  Lord  Chief  Justice  rejected  the  evidence,  because  it  could  not  be 
shown  that  the  plaintiff  when  he  took  the  note  knew  that  the  payee 
gave  no  consideration  for  it.  Arnitt  was  in  court,  but  was  not  called 
as  a  witness.     The  plaintiff  having  obtained  a  verdict, 

Cross,  Serjt.,  now  moved  for  a  rule  nisi  for  a  new  trial. ^^ 
Bayley,  J.  I  am  of  opinion  that  the  declarations  made  by  Arnitt 
were  not  admissible  in  evidence.  The  defendant  did  not  identify 
Arnitt  with  the  plaintiff.  Had  it  been  shown  that  the  latter  took  the 
note  without  giving  a  consideration  for  it,  or  after  it  became  due.  the 
case  would  have  been  very  different.  Although  there  was  no  direct 
evidence  of  the  consideration  given  by  the  plaintiff  to  Arnitt,  yet  deal- 
ings between  them  were  proved,  whence  the  existence  of  a  valuable 
consideration  might  be  fairly  presumed.  Neither  does  it  appear  to 
me  that  this  note  could  be  considered  as  overdue.  It  is  said  that  in 
Banks  v.  Colwell,  Buller,  J.,  treated  a  note  payable  on  demand  as  a 
note  taken  by  an  indorsee  after  it  was  due.  We  are  not,  however, 
acquainted  with  all  the  circumstances  of  that  case.  Payment  might 
have  been  demanded  before  the  indorsement,  and  indeed  it  is  stated 
that  several  payments  had  been  made  on  account.  In  this  case  no  de- 
mand was  proved,  and  the  note  being  made  payable  with  interest  to 
Arnitt  or  order  makes  it  probable  that  the  parties  contemplated  that 
the  note  would  be  negotiated  for  some  time.  For  these  reasons  I  think 
that  the  evidence  was  properly  rejected,  and  that  the  verdict  ought  not 
to  be  disturbed. 

2  2  The  arguments  of  counsel,  and  the  opinions  of  Abbott,  C  J.,  and  Hol- 
royd  and  Littledale,  JJ.,  are  omitted. 


384  NEGOTIATION.  (Part  2 


BREWSTER  v.  McCARDELU 
(Supreme  Court  of  New  York,  1832.    8  Wend.  478.) 

This  was  an  action  of  assumpsit,  tried  at  the  Albany  circuit  in  Feb- 
ruary, 1830,  before  Hon.  James  Vanderpoel,  one  of  the  circuit  judges. 

The  plaintiff  was  the  indorsee  of  a  promissory  note  given  by  the  de- 
fendant to  I.  Smith  &  Co.  for  $200,  bearing  date  1st  ^lay,  1829,  and 
payable  90  days  after  date.  The  note  was  in  fact  made  about  the  1st 
October,  1828,  and  delivered  to  the  payees,  who  transferred  it  to  the 
plaintiff  in  February,  1829,  for  money  actually  loaned.  The  defendant 
offered  to  prove  a  failure  in  the  consideration  of  the  note,  which  evi- 
dence was  objected  to,  unless  it  was  shown  that  the  note  was  taken  by 
the  plaintiff  with  a  knowledge  of  such  failure,  but  the  objection  was 
overruled,  and  evidence  received  in  support  of  the  alleged  failure. 
The  judge  charged  the  jury  that  the  negotiation  of  the  note,  before  the 
day  when  it  bore  date,  was  a  strong  circumstance  of  suspicion,  suffi- 
cient to  put  the  plaintiff  upon  inquiry,  and  that  he  therefore  took  it 
subject  to  any  defense  which  might  have  been  made  had  the  suit  been 
brought  by  the  original  payees.  He  then  submitted  to  the  jury  the 
evidence  given  in  support  of  the  defense  set  up,  and  the  jury  found 
a  verdict  for  the  defendant,  which  the  plaintiff  moved  to  set  aside. 

Sutherland,  J.  The  judge  erred  in  charging  the  jury  that  the  cir- 
cumstance of  the  note  having  been  negotiated  to  the  plaintiff  before 
the  day  when  it  bore  date  was  a  strong  circumstance  of  suspicion  suf- 
ficient to  put  him  upon  inquiry,  and  that  he  therefore  took  it  subject 
to  any  defense  w^hich  might  be  made  as  against  the  original  payee. 

The  note  was  actually  made  and  delivered  to  the  payee  in  October, 
1828,  although  it  bore  date  in  May,  1829,  and  was  payable  90  days 
after  date.  It  was  transferred  to  the  plaintiff  for  a  valuable  consid- 
eration in  February,  1829,  6  months  before  it  became  due.  The  date 
of  a  note  is  in  no  respect  material,  except  for  the  purpose  of  determin- 
ing when  it  was  payable.  There  is  no  legal  objection  either  to  ante- 
dating or  postdating  a  note,  and  I  am  not  prepared  to  say  that  either  is, 
in  itself,  and  disconnected  from  other  circumstances,  a  legal  ground  of 
suspicion,  so  as  to  put  the  indorsee  upon  inquiry,  and  subject  him  to 
all  the  equities  existing  between  the  original  parties.  Mechanics'  & 
Farmers'  Bank  v.  Schuyler,  7  Cow.  337,  note ;  Chitty  on  Bills,  77.  The 
Court  of  King's  Bench,  in  Pasmore  v.  North,  13  East,  516,  held  that  a 
note  which  was  postdated,  and  which  was  transferred  to  the  plaintiff 
before  the  day  when  it  bore  date,  could  not  be  questioned  or  impeached 
by  the  maker.  That  case  is  not  distinguishable  from  this,  and  I  think 
was  rightly  decided  upon  the  well-established  principles  applicable  to 
negotiable  paper. 

A  new  trial  must  therefore  be  granted,  the  costs  to  abide  the  event.^^ 

28  Accord:  Hitchcock  v.  Edwards,  60  L.  T.  R.  636  (1889);  Royal  Bank  v. 
Tottenham.  [1894]  2  Q.  B.  715  (C.  A.). 

A  negotiable  instrument  may  be  antedated ;    and  if  an  instrument  payable 


Ch.  2)  HOLDER  IN  DUB  COURSE.  385 

SYLVESTER  v.  CRAPO. 

(Supreme  Judicial  Court  of  Massachusetts,  Plymoutli,  1833.    15  Pick.  92.) 

Assumpsit  on  a  promissory  note  for  the  sum  of  $160.64,  dated  March 
14,  1826,  payable  on  demand,  with  interest,  to  Isaac  Little  or  his  or- 
der, and  indorsed  by  him  in  blank.    Plea,  the  general  issue. 

At  the  trial,  before  Putnam,  J.,  it  was  proved  by  the  defendant  that 
on  February  28,  1827,  there  was  no  indorsement  on  the  note,  and  that 
it  was  then  held  by  Little. 

The  defendant  then  offered  to  prove  by  the  confessions  of  Little  to 
Peter  Crapo,  a  witness,  made  while  the  note  was  held  by  Little,  that 
the  note  was  obtained  by  fraud,  and  was  therefore  void.  The  plaintiff 
objected  to  this  evidence,  and  it  was  ruled  to  be  inadmissible. 

The  defendant  was  thereupon  defaulted.  If  this  evidence  was  right- 
ly rejected,  judgment  was  to  be  entered  upon  the  default;  otherwise, 
a  new  trial  was  to  be  granted.^* 

Shaw,  C.  J.  The  law  is  well  settled  that  where  an  indorsee  takes 
a  negotiable  security,  with  actual  or  constructive  notice  that  it  was  ob- 
tained by  fraud,  or  would  be  subject  to  any  other  legal  defense  in  a 
suit  commenced  thereon  by  the  payee,  he  takes  it  subject  to  every  such 
defense  in  any  suit  brought  in  his  own  name.  It  has  also  been  long 
held  that,  if  the  security  is  overdue  and  dishonored  at  the  time  of  the 
indorsement,  this  circumstance  proves  such  legal  constructive  notice, 
and  lets  in  the  promisor  to  any  defense  which  he  could  make  against 
the  promisee. 

In  this  commonwealth  it  has  been  determined  in  a  series  of  cases, 
and  is  now  the  settled  rule  of  practice,  that  a  promissory  note  payable 
on  demand  is  payable  within  a  reasonable  time,  that  after  the  lapse  of 
such  reasonable  time  it  is  to  be  deemed  overdue  and  dishonored,  and 
that  what  is  reasonable  time  is  a  question  of  law  upon  the  facts  proved. 
And  it  has  been  repeatedly  decided  that,  in  a  much  shorter  period  than 
11  months,  such  a  note  will  be  deemed  in  law  overdue.  Field  v.  Nick- 
after  date  is  antedated  by  mistake,  the  holder  may  prove  the  real  date  in  order 
to  show  himself  a  purchaser  before  maturity.  Drake  v.  Rogers,  32  Me.  524 
(1851) ;  Almich  v.  Downey,  45  Minn.  460,  48  N.  W.  197  (1S91).  But  the  maker 
may  not  prove  a  mistake  in  date  against  a  holder  in  due  course.  Huston  v. 
Young,  3S  Me.  85  (1851). 

An  undated  instrument,  payable  after  date,  matures  prima  facie  at  the  ex- 
piration of  the  specified  period  after  its  delivery.  Seldonridge  v.  Connable,  32 
Ind.  375  (1869). 

The  day  of  payment  of  a  note  may  be  postponed  by  agreement  of  the  parties 
written  on  the  instrument  before  maturity.  If  such  an  agreement  is  written 
on  the  paper  after  maturity,  a  purchaser  after  the  original,  but  before  the  new, 
day  of  payment,  who  takes  without  notice  of  the  fact  that  the  extension  was 
granted  after  maturity,  is  a  holder  in  due  course.  Conkling  v.  Young,  141 
Iowa,  676,  120  N.  W.  353  (1909)  ;  Whitney  Bank  v.  Cannon,  52  La.  Ann.  1484, 
27  South.  948  (1900). 

2  4  The  arguments  of  counsel  are  omitted. 
Sm.&  M.B.&  N.— 25 


386  '  NEGOTIATION. "  (Part  2 

erson,  15  Mass.  131 ;  Thompson  v.  Hale,  6  Pick.  259 ;  Martin  v.  Wins- 
low,  2  Mason,  2-il,  Fed.  Cas.  No.  9,172. 

The  defendant,  then,  was  entitled  to  make  this  defense  in  this  cause, 
and  the  question  is  whether  he  could  avail  himself  of  the  admissions 
of  Little,  the  promisee,  made  whilst  he  was  the  holder,  and  which 
would  have  been  competent  had  the  action  been  brought  by  the  prom- 
isee. We  think  this  evidence  was  admissible,  on  the  principle  that  they 
were  admissions  in  relation  to  the  title  to  property  which  he  then  held. 
Pocock  V.  Billings,  Ryan  &  Moody,  127,  2  Bing.  2G9  ;  Barough  v. 
White,  4  Barn.  &  Cressw.  325,  6  Dowl.  &  Ryl.  379.  This  decision  on 
the  principal  point  is  entirely  reconcilable  with  that  of  Barough  v. 
W'hite,  and  is  supported  by  it,  although  the  evidence  was  in  that  case 
rejected.  This  proceeded  on  the  ground  that  in  England  a  promissory 
note  payable  on  demand  is  not  overdue,  or  deemed  dishonored,  by  lapse 
of  time,  nor  till  an  actual  demand  made.  Such  a  species  of  security 
is  probably  rare  in  England,  and  is  regarded  as  a  continuing  security 
until  the  holder  shall  see  fit  to  render  it  due  by  a  demand.  Here  it 
has  long  been  in  use,  and  the  rules  appHcable  to  it  have  been  firmly 
fixed.  The  court  are  therefore  of  opinion  that  the  admissions  made  by 
Little,  whilst  he  was  the  holder  of  the  note,  were  admissible  evidence. 

New  trial  granted.^'' 


HODGE  et  al.  v.  WALLACE  et  al. 

(Supreme  Court  of  Wisconsin,  1906.    129  Wis.  84,  lOS  N.  W.  212,  116  Am.  St. 

Rep.  93S.) 

This  action  was  commenced  March  14,  1905,  to  recover  the  amount 
due  on  three  promissory  notes  each  bearing  date  April  15,  1903,  for 
$1,000,  payable,  respectively,  July  15,  1904,  July  15,  1905,  and  July  15, 
1906,  with  interest  at  6  per  cent,  per  annum,  payable  to  Robert  Bur- 
gess &  Son  or  order,  and  signed  by  all  of  the  11  defendants,  and  on 
each  note  there  was  indorsed  as  payment  under  date  of  April  17,  1903, 
$200.  Omitting  the  signatures  and  indorsements  the  note  first  reads 
as  follows: 
"$1,000.00.  Prentice,  Wis.,  April  15,  1903. 

"On  July  15,  1904,  after  date  for  value  received,  we  jointly  and  sev- 
erally promise  to  pay  Robert  Burgess  &  Son,  or  order,  one  thousand 
dollars,  at  Prentice,  Wis.,  with  interest  at  the  rate  of  6  per  cent,  per 
annum  from  date  until  paid ;    interest  payable  annually.     It  is  stipu- 

2  5  Accord:  Gordon  v.  Levine,  197  Mass.  263,  83  N.  E.  861,  15  L.  R.  A.  (N.  S.) 
243  (1908). 

As  to  what  Is  a  reasonable  time,  see  McLean  v.  Bryer,  24  R.  I.  599,  54  Atl. 
373  (1903);  Manufacturing  Co.  v.  Summers,  143  N.  C.  102,  55  S.  E.  522  (1906); 
Matlock  V.  Scheurman,  51  Or.  49,  93  Pac.  823.  17  L.  R.  A.  (X.  S.)  747  (1908). 

The  doctrine  of  the  principal  case  does  not  apply  to  bank  notes  and  certifi- 
cates of  deposit.  Such  instruments  do  not  mature  until  demand.  Shute  v. 
Bank,  136  Mass.  487  (1884). 


Ch.  2)  HOLDER   IN    DUE    COURSE.  387 

lated  and  agreed  that  if  any  payment  or  part  payment  hereon,  or  any 
interest  shall  become  due  and  unpaid,  such  delinquency  shall  cause  the 
whole  note  to  immediately  become  due  and  collectible.  In  signing  this 
note  I  waive  notice  of  protest  and  extension  of  time." 

The  defense  was  failure  of  consideration,  fraud,  and  duress.  At  the 
close  of  the  trial  the  court  directed  a  verdict  for  the  defendants,  and 
the  plaintififs  appeal. ^^ 

Cassoday,  C.  J.  *  *  *  The  claim  on  the  part  of  the  plaintiffs,  is  to 
the  effect  that  it  appears,  from  the  uncontradicted  evidence,  that  the 
plaintiffs  became  the  owners  and  holders  of  each  of  the  three  notes  in 
good  faith  and  for  value  and  before  maturity  and  in  the  usual  course  of 
business,  and  hence,  took  the  same  "free  from  any  defect  of  title  of 
prior  parties,  and  free  from  defenses  available  to  prior  parties  among 
themselves."  Sections  1676—22, 1676—25,  and  1676—27  of  the  negotia- 
ble instrument  law  (chapter  356,  Laws  1899).  On  the  other  hand,  it  is 
claimed,  on  the  part  of  the  defendants,  that,  by  virtue  of  the  stipulation 
contained  in  each  of  the  three  notes,  the  whole  of  the  principal  and  in- 
terest named  therein  became  due  and  payable  six  days  prior  to  the  time 
when  the  notes  were  transferred  by  Robert  Burgess  &  Son  to  L.  J. 
Hodge  &  Son  and  nearly  three  weeks  prior  to  the  time  when  they  were 
transferred  by  L.  J.  Hodge  &  Son  to  the  plaintiffs.  That  stipulation  is 
set  forth  in  the  foregoing  statement  and  need  not  be  here  repeated. 
Each  note  required  interest  to  be  paid  thereon  "at  the  rate  of  6  per 
cent,  per  annum  from  date  until  paid  ;  interest  payable  annually."  The 
stipulation  is  to  the  effect  that  "if  any  payment  or  part  payment  *  *  * 
or  any  interest"  thereon,  should  "become  due  and  unpaid,  such  delin- 
quency" should  "cause  the  whole  note  to  immediately  become  due  and 
collectible." 

Counsel  onTaoth  sides  refer  to  adjudications  which  they  claim  to  be 
in  support  of  their  respective  contentions.  The  case  presented  is  clear- 
ly distinguishable  from  those  where  the  stipulation  for  accelerating  the 
maturity  of  the  note  or  notes  on  nonpayment  of  interest  or  other  de- 
fault, is  contained  in  a  mortgage  or  trust  deed  given  to  secure  the 
same,  and  which  mortgage  or  trust  deed  and  notes  are  construed  in 
some  jurisdictions  as  one  instrument  in  law.  In  such  a  case,  the  note 
or  notes  may  be  transferred  without  the  transferee  having  any  knowl- 
edge of  such  stipulation  in  the  mortgage  or  trust  deed.  Here  the  stip- 
ulation is  in  the  notes  themselves,  and  every  transferee  of  the  same 
necessarily  took  them  with  knowledge  of  such  stipulation.  So  the  case 
presented  differs  from  those  where  one  of  a  series  of  notes  or  an  in- 
stallment of  interest  has  become  due  and  unpaid,  with  no  stipulation, 
as  here,  that  "such  delinquency  shall  cause  the  whole  note  to  imme- 
diately become  due  and  collectible."  Thus  it  was  held  by  this  court, 
long  ago,  that :   "An  indorsee  of  several  notes  of  the  same  maker,  se- 

2  6  The  statement  of  facts  is  abridged,  and  the  arguments  and  part  of  the 
opinion  are  omitted. 


388  NEGOTIATION.  (Part  2 

cured  by  one  mortgage  bearing  the  same  date,  and  payable  to  the 
order  of  the  same  person  at  dilterent  periods,  is  not  chargeable  with 
notice  of  any  equitable  defense  of  the  maker  against  such  of  the  notes 
as  were  not  due  at  the  time  of  the  indorsement,  by  reason  of  the  fact 
that  one  of  the  notes  was  then  overdue.  Nor  is  he  chargeable  with 
such  notice  by  reason  of  the  fact  that  the  notes  bore  interest  payable 
annually,  and  that  one  year's  interest  on  all  of  them  was  due  and  un- 
paid at  the  time  of  the  indorsement."  Boss  v,  Hewitt,  15  Wis.  260. 
To  the  same  effect:  Kelley  v.  Whitney,  45  Wis.  110,  115-117,  30  Am. 
Rep.  607 ;   Patterson  v.  Wright,  64  Wis.  289,  292,  25  N.  W.  10. 

These  cases  do  not  go  to  the  extent  of  supporting  the  contention  of 
the  plaintiffs.  So  the  case  presented  is  distinguishable  from  those 
where  the  stipulation  for  accelerating  the  maturity  of  the  note  or  notes 
contained  therein  is  made  optional  with  the  payee  or  mortgagee  or  his 
representatives  or  assigns.  Schoonmaker  v.  Taylor,  14  Wis.  313,  314, 
316;  Thorp  v.  Mindeman,  123  Wis.  149,  101  N.  W.  417,  68  L.  R.  A. 
146,  107  Am.  St.  Rep.  1003.  There  is  nothing  in  any  of  the  stipula- 
tions or  notes,  here  involved,  to  warrant  the  suggestion  that  the  payees 
or  transferees  of  any  one  of  them  were  thereby  given  such  optional 
right  to  declare  the  whole  note  due  and  payable  on  failure  to  pay  the 
annual  interest  which  by  the  express  terms  of  each  note  became  ab- 
solutely due  and  payable  April  15,  1904.  On  the  contrary,  it  is  ex- 
pressly and  clearly  declared  therein  that  "such  delinquency  shall  cause 
the  whole  note  to  immediately  become  due  and  collectible."  To  con- 
strue such  language  as  merely  optional  or  permissive  would  be  to  de- 
stroy the  clearly  expressed  contract  which  the  parties  made  for  them- 
selves and  to  force  upon  them  a  contract  to  which  neither  of  them  ever 
gave  his  consent.  The  terms  of  the  contract  are  so  clear  as  to  seem- 
ingly preclude  construction.  This  may  account  for  the  'small  number 
of  adjudications  upon  the  precise  point  here  presented. 

In  the  absence  of  such  express  stipulation,  and  notwithstanding  the 
rulings  in  the  cases  cited,  it  was  held  by  this  court,  several  years  ago, 
that  "one  who  takes  a  promissory  note,  which  shows  that  interest  on 
the  principal  sum  therein  named  is  past  due  and  unpaid,  takes  it  sub- 
ject to  all  equities  between  the  original  parties."  Hart  v.  Stickney,  41 
Wis.  630,  22  Am.  Rep.  728.  That  case  followed  Newell  v.  Gregg,  51 
Barb.  (N.  Y.)  263.  To  the  same  effect,  First  Nat.  Bank  v  Forsyth, 
67  Minn  257,  69  N.  W.  909,  64  Am.  St.  Rep.  415.  Such  ruling,  how- 
ever, was  out  of  harmony  with  the  decisions  of  this  court  already  cited, 
and  goes  beyond  what  is  necessary  to  sustain  the  contention  of  the  de- 
fendants in  this  case,  based  on  such  express  stipulation.  In  a  much 
later  case  bearing  upon  that  question  this  court  held :  "The  fact  that 
a  note  bearing  interest  payable  semi-annually  was  dated,  executed,  and 
delivered  on  a  certain  day,  fixes  the  date  for  the  payment  of  install- 
ments of  interest  at  the  end  of  every  six  months  thereafter,  and  no  de- 
mand was  necessary  to  create  a  default."  Zautcke  v.  North  Mil.  T. 
Co.,  95  Wis.  21,  69  N.  W.  978. 


Ch.  2)  HOLDER   IN    DUE    COURSE.  389 

It  seems  to  be  pretty  well  settled,  that  "if  the  principal  of  the  paper 
is  payable  in  installments,  the  paper  is  considered  as  dishonored  by  the 
failure  to  pay  any  one  installment  when  it  fell  due,  whether  the  entire 
debt  became  due  on  such  a  failure  to  pay  or  not,  and  a  subsequent 
transferee  takes  it  subject  to  all  the  equities."  Tiedeman  on  Com.  Pa- 
per, §  297;  Vinton  v.  King,  4  Allen  (Mass.)  562;  Field  v.  Tibbetts, 
57  Me.  358,  99  Am.  Dec.  779 ;  2  Rand.  Com.  Paper  (2d  Ed.)  §  1047. 

But  it  is  said  by  the  same  author :  "It  is  doubtful  whether  the  same 
rule  applies  to  the  failure  to  pay  an  installment  of  interest,  unless  the 
parties  have  stipulated  that  the  entire  debt  shall  become  due  on  the 
failure  to  pay  the  interest.  Althoug-h  it  has  been  held  that  the  failure 
to  pay  the  interest  will  destroy  the  negotiability  of  the  paper,  with  or 
without  this  stipulation,  the  better  opinion  is  that,  in  the  absence  of 
such  a  stipulation,  the  failure  to  pay  an  installment  of  interest  does 
not  afifect  the  future  negotiabiUty  of  the  note  or  bill."     Id. 

It  was  held  in  Massachusetts  more  than  100  years  ago:  "Upon  a 
note  payable  in  8  years  with  interest  payable  annually,  an  action  hes 
for  the  interest  before  the  principal  is  payable."  Greenleaf  v.  Kellogg, 
2  Mass.  568.  To  the  same  effect :  Cooley  v.  Rose,  3  Mass.  221 ;  Walk- 
er V.  Kimball,  22  111.  537 ;  Morgenstern  v.  Klees,  30  111.  422 ;  Faihng 
V.  Clemmer,  49  Iowa,  104 ;   Mills  v.  Town  of  Jefferson,  20  Wis.  50. 

It  is  said  by  Mr.  Randolph :  "A  municipal  bond,  like  a  bill  or  note, 
may  be  conditioned  on  default  in  the  payment  of  interest,  and  will,  in 
such  case,  mature  accordingly,  although  by  its  terms  the  principal  was 
not  otherwise  to  become  payable  for  many  years.  A  provision  of  this 
sort — e.  g.  that  a  note  drawing  interest  annually  shall  become  due  on 
failure  to  pay  the  interest — may  be  contained  in  a  collateral  deed  of 
trust  or  other  instrument."  2  Rand,  Com.  Paper  (2d  Ed.)  §  1048.  So 
it  is  said  by  Mr.  Daniel:  "Where  it  is  provided  in  the  bonds  them- 
selves, that  if  default  be  made  as  to  any  interest  coupon,  the  bonds  shall 
be  due  and  payable,  they  so  become  on  default  of  payment  of  any 
coupon."    2  Daniel,  Neg.  Inst.  (5th  Ed.)  §  1506a. 

Thus  it  has  been  held  in  Georgia :  "Municipal  bonds,  having  on  their 
face  many  years  to  run,  but  issued  and  put  in  circulation  with  an  in- 
dorsement upon  each  of  them,  to  the  effect  that  in  case  default  be  made 
in  paying  any  of  the  interest  coupons  at  maturity,  then,  as  a  part  of 
the  contract,  the  bond  itself  shall  become  due  and  payable,  are  legally 
due,  as  to  the  whole  of  the  principal,  whenever  a  default  in  paying  in- 
terest according  to  any  of  the  coupons  occurs.  Time  is  of  the  essence 
of  the  contract."  Mayor  v.  City  Bank  of  Macon,  58  Ga.  584,  follow- 
ing, and  to  the  same  effect,  Sneed  v.  Wiggins,  3  Ga.  94 ;  Ottawa  N. 
P.  R.  Co.  V.  Murray,  15  111.  336;  Ferris  v.  Ferris,  28  Barb.  (N.  Y.) 
29.  See,  also,  Lybrand  v.  Fuller,  30  Tex.  Civ.  App.  116,  69  S.  W. 
1005 ;   First  Nat.  Bank  v.  Peck,  8  Kan.  660. 

But  there  are  adjudications  the  other  way,  notably  one  particularly 
relied  upon  by  counsel  for  the  plaintiffs.  Chicago  Ry.  E.  Co.  v.  Mer- 
chants' Bank,  136  U.  S.  268,  284-286,  10  Sup.  Ct.  999,  34  L.  Ed.  349, 


390  NEGOTIATION.  (Part  2 

affirming  (C.  C.)  25  Fed.  809.  We  must  hold  that,  by  the  express 
terms  of  the  stipulation  and  the  default  in  paying  the  annual  interest 
which  became  due  and  payable  April  15,  1904r,  the  whole  of  each  note 
"immediately  became  due  and  collectible."  It  follows  from  what  has 
been  said  that  the  plaintiffs  took  the  notes  after  they  became  due  and 
payable  and  subject  to  the  equities  between  the  original  parties. 

2.  But  we  are  constrained  to  hold  that  it  was  error  to  direct  a  ver- 
dict in  favor  of  the  defendants.  We  find  no  defense  established  by  un- 
disputed evidence.    *    *    *    Judgment  reversed. ^^ 


GILL  v.  CUBIT  et  al. 

(Court  of  King's  Bench,  1824.     3  Barn.  &  C.  466.) 

Declaration  by  the  plaintiff  as  indorsee  of  a  bill  of  exchange,  bear- 
ing date  the  19th  of  August,  1823,  drawn  by  one  R.  Evered  and  ac- 
cepted by  the  defendants.  Plea,  general  issue.  At  the  trial  before 
Abbott,  C.  J.,  at  the  London  sittings  after  Hilary  term,  1824:,  the  plain- 
tiff proved  the  handwriting  of  the  acceptors,  and  indorser.  The  de- 
fendant then  proved,  that  on  the  20th  of  August  a  letter  containing  the 
bill  in  question  and  two  others,  was  inclosed  in  a  parcel  and  delivered 
at  the  Green  Man  and  Still  coach  office,  and  booked  for  Birmingham. 
The  parcel  arrived  at  Birmingham  by  the  coach,  but  the  letter  contain- 
ing the  bills  had  been  opened,  and  the  bills  taken  out  of  it.  On  the 
following  day  the  drawer  advertised  the  loss  of  the  bills  in  two  news- 
papers. The  plaintiff,  who  was  a  bill  broker  in  London,  then  proved 
by  his  nephew,  who  assisted  him  in  his  business,  that  the  bill  was 
brought  to  his  office  between  the  hours  of  9  and  10  on  the  morning 
of  the  21st  of  August,  by  a  person  having  a  respectable  appearance, 
and  whose  features  were  familiar  to  the  witness,  but  whose  name  was 
unknown  to  him.  He  desired  that  the  bill  might  be  discounted  for 
him,  but  the  witness  at  first  declined  so  to  do,  because  the  acceptors 
were  not  known  to  him.  The  person  who  brought  the  bill  then  said 
that  a  few  days  before  he  had  brought  other  bills  to  the  office,  and  that 
if  inquiry  was  made  it  would  be  found  that  the  parties  whose  names 
were  on  this  bill  were  highly  respectable.  He  then  quitted  the  office 
and  left  the  bill,  and  upon  inquiry  the  witness  was  satisfied  with  the 
names  of  the  acceptors.  The  stranger  returned  after  a  lapse  of  two 
hours  and  indorsed  the  bill  in  the  name  of  Charles  Taylor,  and  received 
the  full  value  for  it,  the  usual  discount  and  a  commission  of  two  shillings 
being  deducted.  The  witness  did  not  inquire  the  name  of  the  person 
who  brought  the  bill,  or  his  address,  or  whether  he  brought  it  on  his 
own  account  or  otherwise,  or  how  he  came  by  the  bill.  It  was  the 
practice  in  the  plaintiff's  office  not  to  make  any  inquiries  about  the 

2T  Contra:    Gillette  v.  Hodge,  170  Fed.  313,  95  C.  C.  A.  205  (1909). 


Ch.  2)  HOLDER    IN    DUB    COURSE.  391 

drawer  or  other  parties  to  a  bill,  provided  the  acceptor  was  g^od. 
Upon  this  evidence  the  Lord  Chief  Justice  told  the  jury  that  there  were 
two  questions  for  their  consideration :  First,  whether  the  plaintiff  had 
given  value  for  the  bill,  of  which  there  could  be  no  doubt;  and,  sec- 
ondly, whether  he  took  it  under  circumstances  which  ought  to  have 
excited  the  suspicion  of  a  prudent  and  careful  man.  If  they  thought 
that  he  had  taken  the  bill  under  such  circumstances,  then,  notwithstand- 
ing he  had  given  the  full  value  for  it,  they  ought  to  find  a  verdict  for 
the  defendant.  Then  the  Lord  Chief  Justice,  after  stating  the  evi- 
dence and  commenting  upon  the  practice  in  the  plaintiff's  office  of  dis- 
counting bills  for  any  persons  whose  features  were  known  to  him,  but 
whose  names  and  abode  were  unknown,  without  asking  any  questions, 
asked  the  jury  what  they  would  think  if  a  board  were  affixed  over  an 
office  with  this  notice,  "Bills  discounted  for  persons  whose  features 
are  known,  and  no  questions  asked."  The  jury  having  found  a  verdict 
for  the  defendants,  a  rule  nisi  for  a  new  trial  was  obtained  in  Easter 
term  last,  upon  the  ground  that  the  plaintiff  having  paid  a  valuable  con- 
sideration for  the  bill,  was  entitled  to  recover  its  value;  and,  secondly, 
that  the  case  had  been  put  too  strongly  to  the  jury,  when  it  was  com- 
pared to  the  case  of  a  public  notice  given  by  a  broker  that  he  would 
discount  all  bills  without  asking  questions.^' 

Bayley,  J.  I  agree  that  the  way  in  which  my  Lord  Chief  Justice 
put  this  case  for  the  consideration  of  the  jury,  by  asking  what  would  be 
the  case  if  a  man  were  to  put  over  his  shop,  "Bills  discounted  for 
strangers,  if  they  have  good  names  on  them,  without  any  questions 
being  asked,"  was  a  very  strong  way  of  putting  the  case  for  their  con- 
sideration. But  I  think  it  was  no  more  than  the  facts  of  this  case  war- 
ranted, and  that  he  was  putting  as  a  general  proposition,  that  which 
exactly  squared  with  the  particular  facts  of  this  case.  If  a  man  com- 
monly dealt  in  that  way  (and  it  appeared  to  be  the  plaintiff's  habit  as 
a  broker),  it  would  warrant  such  an  advertisement  as  that  which  was 
described.  If  in  general  that  was  not  the  plaintiff's  course  and  habit, 
then  in  this  particular  instance  he  deviated  from  his  general  course. 
In  this  case  a  party  goes  to  a  shop  between  9  and  10  in  the  morning  to 
get  a  bill  discounted,  the  clerk  does  not  know  his  name;  he  thinks  he 
knows  his  features ;  he  does  not  know  where  he  lives ;  he  knows  noth- 
ing at  all  about  him.  The  bill  is  left  for  two  hours,  and  at  the  expira- 
tion of  that  time  the  party  comes  back  again ;  and  the  clerk  then  has 
the  opportunity  of  asking  names,  and  whether  he  came  on  his  own  ac- 
count, or  from  any  and  what  house.  No  question  of  that  description 
is  put  to  him.  Under  these  circumstances,  I  think  it  was  the  duty  of 
my  Lord  Chief  Justice  to  put  it  to  the  consideration  of  the  jury 
whether  there  was  due  caution  used  by  that  party  in  that  particular  in- 
stance. If  there  was  not  due  caution  used,  the  plaintiff  has  not  dis- 
counted this  bill  in  the  usual  and  ordinary  course  of  business,  or  in  that 

2  8  The  opinions  of  Abliott,  C  J.,  and  Holroyd,  J.,  are  omitted. 


392  NEGOTIATION.  (Part  2 

way  in  which  business  properly  and  rightly  conducted  would  have  re- 
quired. 

But  it  is  said  that  the  question  usually  submitted  for  the  considera- 
tion of  the  jury  in  cases  of  this  description,  up  to  the  period  of  time  at 
which  my  Lord  Chief  Justice's  direction  was  given,  has  been  whether 
the  bill  was  taken  bona  fide,  and  whether  a  valuable  consideration  was 
given  for  it.  I  admit  that  has  been  generally  the  case ;  but  I  consider 
it  was  parcel  of  the  bona  fides  whether  the  plaintiff  had  asked  all  those 
questions  which,  in  the  ordinary  and  proper  manner  in  which  trade  is 
conducted,  a  party  ought  to  ask.  I  think  from  the  manner  in  which 
my  Lord  Chief  Justice  presented  this  case  to  the  consideration  of  the 
jury,  he  put  it  as  being  part  and  parcel  of  the  bona  fides;  and  it  has 
been  so  put  in  former  cases.  In  the  case  of  Miller  v.  Race,  1  Burr. 
452,  Lord  Mansfield  says :  "Here  an  innkeeper  took  the  note  bona 
fide  in  his  business  from  a  person  who  made  the  appearance  of  a  gentle- 
man. Here  is  no  pretense  or  suspicion  of  collusion  with  the  robber. 
For  this  matter  was  strictly  inquired  and  examined  into  at  the  trial; 
and  is  so  stated  in  the  case  that  he  took  it  for  a  full  and  valuable  con- 
sideration, in  the  usual  course  of  business.  Indeed  if  there  had  been 
any  collusion,  or  any  circumstance  of  unfair  dealing,  the  case  had  been 
much  otherwise."  Now,  the  question  which  my  Lord  Chief  Justice 
has  put  to  the  consideration  of  the  jury,  whether  a  party  uses  due  cau- 
tion or  not,  is,  in  other  words,  putting  to  them  whether  he  took  it  in 
the  usual  course  of  business ;  for  the  course  of  business  must  require, 
in  the  usual  and  ordinary  manner  of  conducting  it,  a  proper  and  rea- 
sonable degree  of  caution  necessary  to  preserve  the  interest  of  trade. 
The  next  case,  in  order  of  time,  is  Grant  v.  Vaughan.  Mr.  Justice  Wil- 
mott  there  says :  "The  note  appears  to  have  been  taken  by  him  fairly 
and  bona  fide  in  the  course  of  trade,  and  even  with  the  greatest  cau- 
tion. He  made  inquiry  about  it,  and  then  gave  the  change  for  it ;  and 
there  is  not  the  least  imputation  or  pretense  of  suspicion  that  he  had 
any  notice  of  its  being  a  lost  note."  That  learned  judge  did  not  con- 
sider the  question  of  bona  fides  to  be  merely  whether  the  note  was 
taken  by  a  party  without  having  any  real  suspicion  in  his  own  mind, 
but  whether  he  had  taken  it  in  the  usual  course  of  trade,  and  with  cau- 
tion. In  Peacock  v.  Rhodes,  a  shopkeeper  at  Scarborough  took  from  a 
perfect  stranger  a  bill  of  exchange.  The  latter  bought  certain  goods. 
in  the  way  of  the  plaintiff's  trade.  Lord  Mansfield  says :  "The  ques- 
tion of  mala  fides  was  for  the  consideration  of  the  jury.  The  circum- 
stance that  the  buyers  and  the  drawers  were  strangers  to  the  plaintiff, 
and  that  he  took  the  bill  for  goods  on  which  he  had  a  profit,  were 
grounds  of  suspicion  ver}'  fit  for  their  consideration.  But  they  have 
considered  them,  and  have  found  it  was  received  in  the  course  of  trade, 
and  therefore  the  case  is  clear." 

Then  if  in  that  case  those  were  questions  fit  for  the  consideration  of 
a  jury,  as  part  and  parcel  of  the  question  of  bona  fides,  is  it  not  also  a 
fit  and  proper  question  for  their  consideration  (when  the  point  to  be 


Ch.  2)  HOLDER    IN    DUE    COURSE.  393 

decided  is  whether  a  man  has  acted  bona  fide  or  not)  whether  he  has 
inquired  with  that  degree  of  caution  which,  in  the  ordinary  course  of 
trade,  a  prudent  trader  ought  to  use.  That  was  the  question  pro- 
pounded by  my  Lord  Chief  Justice  in  his  direction  to  the  jury;  and 
they  have  exercised  their  judgment  on  it.  I  think  the  question  was  a 
fit  question  for  their  decision,  and  I  think  their  decision  was  one  with 
which  we  are  not  at  hberty  to  quarrel.  On  the  contrary,  it  appears  to 
me  to  be  material  for  the  interests  of  trade,  to  lay  down  as  a  rule  that 
a  party  cannot  in  law  be  considered  to  act  bona  fide,  or  with  due  cau- 
tion and  due  diligence,  if  he  takes  a  bill  of  exchange  from  a  person 
whose  features  alone  he  knows,  without  knowing  what  his  name  is. 
where  he  lives,  or  whether  he  is  a  person  with  whom  he  has  been  in 
the  habit  of  trading.  If  we  were  to  say  that  in  this  instance  there  had 
been  due  caution,  it  would  certainly  be  giving  a  great  facility  to  the 
disposal  of  bills  of  exchange  which  have  been  lost  or  stolen,  by  persons 
who  have  found  or  dishonestly  obtained  them.  For  these  reasons  it 
appears  to  me  that  my  Lord  Chief  Justice  took  the  right  view  of  this 
case;  that  it  was  consistent  with  the  doctrine  laid  down  in  former 
cases;  and  that  the  decision  of  the  jury  was  warranted  by  the  evi- 
dence. *  *  * 
Rule  discharged. 


GOODMAN  V.   SIMONDS. 

(Supreme  Court  of  the  United  States,  1857.    20  How.  343,  15  L.  Ed.  934.) 

Action  by  Goodman,  the  holder,  against  Simonds,  the  acceptor,  of  a 
bill  of  exchange  which  had  been  placed  in  the  hands  of  one  Sigerson  to 
be  negotiated  by  him  for  the  benefit  of  Simonds.  Sigerson  pledged 
the  bill  as  collateral  security  for  his  own  debt  to  the  plaintiff.  Upon 
the  trial  the  court  instructed  the  jury  that  "if  such  facts  and  circum- 
stances were  known  to  the  plaintiff  as  caused  him  to  suspect,  or  that 
would  have  caused  one  of  ordinary  prudence  to  suspect,  that  Wallace 
Sigerson  had  no  interest  in  the  bill,  and  no  authority  to  use  the  same 
for  his  own  benefit,  and  by  ordinary  diligence  he  could  have  ascertained 
these  facts,  then  the  jury  will  find  for  the  defendant." 

The  plaintiff  excepted,  and,  the  jury  finding  for  the  defendant, 
brings  error.^^ 

CiviFFORD,  J.  The  more  important  question,  whether  the  instruc- 
tion was  correct,  remains  to  be  considered.  *  *  *  j^  ^^s  to  the  ef- 
fect that,  if  the  plaintiff  had  acquired  the  bill  under  the  circumstances 
described  in  either  branch  of  the  instruction,  then  he  had  acted  without 
due  caution,  and  was  not  entitled  to  recover.  All  the  other  grounds  of 
defense  had  been  provided  for  in  other  prayers  for  instruction.     This 

2  9  The  statement  of  facts  is  written  by  the  editors.  The  arguments  of 
counsel  and  parts  o^  the  opinion  are  omitted. 


394  NEGOTIATION.  (Part  2 

one  was  obviously  prepared  to  raise  the  single  question,  whether  the 
plaintiff  had  acted  with  due  caution  in  acquiring  the  bill  and  conse- 
quently assumed  all  the  other  requisites  of  a  good  title  in  favor  of  the 
plaintiff.  The  only  question,  therefore,  arising  under  the  instruction, 
is  whether  the  rule  of  commercial  law  applied  to  the  case  was  correct. 
Bills  of  exchange  are  commercial  paper  in  the  strictest  sense,  and  must 
ever  be  regarded  as  favored  instruments,  as  well  on  account  of  their 
negotiable  quality  as  their  universal  convenience  in  mercantile  affairs. 
Tliey  may  be  transferred  by  indorsement;  or  when  indorsed  in  blank, 
or  made  payable  to  bearer,  they  are  transferable  by  mere  delivery. 
The  law  encourages  their  use  as  a  safe  and  convenient  medium  for  the 
settlement  of  balances  among  mercantile  men ;  and  any  course  of  ju- 
dicial decision  calculated  to  restrain  or  impede  their  free  and  unem- 
barrassed circulation  would  be  contrary  to  the  soundest  principles  of 
public  policy. 

INIercantile  law  is  a  system  of  jurisprudence  acknowledged  by  all 
commercial  nations;  and  upon  no  subject  is  it  of  more  importance  that 
there  should  be,  as  far  as  practicable,  uniformity  of  decision  through- 
out the  world.  A  well-defined  and  correct  exposition  of  the  rights  of 
a  bona  fide  holder  of  a  negotiable  instrument  was  given  by  this  court 
in  Swift  V.  Tyson,  16  Pet.  1,  10  L.  Ed.  865,  as  long  ago  as  1842  ;  and 
we  adopt  that  exposition  relative  to  the  point  under  consideration  on 
the  present  occasion,  as  one  accurately  defining  the  nature  and  char- 
acter of  the  title  to  those  instruments  which  such  holder  acquires  when 
they  are  transferred  to  him  for  a  valuable  consideration.  This  court 
then  said,  and  we  now  repeat,  that  a  bona  fide  holder  of  a  negotiable 
instrument  for  a  valuable  consideration,  without  notice  of  facts  which 
impeach  its  validity  between  the  antecedent  parties,  if  he  takes  it  under 
an  indorsement  made  before  the  same  becomes  due,  holds  the  title 
unaffected  by  these  facts,  and  may  recover  thereon,  although,  as  be- 
tween the  antecedent  parties,  the  transaction  may  be  without  any 
legal  validity.  That  question  was  not  one  of  new  impression  at  the 
date  of  that  decision,  nor  was  it  so  regarded  either  by  the  court  or 
the  learned  judge  who  gave  the  opinion;  on  the  contrary,  it  was  de- 
clared to  be  a  doctrine  so  long  and  so  well  established,  and  so  essential 
to  the  security  of  negotiable  paper,  that  it  was  laid  up  among  the  fund- 
amentals of  the  law,  and  required  no  authority  or  reasoning  to  be 
brought  out  in  its  support;  and  the  opinion  on  that  point  was  fully 
approved  by  every  member  of  the  court,  and  we  see  no  reason  to 
qualify  or  change  it  in  any  respect. 

Such  being  the  settled  law  in  this  court,  it  would  seem  to  follow  as 
a  necessary  consequence,  from  the  proposition  as  stated,  that  if  a 
bill  of  exchange  indorsed  in  blank,  so  as  to  be  transferable  by  delivery, 
be  misappropriated  by  one  to  whom  it  was  intrusted,  or  even  if  it  be 
lost  or  stolen,  and  afterwards  negotiated  to  one  having  no  knowledge 
cf  these  facts,  for  a  valuable  consideration,  and  in  the  usual  course 
of  business,  his  title  would  be  good,  and  that  he  would  be  entitled  to 


Ch.  2)  HOLDER    IN    DUE    COURSE.  395 

recover  the  amount.  The  law  was  thus  framed,  and  has  been  so  ad- 
ministeied,  in  order  to  encourage  the  free  circulation  of  negotiable 
paper  by  giving  confidence  and  security  to  those  who  receive  it  for 
value;  and  this  principle  is  so  comprehensive  in  respect  to  bills  of 
exchange  and  promissory  notes,  which  pass  by  delivery,  that  the  title 
and  possession  are  considered  as  one  and  inseparable,  and  in  the  ab- 
sence of  any  explanation  the  law  presumes  that  a  party  in  possession 
holds  the  instrument  for  value  until  the  contrary  is  made  to  appear, 
and  the  burden  of  proof  is  on  the  party  attempting  to  impeach  the 
title.  These  principles  are  certainly  in  accordance  with  the  general 
current  of  authorities,  and  are  believed  to  correspond  with  the  gen- 
eral understanding  of  those  engaged  in  mercantile  pursuits. 

The  word  "notice,"  as  used  by  this  court  on  the  occasion  referred 
to,  we  think  must  be  understood  in  the  same  sense  as  knowledge,  and 
indeed  that  is  one  of  its  usual  and  appropriate  significations.  Where 
the  supposed  defect  or  infirmity  in  the  title  of  the  instrument  appears 
on  its  face  at  the  time  of  the  transfer,  the  question  whether  a  party 
who  took  it  had  notice  or  not  is  in  general  a  question  of  construction, 
and  must  be  determined  by  the  court  as  matter  of  law ;  and  so  it  was 
understood  by  this  court  in  Andrews  v.  Pond  et  al.,  13  Pet.  65,  10  L. 
Ed.  61,  where  it  is  said  that  "a  person  who  takes  a  bill  which  upon  the 
face  of  it  was  dishonored  cannot  be  allowed  to  claim  the  privileges 
which  belong  to  a  bona  fide  holder.  If  he  chooses  to  receive  it  under 
such  circumstances,  he  takes  it  with  all  the  infirmities  belonging  to  it, 
and  is  in  no  better  condition  than  the  person  from  whom  he  received 
it."  And  the  same  doctrine  was  adopted  and  enforced  in  Fowler  v. 
Brantly,  14  Pet.  318,  10  L.  Ed.  473,  where,  in  speaking  of  a  promis- 
sory note,  so  marked  as  to  show  for  whose  benefit  it  was  to  be  dis- 
counted, this  court  held  that  all  those  dealing  in  paper  "with  such 
marks  on  its  face  must  be  presumed  to  have  knowledge  of  what  it 
imported."    See  Brown  v.  Davis,  3  Term,  80. 

Other  cases  of  like  character,  where  the  defect  appears  on  the  face 
of  the  instrument,  are  referred  to  in  the  printed  argument  for  the 
defendant  as  affording  a  support  to  the  instruction  under  considera- 
tion ;  but  it  is  so  obvious  that  they  can  have  no  such  tendency  that 
we  forbear  to  pursue  the  subject.  Aver  v.  Hutchins,  4  Mass.  370,  3 
Am.  Dec.  232;  Wiggin  v.  Bush,  12  Johns.  (N.  Y.)  306,  7  Am.  Dec. 
324;  Cone  v.  Baldwin,  12  Pick.  (Mass.)  545;  Brown  v.  Tabor,  5 
Wend.  (N.  Y.)  566. 

But  it  is  a  very  different  matter  when  it  is  proposed  to  impeach 
the  title  of  a  holder  for  value  by  proof  of  any  facts  and  circumstances 
outside  of  the  instrument  itself.  He  is  then  to  be  affected,  if  at  all, 
by  what  has  occurred  between  other  parties,  and  he  may  well  claim 
an  exemption  from  any  consequences  flowing  from  their  acts,  unless 
it  be  first  shown  that  he  had  knowledge  of  such  facts  and  circum- 
stances at  the  time  the  transfer  was  made.  Nothing  less  than  proof 
of  knowledsre  of  such  facts  and  circumstances  can  meet  the  exigen- 


396  NEGOTIATION.  (Part  2 

cies  of  such  a  defense ;  else  the  proposition  as  stated  is  not  true,  that 
a  party  who  acquires  commercial  paper  in  the  usual  course  of  busi- 
ness, for  value  and  without  notice  of  any  defect  in  the  title,  may  hold 
it  free  of  all  equities  between  the  antecedent  parties  to  the  instrument. 
Admit  the  proposition,  and  the  conclusion  follows.  And  the  question 
whether  the  party  had  such  knowledge  or  not  is  a  question  of  fact 
for  the  jury,  and,  like  other  disputed  questions  of  scienter,  must  be 
submitted  to  their  determination,  under  the  instructions  of  the  court ; 
and  the  proper  inquiry  is:  Did  the  party,  seeking  to  enforce  the  pay- 
ment, have  knowledge,  at  the  time  of  the  transfer,  of  the  facts  and 
circumstances  which  impeach  the  title,  as  between  the  antecedent 
parties  to  the  instrument?  And  if  the  jury  find  that  he  did  not,  then 
he  is  entitled  to  recover,  unless  the  transaction  was  attended  by  bad 
faith,  even  though  the  instrument  had  been  lost  or  stolen. 

Every  one  must  conduct  himself  honestly  in  respect  to  the  antece- 
dent parties,  when  he  takes  negotiable  paper,  in  order  to  acquire  a 
title  which  will  shield  him  against  prior  equities.  While  he  is  not 
obliged  to  make  inquiries,  he  must  not  willfully  shut  his  eyes  to  the 
means  of  knowledge  which  he  knows  are  at  hand,  as  was  plainly 
intimated  by  Baron  Parke,  in  May  v.  Chapman,  16  Mees.  &  W.  355, 
for  the  reason  that  such  conduct,  whether  equivalent  to  notice  or  not, 
would  be  plenary  evidence  of  bad  faith.  Mere  want  of  care  and  cau- 
tion, which  was  the  criterion  assumed  in  the  instruction,  falls  so  far 
below  the  true  standard  required  by  law,  which  is  knowledge  of  the 
facts  and  circumstances  that  impeach  the  title,  that  we  feel  indisposed 
to  pursue  the  general  discussion,  and  proceed  to  confirm  the  views 
we  have  advanced  as  to  what  the  law  is  by  referring  to  some  of  the 
decisions  in  the  English  courts,  from  which,  as  an  important  source 
of  commercial  law,  most  of  our  own  rules  upon  the  subject  have  been 
derived. 

The  leading  case,  among  the  more  modern  decisions  in  that  coun- 
try, is  that  of  Goodman  v.  Harvey,  4  Ad.  &  El.  870.  That  was  a  case 
in  bank,  on  a  rule  nisi,  which  was  made  absolute.  Lord  Denman,  in 
delivering  judgment,  said:  "We  are  all  of  opinion  that  gross  negli- 
gence only  would  not  be  a  sufficient  answer,  where  a  party  has  given 
consideration  for  the  bill.  Gross  negligence  may  be  evidence  of  mala 
fides,  but  it  is  not  the  same  thing.  Where  the  bill  has  passed  to  the 
plaintiff  without  any  proof  of  bad  faith  in  him,  there  is  no  objection 
to  his  title."  That  case  was  followed  by  Luther  v.  Rich,  10  Ad.  & 
El.  784,'  which  was  also  argued  before  a  full  court,  and  the  same 
learned  judge  held  that  the  only  proper  mode  of  implicating  the  plain- 
tiff in  the  alleged  fraud  by  pleading  was  to  aver  that  he  had  notice  of 
it,  leaving  the  circumstances  by  which  that  notice  was  to  be  proved 
directly  or  indirectly  to  be  established  in  evidence;  and  he  further 
held  that  an  averment  that  the  plaintiff  was  not  a  bona  fide  holder 
was  not  equivalent.  According  to  the  rule  laid  down  in  Goodman  v. 
Harvey,  which  indubitably  is  the  settled  law  in  all  the  English  courts, 


Ch.  2)  HOLDER   IN    DUE    COURSE.  397 

proof  that  the  plaintiff  had  been  guilty  of  gross  negligence  in  acquir- 
ing the  bill  ought  not  to  defeat  his  right  to  recover;  and,  if  not,  it 
serves  to  exemplify  the  magnitude  of  the  error  assumed  in  the  in- 
struction, that  any  facts  and  circumstances  which  would  excite  the 
suspicion  of  a  careful  and  prudent  man  were  sufficient  to  destroy  the 
title.  It  is  clear  that  one  or  the  other  of  these  rules  must  be  incorrect; 
both  cannot  be  upheld. 

Gross  negligence  is  defined  to  consist  of  the  omission  of  that  care 
which  even  inattentive  and  thoughtless  men  never  fail  to  take  of  their 
own  property;  and  if  such  neglect  would  not  defeat  the  right  to  re- 
cover— and  clearly  it  would  not,  unless  attended  by  bad  faith — it 
cannot  require  any  further  reasoning  to  demonstrate  that  the  instruc- 
tion was  erroneous.  Several  cases  have  been  decided  in  England  upon 
the  same  subject,  and  to  the  same  effect,  and  the  rule  laid  down  in 
Goodman  v.  Harvey  is  now  adopted  and  sanctioned  by  the  most  ap- 
proved elementary  treatises  upon  commercial  law.  Raphael  v.  Bank 
of  England,  33  Eng.  L-  &  Eq.  276 ;  Stephens  v.  Foster,  1  Cromp.,  M. 
&  W.  849 ;  Palmer  v.  Richards,  1  Eng.  L.  &  Eq.  529 ;  Arbouin  v. 
Anderson,  1  Ad.  &  El.  (N.  S.)  498;  May  v.  Chapman,  16  Mees.  &  W. 
355;  Chitty  on  Bills  (12th  Ed.)  257;  Story  on  Bills  (3d  Ed.)  §  416; 
Byles  on  Bills  (4th  Am.  Ed.)  121  to  126;  Smith's  Mer.  Law  (Ed. 
1857)  255  ;  Edwards  on  Bills,  309  ;  1  Saund.  Plea.  &  Ev.  591 ;  Whee- 
ler V.  Guild,  20  Pick.  (Mass.)  545,  32  Am.  Dec.  231;  Brush  v.  Scrib- 
ner,  11  Conn.  388,  29  Am.  Dec.  303 ;  Backhouse  v.  Harrison,  5  Barn. 
&  Ad.  1098;   Gwynn  v.  Lee,  9  Gill  (Md.)  138. 

These  cases,  beyond  controversy,  confirm  the  rule  laid  down  by  this 
court  in  Swift  v.  Tyson,  and  they  also  furnish  the  fullest  evidence,  by 
their  harmony  each  with  the  other,  as  well  as  by  their  entire  consist- 
ency with  the  principal  case,  that  the  law  has  been  uniform  since  the 
decision  in  Goodman  v.  Harvey,  which  was  decided  in  1836 ;  and  we 
think  it  will  appear,  upon  an  examination,  that  it  has  always  been  the 
same,  at  least  from  a  very  early  period  in  the  history  of  EngHsh  juris- 
prudence down  to  the  present  time,  except  for  an  interval  of  about 
12  years,  while  the  doctrine  prevailed  which  is  now  invoked  in  sup- 
port of  the  instruction  in  this  case.  That  doctrine  had  its  origin  in 
Gill  V.  Cubit,  3  Barn.  &  Cress.  466,  and  it  was  followed  by  the  other 
cases  referred  to  in  the  printed  argument  for  defendant.  It  was  de- 
cided in  1824,  and  it  is  true,  as  the  cases  cited  abundantly  show,  that 
it  was  acquiesced  in  for  a  time  as  a  correct  exposition  of  the  commer- 
cial law  upon  the  subject  under  consideration.  At  the  same  time,  it  is 
proper  to  remark  that  there  is  not  wanting  respectable  authority  that 
it  had  been  much  disapproved  of  before  it  was  directly  questioned; 
and  it  is  certain  that,  nearly  two  years  before  it  was  finally  over- 
ruled, Parke,  Baron,  in  delivering  judgment  in  Foster  v.  Pearson, 
regarded  it  as  mere  "dicta,  rather  than  the  decision  of  the  judges  of 
the  King's  Bench."     See  Raphael  v.  Bank  of  England,  per  Cresswell. 

The  reasons  assigned  for  that  departure  from  the  long-established 


398  NEGOTIATION.  (Part  2 

rule  upon  the  subject  are  as  remarkable  and  unsatisfactory  as  the 
cl:ange  was  sudden  and  radical,  and  yet  their  particular  examination 
at  this  time  is  unnecessary.  It  is  a  sufficient  answer  to  the  case  to 
say  that  it  has  been  distinctly  overruled  in  the  tribunal  where  it  was 
decided,  and  has  not  been  considered  an  authority  in  that  court  for 
more  than  20  years.  The  doctrine,  says  Mr.  Chitty  in  his  treatise 
on  Bills,  is  now  completely  exploded,  and  the  old  rule  of  law  that  the 
holder  of  bills  of  exchange,  indorsed  in  blank  and  transferable  by 
delivery,  can  give  a  title  which  he  does  not  possess  to  a  person  taking 
them  bona  fide  for  value,  is  again  re-established  in  its  fullest  extent. 
It  was  not,  however,  accomplished  at  a  single  blow ;  but  the  error, 
so  to  speak,  was  literally  broken  up  and  destroyed  by  installments. 
The  foundation  of  the  superstructure  was  severely  shaken  in  Crook 
v.  Jadis,  5  Barn.  &  Ad.  909,  when  the  full  bench  first  came  to  the 
conclusion  that  want  of  due  care  and  caution  were  insufficient  to 
constitute  a  defense,  and  that  gross  negligence,  at  least,  must  be 
shown  to  defeat  a  recovery.  But  it  was  left  to  the  case  of  Goodman 
v,  Harvey  to  announce  a  complete  correction  of  the  error,  when  Lord 
Denman  declared  we  have  shaken  off  the  last  remnant  of  the  con- 
trary doctrine. 

A  brief  reference  to  some  of  the  earlier  cases  will  be  sufficient  to 
show  that  the  decision  in  Gill  v.  Cubitt  was  a  departure  from  the 
well-known  and  long-established  rule  upon  the  subject  under  consid- 
eration. One  of  the  earliest  cases  usually  referred  to  is  that  of  Hin- 
ton's  Case,  reported  in  2  Show.  2^7.  It  was  an  action  of  the  case 
against  the  drawer  upon  a  bill  of  exchange  payable  to  bearer.  The 
court  ruled  that  the  holder  must  entitle  himself  to  it  on  a  considera- 
tion; "for  if  he  come  to  be  bearer  by  casualty  or  knavery,  he  shall 
not  have  the  benefit  of  it."  And  so  in  Anonymous,  1  Salk.  126.  where 
a  bank  note  payable  to  A.,  or  bearer,  was  lost,  and  found  by  a  stranger, 
and  by  him  transferred  to  C.  for  value.  Holt,  C.  J.,  held  that  "A. 
might  have  trover  against  the  stranger,  for  he  had  no  title  to  it,  but 
not  against  C,  by  reason  of  the  course  of  trade,  which  creates  a 
property  in  the  bearer."  And  again  in  Miller  v.  Race,  1  Burr.  462, 
where  an  innkeeper  received  a  bank  note  from  his  lodger  in  the  course 
of  business,  and  paid  the  balance,  Lord  Mansfield  held  he  might  re- 
tain it,  as  he  came  by  it  fairly  and  bona  fide,  and  for  value,  and  with- 
out knowledge  that  it  had  been  stolen.  And  on  a  second  occasion,  in 
Grant  v.  Vaughan,  3  Burr.  1516,  where  a  bill  payable  to  bearer  was 
lost,  and  the  finder  passed  it  to  the  plaintiff,  the  same  court  left  it  to 
the  jury  to  find  whether  he  came  to  the  possession  fairly  and  bona 
fide.  But  a  still  stronger  case  is  that  of  Peacock  v.  Rhodes,  2  Doug. 
633,  where  a  bill  of  exchange,  indorsed  in  blank,  was  stolen  and  passed 
to  the  plaintiff  by  a  man  not  known.  It  was  argued  for  the  defend- 
ant that  a  holder  should  not  in  prudence  take  a  bill  unless  he  knew 
the  person.  Lord  Mansfield  answered  "that  the  law  is  well  settled  that 
a  holder  coming  fairly  by  a  bill  has  nothing  to  do  with  the  transac- 


Ch.  2)  HOLDER  IN  DUE  COURSE.  399 

tion  between  the  original  parties.  *  *  *  The  question  of  mala 
fides  was  for  the  consideration  of  the  jury."  And  lastly,  and  to  the 
same  efifect,  is  Lawson  v.  Weston  et  al.,  4  Esp.  R.  56,  where  a  bill  of 
exchange  for  ioOO.  was  lost  or  stolen,  and  was  discounted  by  plaintiff 
for  a  stranger.  It  was  insisted  for  the  defendant  that  "a  banker  or 
any  other  person  should  not  discount  a  bill  for  one  unknown,  without 
using  diligence  to  inquire  into  the  circumstances."  Lord  Kenyon  re- 
plied that  "to  adopt  the  principles  of  the  defense  would  be  to  paralyze 
the  circulation  of  all  the  paper  in  the  country,  and  with  it  all  its  com- 
merce; that  the  circumstance  of  the  bill  having  been  lost  might  have 
been  material,  if  they  could  bring  knowledge  of  that  fact  home  to  the 
plaintiff." 

The  cases  cited,  commencing  in  1694  and  ending  in  1801,  are  suffi- 
cient to  show  what  the  state  of  the  law  was  in  1824,  when  Gill  v. 
Cubit  was  decided,  especially  as  the  judges  of  the  King's  Bench,  in 
giving  their  opinions  on  that  occasion,  did  not  pretend  that  there  were 
any  later  decisions  in  which  it  had  been  modified.     *     *     * 

Judgment  reversed.^  •* 


WEST  ST.  LOUIS  SAVINGS  BANK  v.  SHAWNEE  COUNTY 

BANK. 

(Supreme  Court  of  the  United  States,  1S77.    95  U.  S.  557,  24  L.  Ed.  490.) 

Appeal  from  the  Circuit  Court  of  the  United  States  for  the  District 
of  Kansas. 

Parmelee,  cashier  of  the  Shawnee  County  Bank,  made  his  individ- 
ual note  for  $3,000,  payable  to  the  order  of  the  West  St.  Louis  Savings 
Bank,  indorsed  it  "G.  F.  Parmelee,  Cashier,"  and  gave  as  collateral 
security  a  certificate  of  stock  in  the  Shawnee  County  Bank,  issued  to 
and  owned  by  him.  The  consideration  of  the  note  was  money  lent  to 
him  by  the  payee,  who  was  advised  that  he  intended  to  use  it  to  pay 
for  his  stock  in  the  Shawnee  County  Bank.  He  failed  to  pay  the  note ; 
whereupon  this  suit  was  commenced  by  the  payee  against  him  as  mak- 
er, and  the  Shawnee  County  Bank  as  indorser,  of  the  note. 

The  court  passed  a  decree  against  Parmelee,  but  dismissed  the  bill 
so  far  as  it  asked  rehef  against  the  Shawnee  County  Bank. 

The  complainant  then  brought  the  case  here. 

The  remaining  facts  in  the  case  are  stated  in  the  opinion  of  the  court. 

Waite,  C.  J.  The  testimony  in  this  case  satisfies  us  beyond  all 
doubt  that  the  liability  of  the  Shawnee  County  Bank,  if  any  Hability 
exists,  is  that  of  an  accommodation  indorser  or  surety  for  Parmelee, 
its  cashier,  and  that  this  was  known  to  the  St.  Louis  Bank  when  it 

30  Accord:  Unaka  Bank  v.  Butler,  113  Tenn.  574,  83  S.  W.  655  (1904);  Hutoh- 
ins  V.  Laugley,  27  App.  D.  C.  234  (1906);  Ketcham  v.  Govin,  35  Misc.  Kep. 
375,  71  N.  Y.  Supp.  991  (1901). 


400  NEGOTIATION.  (Part  2 

made  the  discount.  The  note  itself  bears  upon  its  face  the  most  unmis- 
takable evidence  of  this  fact.  It  is  made  payable  directly  to  the  St. 
Louis  Bank,  and  the  Shawnee  Bank  appears  only  as  an  indorser  in 
blank  of  a  promissory  note  before  indorsement  by  the  payee  and  while 
the  note  is  in  the  hands  of  the  maker.  Such  an  indorsement  by  a  bank 
is,  to  say  the  least,  unusual,  and  sufficient  to  put  a  discounting  bank 
upon  inquiry  as  to  the  authority  for  making  it. 

But  we  are  not  left  in  this  case  to  inquiry  or  presumption.  Both 
the  correspondence  and  the  testimony  of  the  cashier  of  the  St.  Louis 
Bank  show  conclusively  that  this  was  the  understanding  of  the  parties. 
Parmelee,  in  transmitting  the  note  for  discount,  wrote  for  himself,  and 
not  as  cashier.  He  spoke  of  his  own  note,  and  authorized  a  draft  up- 
on himself  personally  for  the  interest.  He  pledged  his  own  stock  for 
the  paymiCnt  of  the  note.  Wernse,  the  St.  Louis  cashier,  says  the  nego- 
tiations opened  with  an  application  by  Parmelee  for  a  loan  to  enable 
him  to  pay  for  his  stock  in  the  Shawnee  Bank,  upon  the  pledge  of  the 
stock  as  collateral.  There  is  not  a  single  circumstance  tending  in  any 
manner  to  prove  that  the  transaction  was  looked  upon  as  a  rediscount 
for  the  Shawnee  Bank,  except  the  entries  in  the  books  of  the  St.  Louis 
Bank,  and  these  are  far  from  sufficient  to  overcome  the  positive  testi- 
mony as  to  what  the  agreement  actually  was. 

This  being  the  case,  the  question  is  directly  presented  as  to  the  lia- 
bility of  the  Shawnee  County  Bank  upon  such  an  indorsement.  It  is 
certain  from  the  testimony  that  no  indorsement  of  the  kind  was  ever 
expressly  authorized  by  the  bank.  None  of  the  officers,  except  Par- 
melee, and  Hayward,  the  vice  president,  ever  knew  that  it  had  been 
made  until  long  after  the  last  discount  had  been  obtained.  The  books 
of  the  Shawnee  Bank  contained  no  evidence  of  such  a  transaction,  and 
the  accounts  of  the  St.  Louis  Bank,  as  rendered,  gave  no  indication 
of  the  actual  character  of  the  paper  discounted. 

Ordinarily,  the  cashier,  being  the  ostensible  executive  officer  of  a 
bank,  is  presumed  to  have,  in  the  absence  of  positive  restrictions,  all 
the  power  necessary  for  such  an  officer  in  the  transaction  of  the  legiti- 
mate business  of  banking.  Thus  he  is  generally  understood  to  have 
authority  to  indorse  the  commercial  paper  of  his  bank  and  bind  the 
bank  by  the  indorsement.  So,  too,  in  the  absence  of  restrictions,  if  he 
has  procured  a  bona  fide  rediscount  of  the  paper  of  the  bank,  his  acts 
will  be  binding,  because  of  his  implied  power  to  transact  such  business ; 
but  certainly  he  is  not  presumed  to  have  power,  by  reason  of  his  offi- 
cial position,  to  bind  his  bank  as  an  accommodation  indorser  of  his 
own  promissory  note.  Such  a  transaction  would  not  be  within  the 
scope  of  his  general  powers ;  and  one  who  accepts  an  indorsement  of 
that  character,  if  a  contest  arises,  must  prove  actual  authority  before 
he  can  recover.  There  are  no  presumptions  in  favor  of  such  a  delega- 
tion of  power.  The  very  form,  of  the  paper  itself  carries  notice  to  a 
purchaser  of  a  possible  want  of  power  to  make  the  indorsement,  and 
is  sufficient  to  put  him  on  his  guard.    If  he  fails  to  avail  himself  of  the 


Ch.  2)  HOLDER    IN    DUE    COURSE.  401 

notice,  and  obtain  the  information  which  is  thus  suggested  to  him,  it 
is  his  own  fault,  and,  as  against  an  innocent  party,  he  must  bear  the 
loss. 
Decree  affirmed. 


ECKERT  V.  CAMERON  et  al. 

(Supreme  Court  of  Pennsylvania,  1862.     43  Pa.  120.) 

This  was  an  action  by  Cameron  and  others,  doing  business  as  the 
Lebanon  Deposit  Bank,  against  Eckert,  as  indorser  of  four  promis- 
sory notes,  all  of  which  were,  with  their  indorsements,  identical,  ex- 
cept as  to  dates  and  amounts,  with  the  following: 
"$2,000.  Genesee  Mills,  Lebanon,  April  9,  1860. 

"Three  months  after  date  we  promise  to  pay  to  the  order  of  our- 
selves, at  the  Western  Bank  of  Philadelphia,  two  thousand  dollars, 
value  received,  without  defalcation. 

"No.  Myers  &  Shour." 

Indorsed:     "Myers  &  Shour."  \^ 
"Daniel  Myers."  ) 

"William  Eckert."       / 
"Myers  &  Shour."  > 

In  this  condition  the  notes  on  the  day  of  their  date  were  discounted 
by  the  plaintiffs'  bank  for  Myers  &  Shour,  and  the  proceeds  paid  to 
Shour.  Upon  the  trial  the  court  admitted,  over  the  defendant  Eclcert's 
objection,  incompetent  evidence  tending  to  prove  that  he  indorsed  the 
notes  for  the  accommodation  of  Myers  &  Shour  and  instructed  the 
jury  as  follows: 

"This  suit  is  brought  against  William  Eckert,  as  indorsee  of  these 
promissory  notes,  drawn  by  Myers  &  Shour,  payable  to  their  own  or- 
der at  the  Western  Bank  of  Philadelphia,  indorsed  by  Myers  &  Shour, 
which  rendered  the  paper  negotiable,  then  indorsed  by  Daniel  Myers 
and  William  Eckert,  the  defendant,  and  again  by  Myers  &  Shour. 
The  plaintiffs,  private  bankers,  claim  to  have  discounted  the  notes  in 
the  usual  course  of  business.  Taking  these  notes  as  exhibited  in  court, 
without  any  explanation,  the  indorsers  are  discharged.  They  seem  to 
have  been  drawn  by  Myers  &  Shour,  indorsed  by  them,  then  by  D. 
Myers  and  defendant,  and  afterwards  by  Myers  &  Shour,  who,  both 
as  drawers  and  first  indorsers,  were  liable  to  make  payment ;  and,  as 
their  names  appear  on  the  paper  after  the  other  indorsers,  it  will  be 
presumed  that  they  lifted  the  notes  on  account  of  their  liability,  and 
put  them  again  into  circulation,  as  it  will  not  be  presumed  that  they 
paid  them  before  due.  Coming  back  again  into  the  hands  of  those 
originally  liable,  they  are  in  law  extinguished,  and  there  can  be  no  re- 
covery against  the  indorsers.  Their  obligation  is  discharged.  How  is 
Sm.&  M.B.&  N.— 2G 


402  NEGOTIATION.  (Part  2 

it  as  explained  by  the  parol  evidence?  Dehuff,  a  clerk  in  the  bank,  tes- 
tifies that,  shortly  before  these  notes  were  discounted,  Myers  &  Shour 
wrote  to  them,  asking  if  they  could  obtain  the  money  required  on  such 
paper,  with  D.  Myers  and  William  Eckert  as  indorsers.  An  answer 
was  sent,  and  the  next  day  in  each  case  the  note  thus  prepared  and  in- 
dorsed was  presented  to,  and  discounted  by,  the  bank.  Each  was  pre- 
sented by  Shour  on  the  days  they  respectively  bear  dates,  and  were 
then,  in  presence  of  the  witness,  indorsed  by  Myers  &  Shour,  to  show 
that  they  received  the  money.  If  you  believe  from  this  evidence,  and 
other  to  which  we  will  refer,  that  D.  Myers  and  Eckert  were  accom- 
modation indorsers,  the  notes  brought  by  Shour  to  the  bank  thus  in- 
dorsed on  the  day  of  their  respective  dates,  and  then  discounted  by  the 
bank,  the  mere  reindorsement  by  Myers  &  Shour,  for  the  purpose  stat- 
ed by  the  witness,  will  not  destroy  the  negotiable  character  of  the  notes 
or  binding  effect  of  the  indorsements,  provided  they  never  had  been  in 
circulation,  and  in  that  event  there  is  nothing  in  the  way  of  the  plain- 
tiffs' recovery.  He  who  agrees  to  indorse  paper  for  the  accommoda- 
tion of  another  agrees  that  the  holder  shall  use  it  in  the  way  that  will 
best  accommodate  himself." 

There  was  a  verdict  and  judgment  for  the  plaintiffs,  and  the  de- 
fendant sued  out  this  writ  of  error,  assigning  the  admission  of  the 
incompetent  evidence  and  the  instructions.^^ 

Strong,  J.  (after  holding  the  admission  of  the  evidence  above  re- 
ferred to  error).  *  *  *  But  was  it  necessary  for  the  plaintiffs  to 
prove,  by  affirmative  evidence,  that  the  defendant  was  an  accommoda- 
tion indorser?  They  had  discounted  the  notes  for  the  makers,  on  the 
day  of  their  date,  before  their  maturity,  and  with  the  defendant's  in- 
dorsements upon  them.  Under  such  circumstances  were  the  indorse- 
ments not  binding,  unless  it  was  proved  that  the  notes  had  never  be- 
fore been  negotiated,  but  were  indorsed  for  the  convenience  of  the 
drawers?  A  bill  or  note  which  has  been  once  in  circulation,  overdue, 
and  coming  from  the  hands  of  the  acceptor  or  maker,  is  presumed  to 
be  extinguished.  Byles  on  Bills,  180 ;  McGee  v.  Prouty,  9  Mete.  547, 
43  Am.  Dec.  409.  This  is  because  it  was  the  duty  of  the  maker  or 
acceptor  to  take  it  up  when  it  fell  due,  and  therefore  it  is  fairly  in- 
ferable, from  his  possession  of  it  after  that  time,  that  it  has  fulfilled  its 
ofiice.  But  before  it  has  fallen  due  the  maker  of  a  promissory  note  is 
under  no  obligation  to  take  it  up,  and  the  reason  fails  for  presuming 
its  extinguishment  from  his  then  having  it  in  his  possession.  And  with 
the  failure  of  the  reason  it  is  fair  to  conclude  that  the  rule  also  ceases. 
When,  as  in  this  case,  the  maker  offers  for  discount  an  indorsed  note, 
on  the  day  of  its  date,  and  before  its  maturity,  the  law  does  not  infer, 
from  the  indorsement  and  from  the  possession  of  the  maker,  that  the 
note  has  been  either  paid  or  extinguished.  It  may  be  doubted  whether 
the  condition  of  such  a  note  proves  that  it  has  ever  been  in  circulation : 

n  The  statement  of  the  case  is  abridged,  and  part  of  the  opinion  omitted. 


Ch.  2)  HOLDER    IN    DUE    COURSE.  403 

whether,  indeed,  it  is  not  rather  a  just  inference  that  the  indorsement 
was  made  for  the  accommodation  of  the  maker,  and  the  note  left  with 
him  to  raise  money  upon  it.  In  Burbridge  v.  Manners,  3  Campb.  193, 
Lord  Ellenborough  said :  "Payment  means  payment  in  due  course,  and 
not  by  anticipation,"  "I  agree,"  said  he,  "that  a  bill  paid  at  maturity 
cannot  be  reissued,  and  that  no  action  can  afterwards  be  maintained 
upon  it  by  a  subsequent  endorsee.  A  payment  before  it  becomes  due, 
however,  I  think  does  not  extinguish  it  any  more  than  if  it  were  mere- 
ly discounted." 

Now,  possession  by  a  maker  after  an  indorsement  certainly  cannot 
amount  to  more  than  proof  of  payment.  Burbridge  v.  Manners  was  a 
suit  against  the  indorser  of  a  promissory  note  which  had  been  paid 
four  days  before  it  became  due,  but  not  canceled,  and  which  after- 
wards came  into  the  hands  of  the  plaintiff  before  its  maturity.  The 
plaintiff  was  permitted  to  recover.  And  in  Morley  v.  Culverwell,  7 
Meeson  &  Welsby,  174,  it  appeared  that  a  bill  of  exchange  which  had 
been  accepted  was  satisfied  four  days  before  it  fell  due  by  the  acceptor, 
and  delivered  up  to  him.  by  the  drawer  uncanceled.  It  was  held,  not- 
withstanding this,  that  the  drawer  was  liable  on  it  to  a  party  to  whom 
the  acceptor  afterwards  indorsed  it  for  value  before  it  became  due. 
This  was  the  unanimous  opinion  of  the  Court  of  Exchequer,  and  the 
language  of  the  Barons  completely  vindicates  their  judgment.  Lord 
Abinger,  Chief  Baron,  said:  "The  contract  of  the  drawer  and  of 
each  indorser  is  that  the  bill  shall  be  paid  by  the  acceptor  at  its  maturi- 
ty, not  before  it  is  due ;  that  it  shall  be  paid  according  to  its  tenor  and 
effect — that  is,  when  it  becomes  due.  If,  upon  its  being  discharged 
before  it  becomes  due,  the  drawer  inadvertently  leaves  his  name  upon 
the  bill,  he  is  but  in  the  ordinary  case  of  a  party  who  has  a  bill  in  ne- 
gotiation with  his  name  upon  it  against  his  intention.  It  is  in  the  hands 
of  an  innocent  holder  who  has  no  notice  that  it  has  been  discharged 
Suppose  mutual  accommodation  acceptances  to  be  given,  and  to  be  ex- 
changed before  they  have  been  negotiated,  the  names  remaining  on 
them,  the  parties  may  circulate  them  so  as  to  give  a  title  to  a  bona  fide 
holder  before  they  become  due ;  and  wherein  does  this  case  dift'er  from 
that  ?  Therefore  a  bill  is  not  properly  paid  and  satisfied,  according  to 
its  tenor,  unless  it  be  paid  when  due ;  and  consequently,  if  it  be  satis- 
fied before  it  is  due,  by  an  arrangement  between  the  drawer  and  ac- 
ceptor, that  does  not  prevent  the  acceptor  from  negotiating  it,  or  an 
innocent  holder  for  value  from  recovering  upon  it."  In  the  same  case 
Baron  Parke  said :  "Nothing  will  discharge  the  acceptor  or  the  draw- 
er except  payment  according  to  the  law  merchant ;  that  is,  payment  of 
the  bill  at  maturity.  If  a  party  pays  it  before,  he  purchases  it,  and  is 
in  the  same  situation  as  if  he  had  discounted  it." 

These  cases  hold  there  is  nothing  in  the  fact  that  an  acceptor  or 
maker  of  an  indorsed  note  has  it  in  possession,  and  offers  it  for  dis- 
count before  its  maturity,  to  give  notice  to  a  purchaser  of  its  payment 
or  extinofuishment.     Their  doctrine  is  that  one  who  discounts  such  a 


404  NEGOTIATION.  (Part  2 

note  for  the  maker  before  it  is  due,  according  to  its  tenor,  is  an  inno- 
cent holder  for  value,  and  is  entitled  to  recover  against  any  of  the  par- 
ties to  it.  They  cover  the  present  case,  and  they  appear  to  be  support- 
ed by  sound  reason.  It  follows  that  the  plaintiff  in  error  could  not 
have  been  hurt  by  the  admission  of  the  contents  of  Shour's  letter. 

There  is  nothing  else  in  the  record  of  which  he  has  any  reason  to 
complain. 

The  judgment  is  affirmed. 


NATIONAL    PARK    BANK    v.    GERMAN-AMERICAN    MUT. 
WAREHOUSING  &  SECURITY  CO. 

(Court  of  Appeals  of  New  York,  1SS9.     116  N.  Y.  281,  22  N.  E.   567,  5   L. 

R..  A.  673.) 

Appeal  from  a  judgment  of  the  general  term  of  the  Superior  Court 
of  the  City  of  New  York,  entered  upon  an  order  made  June  8,  1886, 
which  affirmed  a  judgment  in  favor  of  plaintiff,  entered  upon  the  re- 
port of  a  referee. 

This  action  was  brought  upon  certain  promissory  notes  made  by  the 
firm  of  Squires,  Taylor  &  Co.,  made  payable  to  the  order  of  the  mak- 
ers, and  alleged  to  have  been  indorsed  by  defendant,  the  German- 
American  Warehousing  &  Security  Company.  The  notes  were  indors- 
ed by  Squires,  Taylor  &  Co.,  the  makers  and  payees,  and  thereupon 
the  president  of  the  defendant  indorsed  them  as  second  indorser  in  the 
name  of  the  defendant.  The  notes  were  then  discounted  by  the  plain- 
tiff for  Squires,  Taylor  &  Co.,  and  the  avails  credited  to  them.^^ 

FoLLETT,  Ch.  J.  The  statute  by  which  the  defendant  was  incor- 
porated provides  that,  in  addition  to  the  powers  therein  enumerated, 
it  shall  possess  all  the  powers  and  privileges  of  corporations  organized 
under  the  manufacturing  act  (chapter  40,  Laws  1848),  and  the  acts  ex- 
tending and  amending  the  same,  except  wherein  such  acts  are  incon- 
sistent with  the  provisions  of  the  incorporating  statute.  The  litigants 
agree  that  the  defendant's  board  of  directors  had  power  to  authorize 
its  president  to  make  and  indorse  promissory  notes  for  the  purpose 
of  transacting  the  business  it  was  authorized  to  engage  in,  and  that 
such  power  was  conferred  by  the  board  on  its  president.  The  powers 
of  corporations  are  those  enumerated  in  the  statutes  under  which  they 
are  incorporated,  in  general  statutes,  in  the  articles  of  association,  and 
like  instruments,  executed  in  pursuance  of  the  statutes  (denominated 
by  Mr.  Brice  "constating  instruments" — Ultra  Vires  [2d  Am.  Ed.] 
27),  and  also  such  powers  as  f^ow  from  or  are  incidental  and  neces- 
sary to  the  exercise  of  the  enumerated  powers  (1  Rev.  St.  p.  599,  §§ 
1-3) 

3  2  The  statement  of  facts  is  abridged,  and  the  arguments  of  counsel  are 
omitted. 


Ch.  2)  HOLDER   IN    DUB    COURSE.  405 

Counsel  have  not  directed  our  attention  to,  nor  have  we  found  in 
any  of  the  statutes  referred  to,  a  provision  empowering  the  defendant 
to  bind  itself  by  making  or  indorsing  promissory  notes  for  the  accom- 
modation of  the  makers  for  a  consideration  paid.  It  is  well  settled 
that  such  a  power  is  not  incidental  to  the  powers  expressly  conferred 
on  corporations  organized  under  statutes  authorizing  the  formation 
of  corporations  for  banking,  insuring,  manufacturing  and  like  business 
corporations.  Central  Bank  v.  Empire  Stone  Dressing  Co.,  26  Barb. 
23;  Bridgeport  City  Bank  v.  Same,  30  Barb.  421;  Farmers'  &  Me- 
chanics' Bank  v.  Same,  5  Bosw.  275 ;  Morford  v.  Farmers'  Bank  of 
Saratoga,  Fed.  Cas.  No.  4,534,  26  Barb.  568  ;  Bank  of  Genesee  v.  Patch- 
in  Bank,  13  N.  Y.  309;  ^tna  National  Bank  v.  Charter  Oak  Life 
Ins.  Co.,  50  Conn.  167 ;  Monument  National  Bank  v.  Globe  Works, 
101  Mass.  57,  3  Am.  Rep.  322 ;  Davis  v.  Old  Colony  R.  R.  Co.,  131 
Mass.  258;  Culver  v.  Reno  Real-Estate  Co.,  91  Pa.  367;  Hall  v.  Au- 
burn Turnpike  Co.,  27  Cal.  255,  87  Am.  Dec.  75. 

The  defendant  having  the  general  power  to  bind  itself  by  promis- 
sory notes  and  contracts  of  indorsement,  the  plaintiff  is  entitled  to  re- 
cover if  it  is  a  holder  of  the  notes  for  value  and  without  notice  that 
they  were  indorsed  for  the  accommodation  of  the  makers,  and  not  in 
the  usual  course  of  business.  The  referee  finds  that  in  consideration 
of  one- fourth  of  1  per  cent,  per  month  for  every  month  of  the  time  on 
which  the  notes  were  given,  the  defendant  indorsed  for  Squires,  Tay- 
lor &  Co.,  between  November  10,  1876,  and  August  27,  1878,  the  date 
of  the  first  note  in  suit,  19  notes  precisely  like  the  4  in  suit,  except 
dates  and  amounts,  aggregating  $170,000,  which  were  discounted  by 
the  plaintiff  for,  and  the  avails  placed  to  the  credit  of.  Squires,  Taylor 
&  Co.  The  referee  also  finds  that  defendant's  president  was  never 
authorized  by  its  board  of  directors  to  indorse  commercial  paper  for 
the  accommodation  of  makers,  or  to  indorse  such  paper  for  a  consider- 
ation paid  by  the  makers,  and  that  none  of  them  knew  that  such  in- 
dorsements had  been  made  until  this  action  was  brought. 

The  fact  that  the  maker  of  a  promissory  note  procures  it  to  be  dis- 
counted for  his  own  benefit  is,  if  unexplained,  notice  to  the  discounter 
that  the  indorsement  is  not  in  the  usual  course  of  business,  but  it  is 
for  the  accommodation  of  the  maker.  Stall  v.  Catskill  Bank,  18  Wend. 
466 ;  Fielden  v.  Lahens,  9  Bosw.  436,  3  Trans.  App.  218 ;  Fielden  v. 
Lahens,  2  Abb.  Dec.  Ill,  6  Abb.  Pr.  (N.  S.)  341;  1  Ames'  Cas.  on 
Bills  and  Notes,  738 ;  Bank  of  Vergennes  v.  Cameron,  7  Barb.  143  ; 
Hendrie  v.  Berkowitz,  37  Cal.  113,  99  Am.  Dec.  251;  Lemoine  v. 
Bank,  3  Dill.  44,  Fed.  Cas.  No.  8,240 ;  Bloom  v.  Helm,  53  Miss.  21 ; 
Daniel,  Neg.  Inst.  (2d  Ed.)  p.  297,  §  365;  Edw.  Bills  (3d  Ed.)  p.  98, 
§105. 

Ex  parte  Estabrook,  2  Low.  547,  Fed.  Cas.  No.  4,534,  is  opposed 
to  these  authorities,  but  this  case  is  in  conflict  with  the  decisions  in  this 
state,  and  we  believe  it  to  be  without  the  support  of  any  well-consid- 
ered case.     The  indorsements  having  been  made  for  the  accommoda- 


406  NEGOTIATION.  (Part  2 

tion  of  the  makers,  and  the  plaintiff  having  discounted  the  notes  with 
notice  of  that  fact,  cannot  recover.  The  judgment  should  be  reversed 
and  a  new  trial  g:ranted,  with  costs  to  abide  the  event.^^ 


ROCHESTER  &  C.  TURNPIKE  ROAD  CO.  v.  PAVIOUR. 

(Court  of  Appeals  of  New  York,  35)00.     1G4  N.  Y.  281,  58  N.  E.  114,  52  L.  R. 

A.  790.) 

Appeal  from  a  judgment  of  the  Supreme  Court,  entered  April  8, 
1898,  upon  an  order  of  the  Appellate  Division  in  the  Fourth  Judicial 
Department,  overruUng  defendant's  exceptions,  ordered  to  be  heard  in 
the  first  instance  by  the  Appellate  Division,  denying  a  motion  for  a 
new  trial  and  directing  judgment  for  the  plaintiff'  upon  a  verdict  di- 
rected by  the  court. 

Mrs.  Warren,  an  insurance  agent,  deUvered  certain  policies  of  in- 
surance covering  premises  in  New  Mexico  to  the  defendant,  directing 
him  to  collect  the  premiums  due  upon  the  same  from  the  insured.  The 
defendant  delivered  the  polices  to  one  Briggs  for  the  insured,  Briggs 
agreeing  to  pay  the  premiums.  The  premiums  were  not  paid  at  the 
time  either  set  of  policies  was  delivered ;  but,  after  payment  had  been 
demanded  several  times  by  the  defendant,  Briggs  gave  him  a  check  on 
account,  dated  June  17,  1896,  drawn  upon  the  Central  Bank  of  Roches- 
ter, payable  to  the  order  of  the  defendant,  for  $150,  signed,  "Roches- 
ter &  Charlotte  Turnpike  Road  Co.  M.  H.  Briggs,  Treas."  On  the 
2-lth  of  July  following,  Briggs  gave  the  defendant  a  check,  similar  in 
all  respects,  except  that  it  was  for  the  sum  of  $300,  and  subsequently 
he  paid  the  balance  of  the  premiums  from  his  own  funds.  The  defend- 
ant deposited  these  checks  in  the  Traders'  Bank  of  Rochester,  where 
he  did  his  banking  business,  procured  drafts  for  the  amount  owing  to 
Mrs.  Warren,  and  sent  them  to  her.  The  checks  were  paid  upon  pres- 
entation in  the  ordinary  course  of  business  from  moneys  belonging  to 
the  plaintiff  on  deposit  in  the  Central  Bank. 

This  action  was  brought  to  recover  the  amount  paid  by  means  of 
these  checks  as  money  of  the  plaintiff  received  by  the  defendant  to  its 
use.  The  plaintiff  had  no  interest  in  the  policies  and  no  business  re- 
lations with  the  defendant,  and  was  indebted  neither  to  him  nor  to 
Briggs,  who  used  the  checks  without  authority  and  thus  embezzled 
the  money  drawn  thereby.  At  the  close  of  the  evidence  the  court  di- 
rected a  verdict  for  the  plaintiff,  but  ordered  the  defendant's  excep- 
tions to  be  heard  in  the  first  instance  by  the  Appellate  Division,  which, 
after  hearing  the  parties,  overruled  the  exceptions  and  directed  judg- 
ment upon  the  verdict  in  favor  of  the  plaintiff.     From  said  order,  as 

33  Accord:  Cook  v.  American  Tubing  Co.,  28  R.  I.  41,  65  Atl.  641,  9  L.  R.  A. 
(N.  S.)  193  (1905). 


Ch.  2)  HOLDER   IN    DUE    COURSE.  407 

well  as  from  the  judgment  entered  accordingly,  the  defendant  brings 
this  appeal.^* 

Vann,  J.  By  delivering  the  policies  to  Briggs  without  collecting 
the  premiums  at  the  time,  the  defendant  apparently  gave  credit  for 
the  same  and  thus  made  the  debt  his  own.  At  all  events,  he  subse- 
quently treated  it  as  a  debt  owing  by  Briggs  to  himself,  the  same  as 
he  had  similar  claims  under  like  circumstances  in  previous  years. 
Briggs  had  no  authority,  either  actual  or  apparent,  to  give  the  checks 
of  the  plaintiff  in  payment  of  his  own  debt  or  that  of  a  third  person. 
If  the  defendant  knew  or  believed,  or  had  good  reason  to  believe,  that, 
in  giving  the  checks,  Briggs  was  appropriating  the  money  of  the  plain- 
tiff' to  the  payment  of  his  own  debt,  or  one  that  he  treated  as  his  own, 
he  had  no  right  to  accept  them  without  inquiry.  While  he  was  not 
bound  to  be  on  the  watch  for  facts  which  would  put  a  very  cautious 
man  on  his  guard,  he  was  bound  to  act  in  good  faith.  Second  Na- 
tional Bank  v.  Weston,  161  N.  Y.  520,  526,  55  N.  E.  1080,  76  Am. 
St.  Rep.  283 ;  Cheever  v.  Pittsburgh,  etc.,  R.  R.  Co.,  150  N.  Y  59, 
66,  44  N.  E.  701,  34  L.  R.  A.  69,  55  Am.  St.  Rep.  646.  Even  if  his 
actual  good  faith  is  not  questioned,  if  the  facts  known  to  him  should 
have  led  him  to  inquire,  and  by  inquiry  he  would  have  discovered  the 
real  situation,  in  a  commercial  sense  he  acted  in  bad  faith,  and  the 
law  will  withhold  from  him  the  protection  that  it  would  otherwise 
extend. 

The  checks  themselves  gave  notice  of  a  suspicious  fact  and  invited 
inquiry  in  relation  thereto.  They  showed  upon  their  face  that  Briggs 
was  apparently  using  the  money  of  the  plaintiff  for  his  own  purposes, 
since  they  were  not  his  checks,  but  the  checks  of  a  corporation  issued 
by  him  as  its  treasurer.  In  the  absence  of  express  authority,  or  of  that 
which  may  be  implied  from  past  conduct  known  to  the  corporation,  he 
could  not  lawfully  use  the  checks,  which  stood  as  its  money,  for  such 
a  purpose,  as  the  defendant  is  presumed  to  have  known.  There  was 
no  express  authority  and  nothing  to  indicate  that  Briggs  was  implied- 
ly authorized  to  thus  use  the  money  of  the  plaintiff,  and  the  presump- 
tion was  the  other  way.  The  plaintiff,  as  its  name  indicated,  was  not 
a  trading  corporation,  but  a  local  plank  road  company,  with  no  authori- 
ty to  own  buildings  situated  out  of  the  state.  It  would  be  extraordi- 
nary for  a  concern  which  merely  operated  a  short  plank  road  in  this 
state  to  have  any  interest  in  buildings  in  New  Mexico,  or  to  be  indebt- 
ed for  premiums  upon  policies  issued  thereon,  and  the  admitted  facts 
compel  us  to  assume  that  the  defendant  so  regarded  it.  Moreover,  the 
policies  themselves,  as  the  defendant  knew,  were  not  issued  in  the 
name  of  the  plaintiff  as  the  owner  of  the  buildings,  and  there  was  no 
connection,  apparent  or  otherwise,  between  it  and  the  policies.  With- 
out inquiry  he  accepted  checks  drawn  by  Briggs  as  treasurer  of  the 
plaintiff  in  payment  of  a  debt  which  he  had  no  reason  to  believe  w^s 

8*  The  stavement  of  facts  is  abridged. 


408  NEGOTIATION.  (Part  2 

for  it  to  pay,  and  which  he  had  strong  reason  to  believe  had  become 
the  debt  of  Ijriggs  himself.  He  called  for  no  explanation  from  him, 
made  no  inquiry  at  the  office  of  the  plaintiff,  or  of  any  one  represent- 
ing it,  which  would  naturally  have  disclosed  the  fraud,  but  accepted  the 
checks  without  question,  drew  the  money,  and  thereby  ran  the  risk  of 
being  called  upon  to  restore  it. 

The  facts  known  to  the  defendant  should  have  aroused  his  suspicion 
and  led  him,  as  an  honest  man,  to  make  some  investigation  before  he 
accepted  the  money  of  a  corporation,  which  owed  him  nothing,  in  pay- 
ment of  a  claim  that  he  held  against  some  one  else.  If  he  had  such 
confidence  in  Briggs  that  he  was  willing  to  trust  him  without  inquiry, 
under  suspicious  circumstances  of  a  substantial  character,  he  must 
stand  the  loss,  for  he  failed  to  discharge  a  duty  required  by  commer- 
cial integrity.  He  could  not  confide  in  Briggs  at  the  expense  of  the 
plaintiff,  after  notice  of  his  irregular  and  doubtful  conduct.  Among 
the  heaviest  losses  in  business  are  those  which  result  from  a  blind  trust 
in  men  on  account  of  their  standing  in  the  community,  without  making 
the  investigation  required  by  common  prudence.  There  was  a  shadow 
on  the  checks,  and  the  defendant  could  not,  in  good  faith,  accept  them 
until  it  disappeared.  By  accepting  them  he  did  an  act  which  he  had 
reason  to  believe  would  affect  the  rights  of  a  third  party,  and  he  could 
not,  in  justice  to  that  party,  ignore  the  suspicion  which  the  facts  should 
have  aroused.  One  who  suspects,  or  ought  to  suspect,  is  bound  to  in- 
quire, and  the  law  presumes  that  he  knows  whatever  proper  inquiry 
would  disclose.  While  the  courts  are  careful  to  guard  the  interests 
of  commerce  by  protecting  the  negotiation  of  commercial  paper,  they 
are  also  careful  to  guard  against  fraud  by  defeating  titles  taken  in  bad 
faith,  or  with  knowledge,  actual  or  imputed,  which  amounts  to  bad 
faith,  when  regarded  from  a  commercial  standpoint.  2  Randolph, 
Com.  Paper  (2d  Ed.)  §999;  1  Daniel,  Negotiable  Instruments  (4th 
Ed.)  §  775;  1  Edwards,  Bills  &  Notes  (3d  Ed.)  §§  517,  520;  1  Par- 
sons, Notes  &  Bills,  259  ;  Story  on  Promissory  Notes  (6th  Ed.)  §  197; 
Chitty  on  Bills  (Sth  Ed.)  281. 

As  the  rules  of  law  governing  the  case  are  now  well  settled,  we  shall 
refer  to  but  few  authorities,  and  those  of  recent  date  in  this  court. 
In  Wilson  v.  Metropolitan  El.  Ry.  Co.,  120  N.  Y.  145,  24  N.  E.  384, 
17  Am.  St.  Rep.  625,  it  was  stated,  as  a  general  rule,  "that  one  who 
receives  from  an  officer  of  a  corporation  the  notes  or  securities  of  such 
corporation,  in  payment  of,  or  as  security  for,  a  personal  debt  of  such 
officer,  does  so  at  his  own  peril.  Prima  facie  the  act  is  unlawful,  and, 
unless  actually  authorized,  the  purchaser  will  be  deemed  to  have  taken 
them  with  notice  of  the  rights  of  the  corporation."  It  was  also  held  in 
that  case  that  the  purchaser  of  a  promissory  note,  purporting  to  have 
been  issued  by  a  corporation,  who  made  the  purchase  under  circum- 
stances which  devolved  upon  him  the  duty  of  inquiry  as  to  its  validity, 
assumed  the  risk,  by  failing  to  inquire,  of  proving  that  the  facts  he 


Ch.  2)  HOLDER    IN    DUE    COURSE.  409 

could  have  discovered,  had  he  made  inquiry,  would  have  protected 
him. 

In  Gerard  v.  McCormick,  130  N.  Y.  261,  29  N.  E.  115,  14  L.  R.  A. 
234,  an  agent,  who  had  charge  of  certain  premises  known  as  the  "Glass 
Buildings,"  deposited  the  rents  collected  by  him  to  the  credit  of  a 
bank  account  kept  in  his  name  as  "Agent,  Glass  Buildings."  Without 
authority  he  gave  a  check  on  this  account,  signed  by  him  as  "Agent, 
Glass  Buildings,"  in  payment  of  his  own  debt.  The  check  was  paid, 
and,  upon  the  trial  of  an  action  brought  five  years  afterwards  to  re- 
cover the  amount  thereof,  there  was  no  evidence  of  bad  faith  on  the 
part  of  the  defendant  who  took  the  check,  except  that  afforded  by  the 
check  itself  and  the  nature  of  the  debt.  The  court  held  that  the  form 
of  the  check  was  sufficient  to  indicate  to  the  defendant  the  existence 
of  an  agency  and  to  put  him  on  inquiry  as  to  the  agent's  authority  to 
so  use  the  money.  In  deciding  the  case,  the  court  said :  "We  think 
that  the  form  of  the  signature  to  the  check  was  sufficient  to  put  the 
payee  on  inquiry  as  to  the  right  of  the  agent  to  pay  his  personal  debt 
out  of  the  fund.  The  buildings  and  the  bank  were  both  well  known, 
were  in  the  same  city  and  very  near  to  the  place  where  the  check  was 
received  by  the  defendant,  and  had  an  inquiry  been  made  at  the  bank 
or  at  the  buildings  it  would  have  been  ascertained  that  the  account 
was  held  by  William  Boswell,  not  as  owner,  but  as  agent  for  these 
plaintiffs.  In  case  a  person,  having  notice  that  money  or  property  is 
held  by  another  in  a  fiduciary  capacity,  receives  it  without  inquiry  from 
the  agent  in  satisfaction  of  his  personal  debt,  the  sum  or  property  so 
received  may  be  recovered  by  the  true  owner,  unless  the  agent  was 
authorized  to  so  dispose  of  it." 

In  Cheever  v.  Pittsburgh  R.  R.  Co.,  150  N.  Y.  59,  67,  44  N.  E.  701, 
34  L.  R.  A.  69,  55  Am.  St.  Rep.  646,  the  paper  was  regular  on  its  face, 
and  this  fact  protected  the  plaintiff ;  but  the  court,  referring  to  "a  case 
where  an  officer  of  a  corporation  makes  the  corporate  obligation  pay- 
able to  himself,  and  then  attempts  to  deal  with  it  for  his  own  benefit," 
said :  "When  paper  of  that  character  is  presented  by  the  officer  or 
agent  of  the  corporation,  it  bears  upon  its  face  sufficient  notice  of  the 
incapacity  of  the  officer  or  agent  to  issue  it" — citing  the  Wilson  and 
Gerard  Cases,  supra,  and  also  Hanover  Bank  v.  American  Dock  & 
T.  Co.,  148  N.  Y.  612,  43  N.  E.  72,  51  Am.  St.  Rep.  721 ;  Bank  of 
New  York,  etc.,  v.  American  Dock  &  T.  Co.,  143  N.  Y.  559,  38  N.  E. 
713.  In  the  case  at  bar  the  appearances  were  not  deceptive,  but  sug- 
gested the  true  state  of  affairs,  which  worked  a  fraud  on  the  plaintiff'. 
See,  also,  First  Nat.  Bank  of  Paterson  v.  National  Broadway  Bank, 
156  N.  Y.  459,  51  N.  E.  398,  42  L.  R.  A.  139 ;  Smith  v.  Weston,  159 
N.  Y.  194,  199,  54  N.  E.  38 ;  Angle  v.  North  Western,  etc.,  Ins.  Co., 
52  U.  S.  330,  342,  23  L.  Ed.  556. 

The  case  of  Dike  v.  Drexel,  11  App.  Div.  77,  42  N.  Y.  Supp.  979, 
affirmed  without  opinion  in  155  N.  Y.  637,  49  N.  E.  1096,  which  is  re- 
lied upon  by  the  defendant,  does  not  conflict  with  the  views  herein  ex- 


410  NEGOTIATION.  (Part  2 

pressed.  According  to  the  facts  found  in  that  case,  a  new  firm  had 
succeeded  an  old  firm,  composed  in  part  of  the  same  members,  and  with 
a  similar,  but  not  identical,  firm  name.  The  business  of  the  new  firm 
"was  apparently  the  same  as  and  a  continuation  of  that"  of  the  old, 
"and  such  appearance  was  a  natural  result  of  the  conduct  and  acqui- 
escence of  the  other  members  of  the  new  firm,  from  the  formation  and 
during  the  entire  continuance  thereof."  "In  fact,  the  business  and 
assets  of  the  old  firm  were  so  mingled  with  those  of  the  new  firm  as 
to  establish  a  practical  identity  between  the  two  firms."  The  new  firm 
gave  certified  checks  to  be  applied  upon  an  indebtedness  of  the  old, 
which  the  former  had  not  assumed.  Said  checks  were  received  "in 
absolute  good  faith"  and  collateral  securities  were  surrendered  in  con- 
sequence thereof.  Under  these  peculiar  circumstances  it  was  decided 
that  the  receiver  of  the  new  firm,  which  had  become  insolvent,  could 
not  recover  the  money  back.  Owing  to  the  intimate  connection,  if  not 
substantial  identity,  of  the  two  firms,  the  Supreme  Court  held  that  there 
was  nothing  suspicious  or  unusual  in  paying  a  debt  of  the  old  firm  with 
a  check  of  the  new  concern,  nor  any  notice  that  in  so  doing  the  funds 
of  the  new  partnership  were  being  improperly  used.  It  was  natural 
to  assume,  under  the  circumstances,  that  the  new  firm  had  bought  out 
the  old,  and  being  indebted  to  it  for  the  purchase  price,  had  paid  a  part 
of  the  debt  in  this  way  through  the  direction  of  a  member  common  to 
both,  "to  whom,"  as  the  trial  judge  found,  "the  other  three  partners 
confided  the  unrestricted,  absolute,  and  entire  control  and  manage- 
ment of  the  business,  allowing  him  to  conduct  it  as  though  it  were  his 
own,  and  in  its  behalf  to  incur  liabilities  and  dispose  of  assets  absolute- 
ly according  to  his  own  judgment."  Thus  it  is  obvious  that  the  man- 
aging copartner  had  implied  authority  from  his  associates  to  use  the 
checks  as  he  did,  and  that  the  question  of  notice  was  not  necessarily 
involved  in  the  decision.^ ^ 

In  the  case  now  before  us  the  question  of  notice  is  supreme.  The 
checks,  when  read  in  the  light  of  the  facts  known  to  the  defendant, 
were  notice  to  him  that  he  was  apparently  accepting  money  from  one 
to  whom  it  did  not  belong,  and  this  cast  upon  him  the  duty  of  inquir- 
ing into  the  matter  so  as  to  see  whether  the  facts  were  in  accord  with 
the  appearances ;  for,  if  they  were,  he  knew  that  he  could  not  honest- 
ly take  the  checks. 

The  judgment  appealed  from  should  be  affirmed,  with  costs.^' 

35  Compare  Ward  v.  Trust  Co.,  117  App.  Div.  130,  102  N.  Y.  Supp.  50  (1907). 

36  Compare  Borough  of  Moutvale  v.  Bank,  74  N.  J.  Law.  4G4,  67  Atl.  67 
(1907).  where  the  bank,  to  which  the  mayor  of  the  borough  tortiously  pledged 
for  his  own  debt  authorized  but  unissued  city  bonds  payable  to  bearer,  was 
held  a  holder  in  due  course. 

"Where  a  person  takes  from  another,  for  that  other's  personal  liability  or 
on  account  thereof,  the  obligation  upon  commercial  paper  of  a  corporation  in 
which  such  other  is  an  officer  of  a  character  not  ordinarily  intrusted  with 
the  duty  of  making  such  obligations,  the  instrument  being  his  handiwork,  and 
such  person  knows  his  connection  with  the  coi-poration.  such  person  is  put 
upon  inquiry  as  to  the  real  character  of  the  paper  and  the  authority  of  such 


Oh.  2)  HOLDER    IN    DUE    COURSE.  411 

HIAWATHA  IRON  CO.  v.  JOHN  STRANGE  PAPER  CO. 

(Supreme  Court  of  Wiscousin,  1900.     106  Wis.  Ill,  SI  N.  W.  1034.) 

This  is  an  action  upon  two  promissory  notes  against  John  Strange, 
as  maker,  and  the  John  Strange  Paper  Company,  a  corporation,  as  in- 
dorser.  The  corporation  defended  on  the  ground  that  the  payee  in- 
dorsement of  the  corporation  name  upon  said  notes  was  made  by  John 
Strange  in  fraud  of  the  corporation,  and  that  the  plaintiff  was  not 
a  bona  fide  purchaser,  but  took  the  same  with  notice  of  the  fraud. 
Judgment  for  the  plaintiff,  and  the  defendant  appeals.^^ 

WiNSLOW,  J.  The  notes  in  question  were  executed  by  Strange  in 
payment  of  his  individual  debt  to  Smith,  and  it  is  admitted  that  the 
indorsement  of  the  corporation  was  an  accommodation  indorsement, 
and  was  placed  thereon  by  Strange,  as  president,  without  authority  and 
without  consideration,  and  consequently  that  the  corporation  was  not 
bound  by  such  indorsement  to  the  original  holder  of  the  notes,  or  any 
subsequent  indorsee  who  took  them  with  notice  of  the  fact.  They  were 
transferred  to  the  plaintiff,  for  what  must  be  considered  an  adequate 
consideration,  before  maturity,  and  with  no  actual  knowledge  of  the 
infirmity  in  them,  by  a  business  man  in  good  repute,  who  had  posses- 
sion and  apparent  ownership  of  them;  and  the  only  question  in  the 
case  is  whether  the  plaintiff  was  charged  with  notice  of  fraud  upon  the 
corporation  by  the  circumstances  under  which  it  purchased  the  notes, 
or  by  anything  appearing  upon  the  face  of  the  instruments  themselves. 

The  appellant  was  a  trading  corporation,  and  it  had  undoubted  pow- 
er to  receive  commercial  paper  for  debts  owing  to  it,  created  in  the 
course  of  its  business.  Rockwell  v.  Elkhorn  Bank,  13  Wis.  653.  From 
this  it  necessarily  follows  that  it  had  also  power  to  dispose  of  such 
paper  by  indorsement  or  assignment  as  may  suit  its  purpose.  1  Daniel, 
Neg.  Inst.  §§  384,  385.  When  a  corporation  possesses  this  general 
power  to  become  a  party  to  commercial  paper,  such  paper  will  be  pre- 
sumed to  have  been  executed  in  the  legitimate  course  of  its  business, 
and  will  be  valid  in  the  hands  of  a  bona  fide  purchaser  for  value, 
whether  executed  in  the  usual  course  of  business  or  not.  1  Daniel, 
Neg.  Inst.  §  386.  An  indorsement  in  blank  is  valid  according  to  the 
law  merchant,  and  does  not  affect  a  subsequent  holder  with  notice  of 
infirmities,  or  put  him  upon  inquiry.  Lyon  v.  Ewings,  17  Wis.  61. 
A  corporation  must  necessarily  act  through  an  officer  or  agent  in  mak- 
ing an  indorsement,  and  the  indorsement  will  ordinarily  be  valid  in 
the  hands  of  a  bona  fide  holder  before  maturity,  if  made  by  an  officer 
or  agent  having  actual  authority  to  indorse  commercial  paper  on  behalf 

other  to  use  the  name  of  the  corporation  in  the  transaction."  Per  Marshall, 
J.,  in  Pelton  v.  Spider  Lake  Co.,  132  Wis.  219,  236  (1907). 

But  see  Orr  v.  South  Amboy  Co.,  47  Misc.  Rep.  604,  94  N.  Y.  Supp.  524 
(1905),  where  the  rule  was  applied  to  a  director. 

3T  The  statement  of  the  case  is  abridged,  and  the  arguments  of  counsel  are 
omitted. 


412  NEGOTIATION.  (Part  2 

of  the  corporation,  or  by  an  officer  or  agent  who  is  apparently  clothed 
with  such  authority  by  the  corporation,  even  though  the  indorsement 
be  an  accommodation  indorsement,  and  a  fraud  on  the  corporation. 
Houghton  V.  First  Nat.  Bank,  26  Wis.  663,  7  Am.  Rep.  107. 

In  the  present  case,  John  Strange,  who  indorsed  the  notes  on  behalf 
of  the  corporation,  not  only  had  for  years  transacted  the  corporation's 
financial  business  of  this  character,  and  thus  been  clothed  with  ap- 
parent authority  to  indorse  commercial  paper,  but  he  had  also  express 
authority,  by  the  articles  of  incorporation,  "to  have  general  charge, 
control,  and  management  of  the  affairs  of  the  corporation,  and  to  sign 
all  contracts  and  conveyances."  This  is  a  very  broad  and  sweeping 
grant  of  authority,  and  must  be  held  to  include  the  indorsement  of 
commercial  paper;  and  it  was  an  authority  publicly  proclaimed  to  the 
world,  and  which  all  dealing  with  the  corporation  were  entitled  to  re- 
ly upon  implicitly.  Now,  had  the  notes  in  suit  in  this  case  been  the 
notes  of  some  third  person  running  to  the  corporation,  and  indorsed, 
as  these  notes  were,  in  the  corporate  name,  and  by  the  proper  officer, 
there  can  be  no  doubt  that  the  corporation  would  be  bound  by  such  in- 
dorsement the  moment  such  notes  came  into  the  hands  of  a  bona  fide 
purchaser  for  value  before  due,  although  in  fact  it  never  owned  the 
notes,  and  the  indorsement  was  a  fraud  upon  it.  Upon  their  face,  such 
notes  would  appear  to  have  been  notes  taken  by  the  corporation  in 
the  transaction  of  its  business,  and,  being  indorsed  in  the  corporate 
name  by  the  officer  both  apparently  and  actually  authorized  to  indorse 
commercial  paper  for  the  corporation,  a  purchaser  in  good  faith  before 
maturity  would  not  be  bound  to  inquire  whether  the  corporation  own- 
ed it  when  it  was  indorsed  or  not,  but  would  be  entitled  to  assume  that 
the  relations  of  all  the  parties  to  the  paper  were  precisely  what  they 
appeared  to  be  upon  its  face.  Houghton  v.  First  Nat.  Bank,  26  Wis. 
663,  7  Am.  Rep.  107;  Hoge  v.  Lansing,  35  N.  Y.  136;  U.  S.  Nat. 
Bank  of  New  York  v.  First  Nat.  Bank  of  Little  Rock,  13  C.  C.  A.  472, 
64  Fed.  985 ;  Warren-Scharf  Asphalt  Pav.  Co.  v.  Commercial  Nat. 
Bank  of  Detroit,  97  Fed.  181,  38  C.  C.  A.  108. 

But  it  is  claimed  that  the  fact  that  the  notes  on  their  face  showed 
that  they  were  given  by  the  president  of  the  corporation  to  the  corpo- 
ration itself  was  a  fact  which  required  a  purchaser  to  inquire  into  the 
real  nature  of  the  transaction  before  purchasing  them.  Had  the  par- 
ties to  the  paper  been  reversed,  and  the  notes  been  the  notes  of  the 
corporation,  executed  by  Strange,  and  payable  to  Strange  individually, 
a  purchaser  would  doubtless  have  been  put  upon  inquiry,  because  the 
notes  would  then  have  shown  on  their  face  that  an  officer  of  the  corpo- 
ration had  dealt  directly  with  himself,  and  adversely  to  the  interests  of 
the  corporation.  Haywood  v.  Lincoln  Lumber  Co.,  64  Wis.  639,  26 
N.  W.  184 ;  Third  Nat.  Bank  v.  Marine  Lumber  Co.,  44  Minn.  65,  46 
N.  W.  145 ;  Stough  v.  Ponca  Mill  Co.,  54  Neb.  500,  74  N.  W.  868 ; 
Lee  V.  Smith,  84  Mo.  304,  54  Am.  Rep.  101.  And,  again,  had  Strange 
given  his  note  to  a  third  person,  and  before  delivery  placed  the  corpo- 


Oh.  2)  HOLDER    IN    DUE    COURSE.  413 

rate  indorsement  upon  it,  it  might  well  be  that  a  purchaser  of  such  pa- 
per would  be  charged  with  notice  of  the  fact  that  the  corporate  in- 
dorsement was  for  accommodation  only,  and  not  in  the  course  of  busi- 
ness, and  hence  that  he  must  inquire  into  the  question  of  actual  author- 
ity. West  St.  Louis  Sav.  Bank  v.  Shawnee  Co.  Bank,  95  U.  S.  557,  24 
L.  Ed.  490.  But  we  have  no  such  case  here.  The  notes  upon  their 
face  import  simply  that  Strange  was  indebted  to  the  corporation,  and 
executed  his  notes  to  secure  that  indebtedness.  This  occurs  frequent- 
ly, and  there  is  nothing  either  ii]  the  laws  of  business  or  good  morals 
which  prevents  or  disapproves  of  such  a  transaction.  A  corporation 
may  deal  with  its  officers,  and  take  their  notes  for  indebtedness  result- 
ing from  such  dealings.  So  far  as  appears  on  the  face  of  the  paper, 
the  directors  of  the  corporation  may  have  required  Strange  to  execute 
the  notes.  There  is  nothing  on  the  face  of  the  notes  to  indicate  any- 
thing more  than  an  ordinary  business  transaction. 

We  conclude  that  the  undisputed  evidence  shows  that  the  plaintiff 
was  a  bona  fide  holder  of  the  notes  for  value,  before  maturity,  and  in 
the  regular  course  of  business.  This  conclusion  renders  unnecessary 
any  discussion  of  exceptions  reserved  to  portions  of  the  charge,  as  well 
as  the  errors  claimed  because  of  the  refusal  to  nonsuit  the  plaintiff  and 
the  refusal  to  grant  a  new  trial. 

A  verdict  for  the  plaintiff  should  have  been  directed.  Judgment  af- 
firmed.^ ^ 


FILLEBROWN  et  al.  v.  HAYWARD  et  al 
(Supreme  Judicial  CJourt  of  Massachusetts,  1906.    190  Mass.  472,  77  N.  E.  45.) 

Bill  in  equity,  inserted  in  a  writ  of  the  superior  court  dated  May  4, 
1904,  by  the  trustees  in  bankruptcy  of  the  Cable  Rubber  Company,  a 
corporation  organized  under  the  laws  of  this  commonwealth,  against 
Kezia  W.  Hayward  of  Ponkapog,  the  former  treasurer  of  the  Cable 
Rubber  Company,  formerly  holding  and  controlling  a  majority  of  the 
capital  stock  of  that  company,  and  William  J.  Cable,  of  Boston,  pray- 
ing for  an  order  to  compel  the  defendant  Hayward  to  pay  to  the  plain- 
tiffs certain  sums  of  money  alleged  to  have  been  taken  by  the  defend- 
ant Cable  from  the  Cable  Rubber  Company  and  paid  to  her. 

In  the  superior  court  the  case  was  heard  by  Sheldon,  J.,  who  made 
a  decree  that  the  plaintiffs  were  not  entitled  to  recover  from  the  de- 
fendant Hayward  on  any  of  the  grounds  alleged  in  their  bill.  The 
plaintiffs  appealed. 

The  defendant  Hayward,  who  owned  a  majority  of  the  stock  of  the 
bankrupt  corporation  and  was  its  treasurer,  in  September,  1899,  sold  all 
her  stock  to  Wm.  J.  Cable  for  $50,000.    Cable  paid  $35,000  in  cash,  and 

3  8  Compare  Wait  v.  Thayer,  118  Mass.  473  (1875);  In  re  Troy  Co.  (D.  C.) 
136  Fed.  420  (1905),  same  principle. 


411  NEGOTIATION.  (Part  2 

for  the  balance  gave  60  notes,  each  for  $333.33,  payable  at  intervals  of 
one  month,  beginning  January,  1900.  Thereafter  Cable  acted  as  pres- 
ident, treasurer  and  general  manager  of  the  company,  and  had  full 
charge  of  its  affairs  with  the  acquiescence  of  the  directors,  at  a  salary 
of  $5,000  per  year.  Beginning  in  January,  1900,  each  month.  Cable 
caused  the  check  of  the  company  for  $333.33  to  be  drawn  payable  to 
himself  individually,  signed  it  as  treasurer,  indorsed  it  individually  to 
the  defendant,  and  delivered  it  to  her  in  payment  of  his  note  to  her 
maturing  that  month.  The  checks  v^eve  collected  and  the  defendant 
received  the  proceeds. 

The  total  amounts  so  drawn  by  Cable  and  paid  to  her  and  his  other 
creditors  and  to  himself  were  properly  charr^cd  to  him  on  the  books 
of  the  corporation.  They  exceeded  each  year  and  each  month  the 
amounts  respectively  accruing  to  him  from  the  corporation.  These 
accounts  were  openly  kept,  were  never  in  any  way  concealed  from  any 
one  interested  in  the  corporation,  and  Mrs.  Hayward  received  the 
checks  so  sent  to  her  in  good  faith,  without  noticing  their  form  and 
without  any  actual  knowledge  that  he  obtained  the  sums  so  sent  her 
from  the  corporation.  The  amounts  of  all  these  checks  were  charged 
to  Cable  on  the  books  of  the  corporation  as  aforesaid.  This  action  is 
brought  to  recover  from  the  defendant  the  proceeds  of  these  checks.^' 

Braley,  j.  *  *  *  After  the  period  of  service  had  expired  to 
which  reference  already  has  been  made,  the  defendant  having  resigned 
her  offices  as  treasurer  and  director  sold  her  stock  in  the  corporation  to 
one  Cable,  who  then  was  not  only  treasurer  and  president,  but  with 
the  acquiescence  of  the  directors  also  acted  as  manager  of  the  corpora- 
tion with  a  general  control  of  its  affairs.  If  thereafter  there  was  any 
failure  on  the  part  of  the  board  of  directors  properly  to  discharge  the 
functions  of  their  office,  this  delinquency  is  not  shown  to  have  been 
brought  to  the  knowledge  of  the  defendant. 

Upon  the  purchase  of  this  stock  Cable  made  a  large  money  payment, 
and  gave  her  his  promissory  notes  for  the  balance,  so  divided  that  one 
of  them  should  mature  at  the  beginning  of  each  month  for  a  period 
of  five  years.  It  was  undisputed  that  upon  these  notes  as  they  several- 
ly matured  at  least  the  sum  of  $13,000  was  paid  by  checks  drawn  by 
him  from  time  to  time  on  the  treasury  of  the  corporation.  The  books 
of  account  disclose  in  detail  the  number  and  amount  of  these  checks, 
and  a  balance  was  always  struck  by  crediting  as  expense  a  lump  sum 
sufficient  to  offset  the  debit  items. 

In  his  dealings,  although  in  a  few  instances  when  he  caused  the 
checks  to  be  made  payable  to  the  order  of  the  bookkeeper  who  indors- 
ed them  either  to  himself  or  to  the  defendant,  and  upon  one  occasion 
when  the  check  was  made  payable  directly  to  her  order,  this  course  of 
dealing  was  uniformly  followed.  An  examination  properly  conducted 
would  have  shown  that  when  these  monthly  payments  were  received 

3  9  The  statement  of  facts  is  abridged,  and  part  of  the  opinion  omitted. 


Ch.  2)  HOLDER    IN    DUE    COURSE.  415 

as  between  Cable  and  the  company  his  account  would  have  appeared 
to  have  been  constantly  overdrawn ;  but  the  defendant  had  no  actual 
knowledge  of  this  condition  of  affairs,  or  that  the  money  she  was  re- 
ceiving came  clandestinely  from  the  corporation  rather  than  lawfully 
from  him. 

The  plaintiffs  strenuously  contend  that,  notwithstanding  this,  the 
form  of  the  check  should  have  suggested  to  her  that  he  was  misappro- 
priating the  funds  of  the  company,  and  therefore  she  should  be  charg- 
ed with  constructive  notice  that  he  was  using  corporate  assets  for  the 
payment  of  his  maturing  notes. 

The  early  doctrine  on  this  subject,  so  far  as  it  relates  to  negotiable 
paper,  is  found  in  Ayer  v.  Hutchins,  4  Mass.  370,  373,  3  Am.  Dec.  232, 
and  in  Thompson  v.  Hale,  6  Pick.  258,  261,  where  it  is  said  that  cir- 
cumstances which  ordinarily  would  excite  the  suspicions  of  a  reasona- 
bly prudent  and  careful  man  were  sufficient  to  put  the  party  receiving 
negotiable  paper  not  overdue  upon  his  inquiry  as  to  suspicious  defects 
or  infirmity  of  title  in  the  prior  holder.  See,  also.  Cone  v.  Baldwin,  12 
Pick.  545,  546. 

The  rule  thus  formulated  gave  way  later  to  what  has  been  called  the 
modern  doctrine,  that  neither  knowledge  of  suspicious  circumstances, 
nor  doubts  as  to  the  genuineness  of  the  title,  nor  gross  negligence  on 
the  part  of  the  taker,  either,  singly  or  together,  are  sufficient  to  defeat 
the  holder's  recovery,  unless  amounting  to  proof  of  want  of  good  faith. 
Smith  V.  Livingston,  111  Mass.  342;  Freeman's  National  Bank  v.  Sav- 
ery,  127  Mass.  75,  79,  34  Am.  Rep.  345 ;  Boston  Steel  &  Iron  Co.  v. 
Steuer,  183  Mass.  140,  Q6  N.  E.  646,  97  Am.  St.  Rep.  426 ;  Massa- 
chusetts National  Bank  v.  Snow,  187  Mass.  159,  72  N.  E.  959  ;  Good- 
man V.  Harvey,  4  Ad.  &  El.  870 ,  Murray  v.  Lardner,  2  Wall.  110,  17 
L.  Ed.  857;  Hotchkiss  v.  National  Shoe  &  Leather  Bank,  21  Wall. 
354,  22  L.  Ed.  645 ;  Lytle  v.  Lansing,  147  U.  S.  59,  13  Sup.  Ct.  254, 
37  L.  Ed.  78 ;  Jones  v.  Gordon,  L.  R.  2  App.  Cases,  616,  628,  629. 
See,  also,  Jones  v.  Smith,  1  Hare,  43. 

At  the  time  the  first  note  of  the  series  matured,  and  the  first  check 
in  payment  was  given,  St.  1898,  p.  492,  c.  533,  commonly  known  as 
the  "Negotiable  Instruments  Act,"  now  Rev.  Laws,  c.  73,  had  become 
operative.  By  section  56  of  the  original  act,  now  section  73  in  the  re- 
vision, the  common-law  rule  shown  by  these  decisions  relating  to  im- 
pHed  notice  to  the  purchaser  for  value  of  negotiable  paper  of  a  defect 
in  the  title  of  a  previous  owner  was  codified.  The  plaintiffs  therefore 
cannot  recover  the  proceeds  of  the  checks  unless  the  defendant  took 
them  in  bad  faith,  and  this  inquiry  is  a  question  of  fact.  St.  1898,  p. 
501,  c.  533,  §  56 ;  First  National  Bank  of  Chelsea  v.  Goodsell,  107 
Mass.  149 ;  Smith  v.  Livingston,  111  Mass.  342 ;  Freeman's  National 
Bank  v.  Savery,  127  Mass.  75,  34  Am.  Rep.  345 ;  Spaulding  v.  Ken- 
drick,  172  Mass.  71,  51  N.  E.  453. 

If  each  check  was  signed  by  him  as  treasurer,  this  of  itself  was  not 
such  an  affirmative  representation  as  to  indicate  that  he  was  acting  in  a 


416  NEGOTIATION.  (Part  2 

fiduciary  capacity  by  which  his  authority  was  restricted  and  Hniited,  as 
authority  to  draw  and  issue  checks  in  the  name  of  the  corporation  was 
incidental  to  his  office,  and  the  holder  in  due  course  of  business  would 
receive  them  under  a  presumption  that  they  were  issued  lawfully. 
Shaw  V.  Spencer,  100  ^lass.  383,  393,  97  Am.  Dec.  107,  1  Am.  Rep. 
115 ;  Merchants'  National  Bank  v.  Citizens'  Gaslight  Co.,  159  Mass. 
505,  507,  34  N.  E.  1083,  38  Am.  St.  Rep.  453 ;  O'Herron  v.  Gray,  168 
Mass.  573,  47  N.  E.  429,  40  L.  R.  A.  498,  60  Am.  St.  Rep.  411.  Com- 
pare Kneeland  v.  Braintree  Street  Railway,  167  Mass.  161,  162,  45  N. 
E.  86. 

While  the  defendant  may  be  held  to  have  known  that  by  purchasing 
her  stock  Cable  had  acquired  control  of  the  corporation,  there  does  not 
appear  to  have  been  any  reasonable  ground  for  an  assumption  on  her 
part  that  its  business  under  his  management  was  not  profitable,  or  had 
been  impaired  and  then  ruined,  until  the  company's  assignment  for  the 
benefit  of  its  creditors  was  announced.  Before  her  retirement  for  at 
least  two  years  they  had  been  associated  in  conducting  its  business  af- 
fairs, and  neither  during  this  period,  nor  after  her  withdrawal,  is  it 
shown  that  there  was  anything  in  his  conduct  indicating  to  her  that 
he  was  dishonest  or  incompetent.  There  was  therefore  no  reason  why 
she  should  not  have  retained  her  confidence  in  him,  and,  even  if  her 
former  experience  had  made  her  familiar  with  the  duties  of  the  office 
which  he  held,  it  could  be  found  that  she  received  the  checks  without 
realizing  the  possible  fact  that,  notwithstanding  their  form,  they  were 
drafts  upon  the  funds  of  the  company  in  payment  of  her  own  debt. 

It  is  more  than  probable  that  as  note  after  note  matured  and  pay- 
ments were  made  in  this  manner  she  gave  no  thought  to  the  general 
transaction,  except  to  get  her  pay ;  but,  if  so,  she  still  may  have  in- 
ferred that  the  money  so  appropriated  was  in  payment  of  his  own  sal- 
ary, or  otherwise  was  being  withdrawn  lawfully.  See  Fay  v.  Noble, 
12  Cush.  1,  16,  17.  But  while  she  may  have  been  incautious  and  un- 
suspecting, where  others  more  accustomed  to  mercantile  afifairs  might 
have  been  mistrustful,  there  is  no  evidence  that  at  any  time  she  was 
possessed  of  any  knowledge  of  what  undoubtedly  to  a  certain  extent 
was  an  embezzlement  on  his  part,  or,  having  doubts  as  tO  how  he  ob- 
tained the  money,  she  deliberately  decided  for  her  own  advantage  not 
to  make  any  inquiries  to  ascertain  why  instead  of  paying  with  checks 
drawn  on  a  bank  account  of  his  own,  or  in  money,  he  used  checks  is- 
sued by  him  as  treasurer,  though  if  such  conduct  had  been  shown,  then 
it  might  be  inferred  that  she  ignored  significant  facts  with  a  purpose 
not  to  know  anything  more,  and  this  would  have  been  enough  to  in- 
dicate that,  suspecting  something  was  wrong,  she  intended  to  avoid 
the  efifect  of  the  evidence.    Kettiewell  v.  Watson,  21  Ch.  D.  685,  706. 

But  having  taken  before  maturity  for  a  valuable  consideration  ne- 
gotiable paper  which  was  regular  upon  its  face,  without  knowledge  of 
any  defect  in  the  title,  even  if  there  might  have  been  some  circum- 
stances which  would  have  raised  doubts  in  the  mind  of  a  more  pru- 


Ch.  2)  HOLDER    IN    DUE    COURSE.  417 

dent  person,  the  defendant's  right  to  retain  the  proceeds  of  the  checks 
cannot  be  divested  without  proof  that  she  knew,  or  in  the  face  of  facts 
sufficient  to  put  her  upon  inquiry  purposely  refrained  from  knowing 
of  the  fraud  of  Cable,  although,  if  obliged  to  bring  suit  upon  them, 
after  evidence  had  been  introduced  in  defense  that  they  had  been 
fraudulently  issued,  the  burden  would  have  remained  upon  her  to 
prove  that  she  was  a  holder  in  good  faith  and  for  value.  Bill  v.  Stew- 
art, 156  Mass.  508,  31  N.  E.  386;  Massachusetts  National  Bank  v. 
Snow,  187  Mass.  159,  ubi  supra;  Holden  v.  Phoenix  Rattan  Co.,  168 
Mass.  570,  47  N.  E.  241 ;  Latam  v.  Hasler,  23  Q.  B.  D.  345. 

While  the  form  of  procedure  does  not  change  this  rule,  we  fail  to 
find  anything  in  the  evidence  reported  sufficient  to  modify  or  over- 
come the  conclusions  of  fact  reached  by  the  trial  court,  which  deter- 
mined that  the  defendant  had  sustained  this  burden. 

Decree  affirmed. 


FOX  et  al.  v.  CITIZENS'  BANK  &  TRUST  CO.  et  al. 
(Court  of  Chancery  Appeals  of  Tennessee,  1896.    37  S.  W.  1102.) 

Bill  by  Fred  Fox  and  others  against  the  Citizens'  Bank  &  Tr^st 
Company  and  others  to  enjoin  defendant  bank  and  trust  company 
from  further  prosecuting  suits  on  notes  executed  by  complainants  to 
J.  C.  Anderson,  trustee,  who  indorsed  them  to  the  bank  and  trust 
company. 

The  cause  was  heard  by  the  chancellor  April  11,  1895.  He  held 
that  the  complainants  were  not  entitled  to  the  relief  sought,  inasmuch 
as  the  bank  and  trust  company  acquired  the  notes  in  good  faith,  for  a 
valuable  consideration,  before  their  maturity,  in  due  course  of  trade, 
and  without  any  notice  of  the  equities  existing  against  them,  or  be- 
tween the  original  parties  thereto.  So  holding,  he  dismissed  the 
original  bill,  dissolved  the  injunction  that  had  been  granted,  gave  the 
bank  and  trust  company  a  decree  for  the  amount  of  the  notes,  interest, 
and  an  agreed  attorney's  fee,  and  taxed  complainants  with  the  costs. 
From  this  decree  complainants  prayed  and  obtained  an  appeal  to  the 
Supreme  Court,  and  have  assigned  errors. 

Four  errors  are  assigned,  as  follows:  (1)  Error  in  holding  that 
the  bank  and  trust  company  was  an  innocent  purchaser  of  the  notes, 
in  due  course  of  trade,  and  without  notice  of  the  equities  of  complain- 
ants; (2)  because  the  notes,  being  payable  on  their  face  to  J.  C.  An- 
derson, trustee,  and  showing  that  they  were  given  for  land,  gave  no- 
tice to  the  bank  that  Anderson  was  holder  of  the  land  and  notes  for 
somebody  else;  (3)  error  in  not  holding,  under  the  evidence,  that 
the  bank  was  not  a  holder  of  the  notes  in  due  course  of  trade,  but  that 
it  received  them  as  collateral  security  for  a  pre-existing  debt,  except 
as  to  a  $1,000,  which  was  advanced  at  the  time,  but  which  was  after- 
SM.&  M.B.&  N.— 27 


418  NEGOTIATION.  (Part  2 

wards  paid ;  (4)  error  in  not  holding  that  the  bank,  at  the  time  it  took 
these  notes  as  collaterals,  had  notice  that  the  consideration  for  them 
had  failed. 

It  is  conceded  that  the  consideration  of  these  notes  entirely  fail- 
ed.*" 

Wilson,  J.  It  is  next  insisted  that  the  notes,  being  payable  on 
their  face  to  Anderson,  trustee,  carried  notice  of  the  equities  of  com- 
plainants. Helleard,  Vend.  §  408,  1  Stay.  99,  §§  399,  400,  and  Cov- 
ington V.  Anderson,  16  Lea,  310,  are  cited.  Beyond  question,  a  trus- 
tee converting  trust  assets  to  his  own  use  is  liable  to  the  beneficiaries ; 
and  equally  liable  is  any  one  purchasing  from  him  knowing  of  his 
fraudulent  intention,  as  having  knowledge  of  facts  that  would  put  a 
reasonably  prudent  man  on  inquiry  as  to  the  power  and  dishonest  ends 
of  the  trustee,  and  which  inquiry,  if  properly  prosecuted,  would  dis- 
cover the  truth.  This  is  the  extent  to  which  the  authorities  cited  go. 
But  we  are  unable  to  perceive  the  direct  connection  and  application 
of  the  principle  cited  to  the  facts  of  this  case.  It  is  well  settled  that 
the  fact  that  the  consideration  for  which  a  note  is  given  is  stated  in  it 
will  not  destroy  its  negotiability,  unless  the  recital  qualifies  the  prom- 
ise to  pay,  or  renders  it  uncertain  either  as  to  the  time  of  payment  or 
the  sum  to  be  paid.  And  if  the  note  be  received  before  maturity, 
and  before  a  failure  of  consideration,  it  will  be  held  free  from  the 
equities,  although,  from  the  recital,  it  was  known  to  the  indorser  that 
the  consideration  was  future  and  contingent.  Goodloe  v.  Taylor,  10 
N.  C.  458;  Stevens  v.  Blunt,  7  Mass.  240;  Davis  v.  McCready,  IT 
N.  Y.  230,  72  Am.  Dec.  461;  Bank  v.  Cason,  39  La.  Ann.  865,  2 
South.  881 ;  Siegel  v.  Bank,  131  111.  569,  23  N.  E.  417,  7  L.  R.  A. 
537,  19  Am.  St.^Rep.  51;  Daniel.  Neg.  Inst.  §§  790-796.  In  other 
words,  says  the  Louisiana  Annual  (2  South.)  case  and  the  cases  in 
131  111.  569,  and  23  N.  E.  417,  "it  cannot  afifect  the  negotiability  of  a 
note  that  its  consideration  is  to  be  hereafter  realized,  or  that,  from 
contingency,  it  may  never  be  enjoyed," 

The  argument  or  proposition  is  advanced  by  implication,  at  least, 
that  the  fact  that  these  notes  are  made  payable  to  Anderson,  trustee, 
impaired  their  negotiability,  or  put  a  transferee  on  notice  of  all  equi- 
ties existing  as  between  the  maker  and  the  trustee.  In  a  contest  be- 
tween the  beneficiaries  of  these  notes,  assuming  that  Anderson  was 
not  their  real  owner,  and  the  transferee  of  Anderson,  the  fact  that 
the  notes  appeared  on  their  face  to  be  payable  to  him  as  trustee  would 
put  the  transferee  on  notice,  and  the  claim  of  the  beneficiaries  would 
be  superior*^  (Cardwell  v.  Cheatham,  2  Head.  14;  Duncan  v.  Jau- 
don,  15  Wall.  175,  21  L-  Ed.  142 ;  Shaw  v.  Spencer,  100  Mass.  389, 
97  Am.  Dec.  107,  1  Am.  Rep.  115;    Alexander  v.  Alderson,  7  Baxt. 

♦  0  The  statement  of  the  ea?e  is  taken  from  the  opinion,  part  of  which  is 
omitted. 

•ti  Accord:  Ford  v.  Brown,  114  Teun.  467,  88  S.  W.  1036,  1  L.  R.  A.  (N. 
S.)  188  (1904). 


Ch.  2)  HOLDER    IN    DUE    COURSE.  419 

•iOS),  because  the  notes  gave  direct  information  that  they  were  trust 
property,  and  the  direct  purpose  of  the  transfer  was  to  pay  his  indi- 
vidual debt  (Covington  v.  Anderson,  16  Lea,  310). 

The  question  as  to  whether  a  note  payable  to  one  as  trustee  is  ne- 
gotiable is  a  subject  of  dispute  in  the  authorities  or  adjudged  cases. 
In  Maryland  it  seems  to  have  been  held  that  such  a  note  is  not  com- 
mercial paper,  and  that  an  indorsement  of  it  by  the  trustee  transfers 
it,  subject  to  the  trust,  and  that,  after  such  transfer,  it  is  open  to  the 
equitable  defenses  between  the  original  parties.  Bank  v.  Lange,  51 
Md.  139,  34  Am.  Rep.  304.  But  it  is  holden  in  other  jurisdictions 
that  a  note  to  and  indorsed  by  one  as  trustee  of  a  named  person  does 
not  carry  to  an  innocent  purchaser  any  notice  of  a  restriction  upon 
the  payee's  right  to  transfer  it.  Downer  v.  Read,  17  Minn.  493  (Gil. 
470);  Bush  v.  Packard,  3  Har.  (Del.)  385;  citing  Rand.  Com.  Paper, 
§  158,  p.  242 ;  Davis  v.  Garr,  6  N.  Y.  124,  55  Am.  Dec.  387,  and  note ; 
Pierce  v.  Robie,  39  Me.  205,  63  Am.  Dec.  614;  Conner  v.  Clark,  12 
Cal.  168,  73  Am.  Dec.  529.  As  a  general  thing,  the  addition  of  the 
words  "trustee"  and  the  like  will  be  treated  as  descriptio  personse. 
Authorities  supra;  2  Am.  &  Eng.  Enc.  Eaw,  p.  358,  notes  on  pages 
358  and  359. 

We  take  it  that  the  decided  weight  of  authority,  and,  it  seems  to  us, 
of  sound  reason,  supports  the  position  that  the  addition  of  the  word 
■'trustee"  to  the  name  of  the  payee  of  a  note  of  itself  does  not  destroy 
its  negotiability.  Under  the  rules  of  the  common  law,  all  conveyances 
by  a  trustee,  whether  to  innocent  purchaser  or  not,  even  if  made  in 
contravention  of  the  trust,  operated  upon  the  legal  title,  and  vested 
it  in  the  grantee.  The  beneficiary  had  to  go  into  equity,  and  there 
he  could  compel  the  grantee  to  respect  the  trust,  as  the  original  trus- 
tee should  have  done.  Gale  v.  Mensing,  20  Mo.  461,  64  Am.  Dec.  197, 
and  notes ;  See,  also,  Tyler  v.  Plerring,  67  Miss.  169,  6  South.  840, 
19  Am.  St.  Rep.  263,  and  extended  note  where  the  subject,  with  the 
authorities,  is  fully  presented.  The  substance  or  real  rule,  in  the  ab- 
sence of  a  statute,  in  respect  to  unauthorized  sales  or  transfers  of 
property  by  trustees,  is  that  they  are  voidable  at  the  election  of  the 
parties  in  interest,  and,  until  so  avoided,  the  grantee  has  all  rights 
in  the  property  as  to  third  parties.  In  this  case  there  is  no  evidence 
that  the  notes  did  not  belong  to  Anderson,  or  that  he  did  not  have 
the  right  to  deal  with  them  as  he  pleased. 

The  result  is  that,  as  to  these  complainants,  the  defendant  bank  is 
an  innocent  purchaser  of  the  notes,  for  value,  without  notice  of  any 
equities  in  their  favor;  and,  this  being  so,  the  decree  of  the  chan- 
cellor is  correct,  and  must  be  affirmed,  with  costs. 


420  NEGOTIATION.  (Part  2 

HARGER  et  al.  v.  WORRALL. 
(Court  of  Appeals  of  New  York,  1877.     G9  N.  Y.  370,  25  Am.  Rep.  200.) 

RapaIvLO,  J.  This  action  was  brought  against  the  appellant  and 
his  copartner  as  acceptors  of  a  bill  of  exchange  drawn  upon  them  by 
the  Pittston  &  Elmira  Coal  Company,  and  transferred  to  the  plaintiffs. 
The  complaint  contains  all  the  necessary  allegations  to  maintain  the 
action,  and  among  them  an  averment  that  after  acceptance  and  be- 
fore maturity,  the  bill  was,  for  value  received,  sold,  transferred  and 
delivered  to  the  plaintiffs.  The  answer  does  not  deny  any  of  the  al- 
legations of  the  complaint,  but  sets  up  as  a  defense  that  the  bill  was 
accepted  by  the  defendants  without  consideration  and  solely  for  the 
accommodation  of  the  coal  company,  and  to  enable  them  to  raise 
money  thereon,  and  that  it  was  discounted  by  the  plaintiffs  for  that 
company  at  a  usurious  rate  of  interest.  No  evidence  was  given  by 
the  defendants  in  support  of  this  defense,  except  that  the  acceptance 
was  without  consideration  as  between  the  drawers  and  acceptors  and 
solely  for  the  accommodation  of  the  drawers,  and  the  referee  so  found. 
No  proof  was  given  by  either  party  as  to  the  amount  paid  by  the  plain- 
tiffs for  the  bill,  and  the  defendants  claimed  upon  the  trial  and  now 
insist  that  they  having  proved  themselves  to  be  mere  accommodation 
acceptors,  it  was  incumbent  upon  the  plaintiffs  to  show  what  value 
they  paid  for  the  bill,  and  that  their  recovery  should  be  restricted  to 
the  amount  so  paid. 

Such  would  undoubtedly  be  the  case  had  the  acceptance  been  ob- 
tained by  fraud  or  duress,  or  had  it  been  fraudulently  diverted  from 
the  purpose  for  which  it  was  given.  First  Nat.  Bank  v.  Green,  43 
N.  Y.  298.  But,  in  the  absence  of  proof  of  fraud  or  misappropriation, 
the  presumption  is  that  the  indorsee  of  a  negotiable  bill  or  note  is 
a  bona  fide  holder  for  value,  and  this  presumption  is  not  repelled 
merely  by  proof  that  the  bill  or  note  as  between  the  immediate  par- 
ties was  without  consideration,  and  was  made,  indorsed,  or  accepted 
by  one  for  the  sole  accommodation  of  the  other.  When  no  other  proof 
is  given  the  holder  is  not  bound  to  prove  a  valuable  consideration. 
Ross  V.  Bedell,  5  Duer,  462 ;  Mechanics'  &  Traders'  Bank  v.  Crow, 
60  N.  Y.  85.  The  proof  and  finding  that  the  bill  in  the  present  case 
was  accepted  without  consideration,  and  solely  for  the  accommoda- 
tion of  the  drawer,  constituted  no  defense  to  the  action,  and,  as  no 
other  fact  was  proved  on  the  part  of  the  defense,  the  plaintiffs  were 
clearly  entitled  to  judgment.    Grant  v.  EHicott,  7  Wend.  229. 

In  the  case  of  Bank  of  St.  Albans  v.  Gilliland,  23  Wend.  311,  35 
Am.  Dec.  566,  cited  by  appellant,  the  note  was  given  for  the  accom- 
modation of  a  firm,  and  applied  by  one  member  of  the  firm  to  his  in- 
dividual use.  This  was  a  clear  misappropriation  of  the  note,  which 
threw  upon  the  holder  the  burden  of  proving  that  it  paid  value.  No 
such  diversion  appears  in  the  present  case.     The  other  references  by 


Ch.  2)  HOLDER    IN    DUE    COURSE.  •   421 

counsel  are  to  cases  where  one  member  of  a  firm  has  issued  accommo- 
dation paper  without  the  consent  of  his  copartners.  They  are  in- 
appHcable  here,  as  the  acceptance  by  the  firm  is  admitted  in  the  plead- 
ings. 

The  judgment  must  be  affirmed.*^ 


TATAM  V.  HASLER  et  al. 
(Queen's  Bench   Division,   1889.     23  Q.   B.    D.   345.) 

The  plaintiff  sued  upon  a  bill  of  exchange  for  £500.,  drawn  by  the 
defendant  Johnstone,  and  accepted  by  the  defendant  Haslar,  payable 
to  the  order  of  Johnstone,  and  indorsed  by  him  to  the  plaintiff.  Judg- 
ment had  been  signed  against  Johnstone,  but  Haslar,  having  obtained 
leave  to  defend,  pleaded  that  he  had  accepted  the  bill  and  handed  it 
to  one  Leslie  for  the  purpose  of  getting  it  discounted  for  him,  that 
there  was  no  consideration  for  his  acceptance,  and  that  Leslie  fraudu- 
lently handed  over  the  bill  to  Johnstone,  who  fraudulently  indorsed 
it  to  the  plaintiff,  who  took  it  without  consideration  and  with  notice  of 
the  fraud. 

At  the  trial,  before  Field,  J.,  and  a  jury,  the  plaintiff  gave  evi- 
dence of  the  fraudulent  negotiation  of  the  bill,  which  the  judge  held 
to  be  sufficient  to  throw  upon  the  plaintiff  the  onus  of  proving  that  he 
gave  value  in  good  faith.  The  plaintiff  gave  evidence,  and  proved 
that  he  had  given  £450.  for  the  bill,  and  also  alleged  that  he  had 
bought  the  bill  honestly,  without  notice  of- the  fraud. 

The  learned  judge,  in  his  summing-up,  told  the  jury  that  the  onus 
was  on  the  plaintiff  to  satisfy  them  that  he  really  gave  value  for  the 
bill,  but  on  the  defendant  to  satisfy  them  that  the  plaintiff  took  the 
bill  under  such  circumstances  as  to  invalidate  his  title,  because  he 
had,  or  ought  to  have  had,  notice  of  the  fraud.  The  learned  judge 
also  told  the  jury  that  the  plaintiff  was  a  bona  fide  holder  for  value, 
if  he  really  and  truly  advanced  the  value  alleged  by  him. 

The  jury  found  a  verdict  for  the  defendant,  and  the  plaintiff  moved 
that  judgment  might  be  entered  for  him,  or  a  new  trial  had,  on  the 
ground  that  the  judge  misdirected  the  jury  in  telling  them  that  there 
was  evidence  of  circumstances  which  should  have  put  the  plaintiff'  upon 
inquiry,  and  that  the  verdict  was  against  the  weight  of  evidence.*^ 

Denman,  J.  The  summing-up  of  the  learned  judge  has  been  read 
through  and  fully  commented  upon,  and  I  have  come  to  the  conclu- 
sion that,  upon  the  true  construction  of  the  Bills  of  Exchange  Act, 
1882   (45  &  46  Vict.  c.   61),  he  put  the  case  too  favorably  for  the 

42  Accord:     Mitchell  v.   Baldwin,  88  App.  Div.  265,  84  N.   Y.   Supp.   1043 

(1903).     See  Packard  v.  Windholz,  88  App.  Div.  305,  84  N.  Y.  Supp.  666  (1903) 

4  3  The  arguments  of  counsel,  and  the  ophiiou  of  Charles,  J.,  are  omitted, 


422  •  NEGOTIATION.  (Part  2 

plaintiff.  Inasmuch  as  the  argument  in  this  case  has  turned  to  a  great 
extent  upon  what  is  the  present  state  of  the  law  under  the  Act,  1 
think  that  we  must  express  our  opinion  upon  it.  The  first  clause 
with  which  we  must  deal  is  section  30,  subsec.  2,  which  provides 
that  "every  holder  of  a  bill  is  prima  facie  deemed  to  be  a  holder  in 
due  course;  but  if  in  an  action  on  a  bill  it  is  admitted  or  proved  that 
the  acceptance,  issue,  or  subsequent  negotiation  of  the  bill  is  affected 
with  fraud,  *  *  *  the  burden  of  proof  is  shifted,  unless  and 
until  the  holder  proves  that,  subsequent  to  the  alleged  fraud  or  ille- 
gality, value  has  in  good  faith  been  given  for  the  bill."  Now  the 
learned  judge  told  the  jury  that,  if  money  had  really  and  in  fact  been 
given  for  the  bill,  value  had  in  good  faith  been  given.  I  have  never 
so  read  this  section  of  the  act;  and  I  think  that  the  attention  of  the 
learned  judge  could  not  have  been  called  to  the  other  clauses  of  the 
act.  Giving  "value  in  good  faith"  must  mean  something  more  than 
the  mere  actual  and  real  passing  of  money  or  other  value,  and  this 
appears  clearly  when  the  other  clauses  of  the  Act  are  looked  at.  A 
"holder  in  due  course"  is,  by  section  29,  subsec.  1  (b),  defined  to 
be  a  person  who  has  taken  a  bill  in  good  faith  and  for  value  and 
without  notice  of  any  defect  in  the  title  of  the  person  who  negotiated 
it.  Then  section  30,  subsec.  2,  says,  in  effect,  that,  if  fraud  in  the 
inception  or  negotiation  of  a  bill  is  proved  or  admitted,  the  holder 
must  prove  that  he  is  a  holder  in  due  course  as  defined  by  section  29, 
subsec.  1  (b).  Again,  section  90  says  that  "a  thing  is  deemed  to  be 
done  in  good  faith  *  *  *  when  it  is  in  fact  done  honestly,  wheth- 
er it  is  done  negligently  or  not."  This  clause  is  obviously  founded 
upon  the  distinction,  which  is  pointed  out  by  Lord  Blackburn  in  Jones 
V.  Gordon,  2  App.  Cas.  616,  at  page  629,  between  honest  blundering 
or  carelessness  and  a  dishonest  refraining  from  inquiry.  Applying 
that  construction  to  the  words  "value  given  in  good  faith"  at  the  end 
of  section  30,  subsec.  2,  it  appears  to  me  that  those  words  mean  value 
given  honestly  and  without  any  notice  of  the  fraud,  in  the  sense  ex- 
plained by  Lord  Blackburn,  and  not  merely  the  actual  giving  of  value. 

The  words  of  section  30,  subsec.  2,  "if  it  is  admitted  or  proved," 
mean  no  more  than  that  some  evidence  of  circumstances  in  the  nature 
of  fraud  must  be  given  sufficient  to  be  left  to  the  jury.  That  was 
the  old  law,  as  stated  in  Hall  v.  Featherstone,  3  H.  &  N.  284,  which 
has  not,  I  think,  been  altered  by  this  act.  When,  therefore,  some  suffi- 
cient evidence  of  fraud  has  been  given,  as  in  this  case,  the  onus  is  on 
the  plaintiff  to  prove  both  that  he  gave  value  and  that  he  had  no  no- 
tice of  the  fraud  in  the  sense  explained  by  Lord  Blackburn  in  Jones 
V.  Gordon,  2  App.  Cas.  616.  at  page  629. 

In  this  case  there  was  evidence  of  fraud  which  could  not  have  been 
withdrawn  from  the  jury,  and  their  verdict  on  that  point  cannot  be 
set  aside  as  against  the  weight  of  evidence.  The  onus  of  proving 
that  he  had  no  notice  being  upon  the  plaintiff,  it  was  essentially  a 
matter  for  the  jury  to  say  whether  he   had   satisfied   them  on   that 


Ch.  2)  HOLDER    IN    DUE    COURSD.  423 

point,  and  I  think  that  even  had  the  onus  been  upon  the  defendant 
there  was  evidence  upon  which  the  jury  were  entitled  to  find  a  ver- 
dict for  him.     The  verdict,  therefore,  cannot  be  disturbed.** 


KERR  v.  ANDERSON. 

(Supreme  Court  of  North  Dakota,  1907.     16  N.  D.  36.  Ill  N.  W.  614.) 

Morgan,  C.  J.  Action  upon  a  promissory  note  by  the  plaintiff,  as 
indorsee,  against  the  defendant,  as  maker  thereof.  The  complaint  al- 
leges the  execution  and  delivery  and  nonpayment  of  the  note  at  ma- 
turity, and  that  the  same  was  duly  indorsed  to  the  plaintiff  before 
maturity  for  a  valuable  consideration  in  due  course  of  business.  The 
answer  is  a  general  denial.  A  jury  was  impaneled.  Plaintiff  estab- 
lished the  due  indorsement  of  the  note  by  the  payee,  and  offered  the 
note  in  evidence,  which  was  received  without  objection,  and  thereupon 
rested.  Defendant  rested  without  offering  any  evidence.  Plaintiff 
moved  the  court  to  direct  a  verdict  in  his  favor,  and  the  motion  was 
denied.  The  defendant  then  moved  for  a  directed  verdict  in  his  favor, 
which  was  granted.  Plaintiff  excepted  to  the  rulings  on  each  of  these 
motions.  Plaintiff  thereafter  moved  for  a  judgment  notwithstanding 
the  verdict,  and  for  a  new  trial.  Both  motions  were  denied.  Plain- 
tiff appeals  from  the  order  denying  these  motions. 

The  record  does  not  disclose  the  grounds  upon  which  the  trial 
court  granted  defendant's  motion  for  a  directed  verdict.  In  their 
printed  argument,  the  defendant's  attorneys  attempt  to  sustain  the 
trial  court's  action  upon  the  ground  that  plaintiff  offered  no  evidence 
to  show  that  he  was  an  innocent  purchaser  of  the  note  before  maturity. 
It  was  not  necessary  to  offer  such  evidence.  The  presumption  is  that 
the  indorsement  was  made  in  the  regular  course  of  business.  The 
statute  expressly  so  declares,  and  every  holder  of  negotiable  instru- 
ments is  deemed  prima  facie  to  be  a  holder  in  due  course,  unless  the 
title  of  the  person  negotiating  the  instrument  is  shown  to  be  defective 
for  fraud  or  other  reasons.  When  this  is  shown,  the  burden  is  then 
upon  the  holder  to  show  that  he  took  the  instrument  in  due  course. 
Section  6361,  Rev.  Code  1905.-^^     This  court  has  often  held  that  the 

*4  Contra :     Hodge  v.  Smith,  130  Wis.  326,  336,  110  N.  W.  192  (1907). 

4 5  Accord:  Keegan  v.  Rock.  128  Iowa,  .39,  102  N.  W.  805  (190.^);  Johnson 
County  V  Walker,  79  Conn.  348,  65  Atl.  132  (190(5) ;  Tamlyn  v.  Peterson.  15 
N  D  488  107  N.  W.  1081  (1906) ;  Abmeyer  v.  Bank.  76  Kan.  877,  02  Pac. 
1109  (1907) ;    Engle  v.  Hyman,  54  iNIisc.  Rep.  251,  104  N.  Y.  Supp.  390  (1907). 

"The  instruction  in  question  ought  to  have  been  refused.  Its  rejection  was 
proper  for  the  reason,  if  there  were  no  other,  that  it  required  the  jury,  if 
they  believed  either  fraud  or  illegality  in  the  inception  of  the  bonds  to  have 
been  established,  to  find  for  the  township,  unless  the  plaintiff  proved  that  he 
purchased  for  value  or  gave  some  consideration  for  them.  Such  is  not  the 
law  •  for,  if  any  previous  holder  of  the  bonds  in  suit  was  a  bona  fide  holder 
for  value,  the  plaintiff,   without  showing  that  he  had  himself  paid  value. 


424  NEGOTIATION.  (Part  2 

holder  of  a  negotiable  instrument  is  not  primarily  bound  to  establish 
that  he  is  an  innocent  purchaser.  Shepard  v.  Hanson,  9  N.  D.  249, 
83  N.  W.  20;  Id.,  10  N.  D.  194,  86  N.  W.  704.  Plaintiff  produced 
the  note  in  court  duly  indorsed,  and  by  so  doing  established  prima 
facie  that  he  acquired  title  thereto  in  due  course  of  business.*^ 
Daniel  on  Neg.  Ins.  §  812,  and  cases  cited. 

The  fact  that  plaintiff  alleged  in  his  complaint  that  the  note  was 
purchased  by  him  before  maturity  did  not  make  it  incumbent  on  him 
to  establish  that  fact  by  evidence.  The  statutory  presumption  was  in 
force  with  or  without  such  allegation.  It  was  therefore  error  to  di- 
rect a  verdict  in  defendant's  favor.  Plaintiff  requests  this  court  to 
order  judgment  in  his  favor  notwithstanding  the  verdict.  This  is 
not  a  proper  case  for  such  a  judgment.  Defendant  may  be  able  to 
show  upon  another  trial  that  the  allegations  of  the  complaint  are  not 
true.     *     *     * 

Order  reversed. 


SECTION  3.— EQUITIES 


WHITEHEAD  v.  WALKER. 

(C!ourt  of  Exchequer,  1842.     10  Mees.  &  W.  096.) 

Assumpsit  by  the  assignees  of  the  indorsee  against  the  indorser  of  a 
bill  of  exchange.  The  declaration  stated,  that  on  the  8th  of  August, 
1834,  and  before  the  bankruptcy  of  Benbow,  certain  persons  made 
their  bill  of  exchange  in  writing,  directed  to  Grayhurst  &  Co.,  and 
payable  to  the  defendant;  that  the  defendant  indorsed  the  bill  to  W. 
vSwainson,  who  indorsed  it  to  Willis  &  Swainson,  who  indorsed  it  to 
Benbow  before  his  bankruptcy.  Averment,  that  Grayhurst  &  Co. 
refused  to  accept  the  bill,  and  that  the  same  was  protested,  etc.  See 
the  former  case  of  Whitehead  v.  Walker,  9  Mees.  &  W.  506. 

Plea,  that  after  the  indorsement  of  the  bill  to  Willis  &  Swainson. 
and  before  and  at  the  time  when  it  was  indorsed  by  them  to  Ben- 
bow. Willis  &  Swainson  were,  and  still  are,  indebted  to  the  defendant 
in  certain  large  sums  of  money,  amounting  in  the  whole  to  il,000., 
in  respect  of  certain  bills  of  exchange,  etc.,  goods  sold  and  delivered, 
etc.     Averment,  that  the  said  sums  so  due  from  Willis  &  Swainson 

could  avail  himself  of  the  position  of  such  previous  holder."  Montclair  v. 
Ramsdell,  107  U.  S.  147,  159.  2  Sup.  Ct.  391.  27  L.  Ed.  431  (1882). 

See.  also,  to  the  same  effect,  Bryan  v.  Ilarr,  21  App.  D.  C.  190  (1903) ; 
Benedict  v.  Kress,  97  App.  Div.  65,  89  N.  Y.  Supp.  607  (1904) ;  Symonds  v. 
Riley,   ISS  Mass.  470  (1905). 

■*«  Accord:  Karsch  v.  Pottier  Co..  82  App.  Div.  230,  81  N.  Y.  Supp.  782 
(1903) ;  Colborn  v.  Arbecam.  54  Misc.  liep.  623,  104  N.  Y.  Supp.  986  (1907). 
But  see  McGehee  v.  Cooke,  55  Misc.  Rep.  40,  105  N.  Y.  Supp.  60  (1907). 


Ch.  2)  HOLDER    IN    DUE    COURSE.  42o 

to  the  defendant  exceeded  the  amount  of  the  said  bill  of  exchange,  of 
all  which  premises  Benbow,  at  the  time  of  the  said  indorsement  there- 
of to  him  by  Willis  &  Swainson,  had  notice,  and  that  the  said  bill  was 
indorsed  by  them  to  Benbow,  after  it  had  so  been  refused  acceptance 
and  had  been  protested  as  in  the  declaration  mentioned,  and  after  it 
had  become  due.     Verification. 

Replication,  de  injuria. 

Special  demurrer,  and  joinder  therein.*^ 

Parke,  B.  It  is  unnecessary  to  determine  whether  the  replication 
is  good  or'  not,  for  we  think  the  plea  is  bad  in  substance,  on  the  au- 
thority of  Burrough  v.  Moss.*^  That  case  decides  that  the  indorsee  of 
an  overdue  promissory  note  takes  it,  as  against  the  maker,  with  all 
the  equities  arising  out  of  the  note  transaction  itself,  but  not  subject 
to  a  set-oflf  in  respect  of  a  debt  due  from  the  endorser  to  the  maker 
of  the  note,  arising  out  of  collateral  matters.  For  example,  if  the  note 
be  released  or  discharged,  the  plaintifif  under  such  circumstances  can- 
not make  a  title  to  it.  But  a  set-ofif  is  not  an  equity;  it  is  a,  mere  col- 
lateral matter ;  it  is  a  right  to  set  off  a  cross-demand  against  the  plain- 
tiff's cause  of  action,  which  was  introduced  to  prevent  a  multiplicity  of 
actions.  The  case  of  Burrough  v.  Moss  is  good  law,  and  has  been 
recognized  in  this  court.  Nor  do  I  think  that  case  is  afifected  by  the 
decision  of  Coleridge,  J.,  in  Goodall  v.  Ray,  4  Dowl.  P.  C.  76.  It 
seems  to  me  that  either  there  must  be  some  inaccuracy  in  the  report, 
or  there  must  have  been  in  that  case  that  sort  of  formal  notice  to  the 
plaintifif  which  is  equivalent  to  an  agreement  to  set  ofif  the  cross-de- 
mand as  against  him.  On  that  ground  the  case  may  perhaps  be  sup- 
ported ;  otherwise  I  cannot  assent  to  the  position  that  a  mere  notice 
of  a  set-ofif  between  the  payee  and  the  maker  can  operate  to  restrict 
the  negotiability  of  a  promissory  note.  Besides,  the  decision  of  the 
point  was  unnecessary  in  that  case,  inasmuch  as  the  plaintiff's  demand 
was  for  a  sum  less  than  the  amount  of  the  note.  I  cannot,  therefore, 
consider  that  case  as  an  authority  that  mere  notice  of  the  set-ofif  makes 
any  difiference.    Our  judgment  must  be  for  the  plaintififs. 

Alderson,  B.  I  am  of  the  same  opinion.  If  the  doctrine  advanced 
on  the  defendant's  part  were  correct,  no  one  would  be  able  to  tell 
whether  certain  instruments  were  negotiable  or  not;  for  their  nego- 
tiability would  depend  on  the  will  of  a  third  person.  No  one  could 
tell  whether  the  maker  would  set  ofif  his  claim  against  the  prior  party 
or  not.  If  he  will  not,  the  note  is  negotiable ;  otherwise,  it  is  not. 
Burrough  v.  Moss,  lays  down  the  true  rule,  that  the  indorsee  of  an 
overdue  bill  is  subject  to  those  equities,  and  those  only,  which  afifect 
the  bill  itself. 

GuRNEY,  and  Rolee,  BB.,  concurred. 

Judgment  for  the  plaintififs. 

*■?  The  arguments  of  counsel  are  omitted. 
*8  10  Barn.  &  O.  558. 


426  NEGOTIATION.  (Part  2 

RANGER  V.  GARY. 
(Supreme  Judicial  Court  of  Massachusetts,  1840.     1  Mete.  369.) 
See  ante,  p.  327,  for  a  report  of  the  case. 


BAXTER  V.  LITTLE. 

(Supreme  Judicial  Court  of  Massachusetts,  Suffolli  and  Nantucket,  1843.     6 
Mete.  7,  39  Am.  Dec.  707.) 

This  action  was  by  the  indorsee  against  the  maker  of  a  promissory 
note  for  $330,  dated  March  1,  1837,  payable  to  Joseph  Harris,  Jr.,  in 
four  months,  and  by  him  indorsed.  The  action  was  commenced  Octo- 
ber 4,  1839. 

At  the  trial  before  the  Chief  Justice,  the  signatures  of  the  maker 
and  indorser  were  admitted  by  the  defendant,  and  he  relied  upon  a 
set-off  of  notes  against  the  Franklin  Bank,  upon  the  ground  that  the 
note  in  suit  was  held  by  that  bank,  after  it  was  due,  and  that  he  had  a 
right  to  make  the  same  defense  against  the  plaintiff  as  if  the  action 
were  brought  by  the  bank. 

In  order  to  present  the  question  of  law,  it  was  mutually  conceded 
that  the  note  was  discounted  by  the  Franklin  Bank  in  the  due  course 
of  business ;  that  it  was  held  by  the  bank  when  it  became  due ;  that 
afterwards,  and  after  the  bank  had  stopped  payment,  in  pursuance  of 
a  vote  of  the  directors  to  pay  the  debts  of  the  bank  in  such  securities 
as  they  had,  the  note  in  question,  on  the  20th  of  December.  1837,  was 
delivered  to  the  plaintiff,  or  to  the  person  under  whom  the  plaintiff 
claims  title,  in  exchange  for  bills  of  said  bank,  at  par,  which  bills 
were  then  at  a  discount  in  the  market ;  that  before  this  action  was 
brought — upon  notice  of  the  plaintiff's  attorneys  that  they  had  such  a 
note,  and  demanded  payment  thereof,  but  without  notice  to  the  de- 
fendant that  the  note  had  been  transferred  by  the  bank — the  defendant 
tendered  to  said  attorneys,  in  satisfaction  of  the  note,  bills  of  the 
Franklin  Bank,  which  they  declined  to  accept ;  that  the  defendant  has 
ever  since  had  said  bills,  and  has  filed  them  in  offset  in  this  action, 
and  now  relies  upon  that  tender  and  set-off. 

It  was  agreed  that  judgment  should  be  entered  by  the  plaintiff  if  in 
the  opinion  of  the  court  he  was  entitled  to  recover ;  otherwise,  that 
the  plaintiff  should  become  nonsuit.*^ 

Shaw,  C.  J.  When  a  negotiable  note  is  indorsed  and  transferred 
after  it  is  due,  and  the  defendant  relies  upon  matter  of  set-off  which 
he  may  have  against  the  promisee,  he  can  avail  himself  only  of  such 
matter  of  defense  as  existed  between  himself  and  the  promisee,  at 

*»  The  arguments  of  cbunsel  are  omitted.  Baxter  v.  Harris  is  reported 
with  the  principal  case,  but  everything  relating  to  that  action  is  omitted- 


Ch.  2)  HOLDER    IN    DUE    COURSE.  427 

the  time  of  the  actual  indorsement  and  transfer  of  the  note  to  the 
holder.  A  note  does  not  cease  to  be  negotiable,  because  it  is  overdue. 
The  promisee,  by  his  indorsement,  may  still  give  a  good  title  to  the 
indorsee.  Notes  or  other  matters  of  set-off,  acquired  by  the  defend- 
ant against  the  promisee,  after  such  transfer,  cannot  be  given  in  evi- 
dence in  defense  to  such  note,  although  the  maker  had  no  notice  of 
such  transfer  at  the  time  of  acquiring  his  demand  against  the  prom- 
isee. Having  made  his  promise  negotiable,  he  is  liable  to  any  bona 
fide  holder  and  actual  indorsee ;  and  therefore,  even  after  the  note 
has  become  due,  in  making  payments  to  the  original  promisee,  or  in 
further  dealings  by  which  he  gives  him  a  credit,  he  has  no  right  to 
presume,  without  proof,  that  the  promisee  is  still  the  holder  of  the 
note.  Besides,  in  case  of  payment  of  a  negotiable  note,  or  of  a  credit 
which  the  maker  intends  shall  operate  by  way  of  payment,  he  has  a 
right  to  have  his  note  given  up,  if  paid  in  full,  or  to  see  the  payment 
indorsed,  if  partial.  Should  he  insist  on  this  right,  in  the  case  pro- 
posed, he  would  at  once  perceive  that  the  person  to  whom  he  is  mak- 
ing payment  or  giving  credit  is  no  longer  the  holder  of  the  note.  And 
this  appears  to  us  to  be  the  true  distinction  between  the  indorsement 
of  a  note  overdue  and  the  assignment  of  a  chose  in  action.  In  the 
latter  case,  notice  of  the  assignment  must  be  given  by  the  assignee  to 
the  debtor,  to  prevent  him  from,  making  payment  to  the  assignor. 
Without  such  notice,  he  has  no  reason  to  presume  that  the  original 
creditor  is  not  still  his  creditor;  and  payment  to  him  is  according  to 
his  contract  and  in  the  due  and  ordinary  course  of  business.  The  as- 
signee takes  an  equitable  interest  only,  which  must  be  enforced  in 
the  name  of  the  assignor;  and,  until  notice,  he  has  no  equity  against 
the  debtor,  which  can  be  recognized  and  protected  by  a  court  of  law 
or  equity.  The  indorsee  of  a  note  overdue  takes  a  legal  title ;  but 
he  takes  it  with  notice  on  its  face  that  it  is  discredited,  and  therefore 
subject  to  all  payments  and  offsets  in  the  nature  of  payment.  The 
ground  is  that  by  this  fact  he  is  put  upon  inquiry,  and  therefore  he 
shall  be  bound  by  all  existing  facts,  of  which  inquiry  and  true  informa- 
tion would  apprise  him ;  but  these  could  only  apprise  him  of  demands 
then  acquired  by  the  maker  against  the  payee.     *     *     *  so 

The  defendant  Little,  the  maker  of  the  note  now  in  suit,  not  having 
shown  that  he  held  the  bills  of  the  Franklin  Bank  at  the  time  that  his 
note  was  transferred  to  the  plaintiff,  he  cannot  set  them  off  in  this 
suit.  In  a  case  in  New  York,  it  was  held  that  bills  of  a  bank,  held 
by  the  defendant  when  his  note  became  due,  could  not  be  set  off  in  an 
action  brought  on  the  note  by  receivers  appointed  previously.  Hax- 
ton  V.  Bishop,  3  Wend.  (N.  Y.)  13. 

The  English  rule,  in  allowing  set-off  in  an  action  upon  a  note,  is 
somewhat  more  limited  than  our  own,  confining  such  defense  to  equi- 


Bo  The   Chief  Justice  here  discussed  the  case  of  Sargent  v.   Southgate,  5 
Pick.  312,  16  Am.  Dec.  409. 


428  NEGOTIATION.  (Part  2 

ties  arising  out  of  the  same  note,  or  transactions  connected  with  it. 
Burrough  v.  Moss,  10  Barn.  &  Cres.  5-58.  Here  it  has  been  held  that 
an  independent  demand  may  be  set  off,  where  in  other  respects  the 
party  is  entitled  to  go  into  that  defense.  Sargent  v.  Southgate,  5 
Pick.  312,  16  Am.  Dec.  409 ;  Ranger  v.  Gary,  1  Mete.  375. 

Since  tlie  decision  in  Sargent  v.  Southgate,  the  principle  decided  by 
it  has  been  confirmed,  and  the  whole  subject  of  set-off  placed,  by  Rev. 
St.  c.  96,  upon  grounds  more  distinct  and  satisfactory  than  it  was 
under  the  former  statutes.     *     *     * 

Judgment  for  the  plaintiff.'*^ 


PROUTY  V.  ROBERTS. 

(Supreme  Judicial  Court  of  Massachusetts,  Hampshire,  Franlilin,  and  Hamp- 
den,  ISGO.     6  Gush.   19,  52  Am.   Dec.  761.) 

This  was  an  action  of  assumpsit  on  a  promissory  note  signed  by 
the  defendant,  payable  to  Daniel  Whitney  or  order,  on  demand,  and 
indorsed  by  Whitney.  The  note  was  dated  on  the  12th  of  August, 
1849,  and  was  put  in  suit  on  the  22d  of  October  following. 

The  defendant  pleaded  the  general  issue,  and  offered  evidence  to 
prove  that  the  note  declared  on  was  still  the  property  of  Daniel  Whit- 
ney, the  payee,  and  was  never  legally  transferred  by  him,  but  was 
got  out  of  his  possession,  by  false  and  fraudulent  pretenses,  by  Hart 
&  Forbes,  who  represented  that  they  had  $700  deposited  in  the  savings 
bank  in  Greenfield,  which  they  would  draw  out  and  loan  to  him,  if 
he  would  give  them  the  note,  by  means  of  which  pretenses  they  got 
possession  of  the  same ;  that  these  representations  were  false ;  that 
Hart  &  Forbes  had  not  and  never  had  any  money  deposited  in  the 
savings  bank ;  that  the  plaintiff,  at  the  time  he  got  possession  of  the 
note,  knew  that  the  same  was  thus  fraudulently  obtained  from  Whit- 
ney ;  and  that  he  obtained  it  for  a  small  consideration,  much  less  than 
half  the  sum  for  which  it  was  given. 

The  presiding  judge  (Mellen,  J.)  ruled  that  the  above  facts,  if 
proved,  would  not  constitute  a  defense  in  behalf  of  the  defendant. 
A  verdict  was  thereupon  rendered  for  the  plaintiff,  and  the  defendant 
excepted. 

Per  Guriam.  The  directions  we  think  were  right.  The  plaintiff 
proved  a  legal  title  to  the  note,  and  the  facts  proposed  to  be  proved  by 
the  defendant  could  afford  him  no  ground  of  defense.     It  was  no 

51  Accord :  Driggs  v.  Rocliwell,  11  Wend.  (N.  Y.)  504  (1S33).  Centra  :  Gem- 
mell  V.  Huebeu.  71  Mo.  Aiip.  291  (1S97).  C<»nipare  Marling  v.  FitzGerald,  138 
Wis.  93.  101,  120  N.  W.  388.  23  L.  R.  A.  (N.  S.)  177  (1009) ;  and  see  lYeitten- 
berg  V.  Rubel,  123  Iowa,  154,  98  N.  W.  024  (1904). 


Oh.  2)  HOLDER    IN    DUE    COURSE.  429 

fraud  upon  the  defendant;   he  was  called  upon  to  pay  only  what  he 
had  undertaken  to  pay ;   and  payment  to  the  plaintiff  would  be  a  good 
discharge.    Knights  v.  Putnam,  3  Pick.  184. 
Judgment  on  the  verdict. 


CARRIER  V.  SEARS. 

(Supreme  Judicial   Court  of  Massachusetts,   Berkshire,   18G2.     4  Allen,  336, 

81  Am.  Dec.  707.) 

Hoar,  J.^^  This  action  is  by  the  indorsee  of  a  promissory  note 
against  the  maker;  and  the  defendant  offered  to  prove  that  the  plain- 
tiff procured  the  indorsement  by  undue  influence  from  the  payee,  when 
he  was  of  unsound  mind  and  incapable  of  making  a  valid  indorsement. 
This  evidence  was  rejected,  and  we  think  it  ought  not  to  have  been 
admitted.  An  indorsement  is  a  contract ;  and  the  contract  of  an  insane 
person,  or  one  obtained  by  fraud  or  duress,  is  voidable  and  not  void. 
2  Bl.  Com.  291;  2  Kent,  Com.  (6th  Ed.)  451;  Seaver  v.  Phelps,  11 
Pick.  304,  22  Am.  Dec.  372 ;  Allis  v.  Billings,  6  Mete.  415,  39  Am. 
Dec.  744;  Arnold  v.  Richmond  Iron  Works,  1  Gray,  434;  Gibson  v. 
Soper,  6  Gray,  279,  66  Am.  Dec.  414.  The  right  to  avoid  it  is  a  per- 
sonal right,  which  can  only  be  exercised  by  the  insane  person,  or  his 
guardian,  or  representatives.  The  contract  is  binding  upon  the  party 
who  is  of  sound  mind,  and  his  rights  under  it  are  not  affected  until  it 
is  avoided  by  the  party  entitled  to  disaffirm  it.  The  property  passes 
as  to  third  persons. 

The  only  case  cited  by  the  defendant  upon  this  point  is  Peaslee  v. 
Robbins,  3  Mete.  164.  That  was  an  action  upon  a  note  by  an  indorsee 
against  the  promisor,  and  evidence  was  oft'ered  tending  to  prove  that 
the  payee,  when  he  indorsed  the  note,  had  not  sufficient  mental  ca- 
pacity to  make  a  valid  transfer  of  it.  To  establish  this,  evidence  was 
admitted  as  to  his  incapacity  at  the  time  the  note  was  made  to  him,  as 
well  as  after;  and  the  admissibility  of  this  evidence  was  the  question 
raised  upon  the  bill  of  exceptions.  This  court  held  that  it  was  ad- 
missible, as  tending  to  show  his  state  of  mind  at  the  time  he  indorsed 
it.  Whether  his  want  of  mental  capacity  was  a  defense  of  which  the 
defendant  could  avail  himself  does  not  appear  to  have  been  questioned 
by  either  party,  or  by  the  court.  Judge  Wilde,  in  delivering  the  opin- 
ion, says :  "The  plaintiff  is  bound  to  show  a  legal  transfer  of  the  note, 
by  proof  of  the  handwriting  of  the  indorser;  and  it  follows,  as  a 
necessary  consequence,  that  the  defendant  must  be  allowed  to  impeach 
the  plaintiff's  title  to  the  note  by  showing  that  the  indorsement  was 
void.  Evidence,  therefore,  of  the  indorser's  mental  incapacity  to 
make  a  valid  contract,  at  the  time  he  indorsed  the  note,  was  material 
evidence;  and  not  the  less  material  because  the  same  incapacity  ex- 
isted when  the  note  was  signed." 

5  2  Part  of  the  opinion  is  omitted. 


430  NEGOTIATION.  (Part  2 

These  remarks  of  the  learned  judge,  unexplained,  would  certainly 
countenance  the  position  taken  by  the  defendant  in  the  case  at  bar ; 
and  the  report,  as  it  stands,  does  not  afford  the  necessary  explanation. 
The  point  decided  was  only  that  evidence  of  insanity  at  one  time  was 
competent  as  tending  to  prove  insanity  at  a  time  shortly  after.  But 
the  fact  in  the  case  was,  as  I  well  remember,  that  the  defendant  had 
been  notified  by  the  guardian  of  the  insane  payee  not  to  pay  the  note 
to  the  plaintiff;  and  the  defense  was  conducted  by  the  guardian  for 
the  benefit  of  his  ward.  We  have  examined  the  record,  and  find  in 
the  original  specification  of  defense  the  statement  "that  said  Fletcher, 
as  guardian  to  said  Parker  (the  payee  of  the  note),  claims  said  note 
as  the  property  or  estate  of  said  Parker."  There  was  no  controversy 
upon  this  point;  and,  the  guardian  having  claimed  and  exercised  the 
right  to  disaffirm  and  avoid  the  indorsement,  the  only  question  was 
upon  the  metal  incapacity  of  the  payee  at  the  time  the  indorsement 
was  made.  The  language  of  the  court  was  therefore  perfectly  war- 
ranted in  its  application  to  the  circumstances  of  the  case,  as  it  was 
presented  and  understood  by  the  parties,  but  would  require  limitation 
if  taken  as  the  enunciation  of  a  general  principle.     *     *     * 


CLARK  V.  PEASE  et  al. 
(Supreme  Judicial  Court  of  New  Hampsliire,  1860.    41  N.  H.  414.) 

This  is  an  action  of  assumpsit,  counting  upon  the  promissory  note 
of  the  three  defendants,  dated  July  26,  1858,  for  $112.50,  payable  to 
one  Theodore  P.  Clark,  or  order,  on  the  1st  day  of  the  following 
November,  and  by  the  payee  indorsed  and  delivered,  on  the  day  of  its 
date,  to  the  plaintiff.  There  was  also  a  count  for  money  had  and  re- 
ceived, to  the  amount  of  $300.     Plea,  the  general  issue. 

The  defendants  offered  to  prove  that,  on  the  day  before  the  giving 
of  the  note,  all  of  the  makers  except  Charles  Pease  were  arrested  at 
Ellsworth,  in  Grafton  county,  by  Calvin  Clark,  a  deputy  sheriff,  by 
the  procurement  and  with  the  aid  of  the  payee,  and  held  by  them  in 
custody  until  the  next  day,  when  they  were  carried  by  them  to  Ply- 
mouth, and  there  held  in  custody  until,  to  effect  their  liberation,  this 
note  was  given,  the  said  Charles  Pease  signing  as  the  surety  of  the 
others;  that  the  arrest  was  made  without  any  warrant  or  other  law- 
ful authority,  but  it  was  represented  by  the  sheriff  that  they  were  ar- 
rested for  the  criminal  offense  of  malicious  mischief,  and  that  he  had 
the  right  to  arrest  them  without  a  warrant;  that  this  note,  with  two 
others,  amounting  in  all  to  $250,  was  given  to  said  Theodore  P.  Clark 
to  obtain  the  release  from  duress  of  the  three  principals  in  the  note, 
and  upon  the  promise  by  the  payee  that  they  should  then  be  set  at 
liberty,  and  he  would  prosecute  them  no  further ;  and  upon  the  exe- 
cution of  the  note  they  were  set  at  liberty  accordingly. 


Oh.  2)  HOLDER   IN    DUE    COURSE.  431 

The  plaintiff  excepted  to  this  evidence,  as  no  defense  ag^ainst  the 
indorsee,  without  proof  that  he  was  not  the  bona  fide  holder  of  the 
note.  But  the  court  ruled  that,  if  the  note  was  obtained  by  duress,  it 
was  void  in  the  hands  of  an  innocent  indorsee,  and  thereupon  the 
plaintiff,  admitting  for  the  purposes  of  this  trial  that  the  defendants' 
witnesses  would  testify  to  the  facts  stated,  a  verdict  for  the  defendants 
was  taken  by  consent,  subject  to  the  opinion  of  the  court;  and  the 
questions  thus  raised  were  reserved,  and  assigned  to  the  determination 
of  the  whole  court.^^ 

Sargent,  J.  That  the  case  presented  is  clearly  one  of  duress  there 
can  be  no  question.  The  abuse  of  any  process,  either  civil  or  criminal, 
to  compel  a  party,  by  imprisonment,  to  do  any  act  against  his  will 
except  to  pay  the  debt  for  which  he  is  arrested,  is  entirely  illegal, 
and  the  act  may  be  avoided  on  the  ground  of  duress.  Richardson  v. 
Duncan,  3  N.  H.  508 ;  Severance  v.  Kimball,  8  N.  H.  386 ;  Shaw  v. 
Spooner,  9  N.  H.  197,  32  Am.  Dec.  348 ;  Burnham  v.  Spooner,  10  N. 
H.  523;  Breck  v.  Blanchard,  22  N".  H.  303.  Here  the  arrest  was 
without  any  warrant  or  lawful  authority.  Such  duress  is  a  perfect 
defense,  upon  all  the  authorities,  to  an  action  between  the  original 
parties. 

The  note  in  this  case  was  not  only  void  as  between  the  original 
parties,  on  the  ground  of  duress,  but  was  given  to  compromise  a 
charge  of  crime,  and  was  wholly  illegal  upon  that  ground.  Plumer  v. 
Smith,  5  N.  H.  553,  22  Am.  Dec.  178.  But  the  principal  question 
raised  here  by  the  ruling  of  the  court  is  whether  such  a  note  is  ab- 
solutely void  in  the  hands  of  any  holder;  and  if  not,  then  another 
question  arises  upon  the  exception  which  was  taken  by  the  plaintiff, 
which  is  this :  After  an  indorsee  has  made  out  a  prima  facie  case  by 
proving  the  indorsement,  etc.,  and  the  defendant  has  shown  that  the 
note  was  obtained  from  him  by  duress,  upon  whom  rests  the  burden 
of  proof?  Must  the  defendant  prove  that  the  plaintiff  was  not  the 
bona  fide  holder,  and  that  he  did  not  pay  a  valid  consideration  for  it, 
as  the  plaintiff  claimed?  or,  the  duress  being  proved,  does  that  throw 
the  burden  of  proof  upon  the  plaintiff,  to  prove  how  he  came  by  the 
note,  and  the  consideration  he  paid,  etc.,  as  the  defendant  claims?  We 
will  examine  these  questions  in  the  order  in  which  we  have  stated 
them. 

I.  Is  this  note  absolutely  void  in  the  hands  of  any  holder,  however 
innocent,  who  has  paid  a  valid  consideration  for  it  before  it  was  due? 

We  find  that  the  law  holds  certain  persons  to  be  incompetent  parties 
to  make  contracts,  on  account  of  want  of  capacity.  It  has,  therefore, 
wisely  taken  care  of  the  interests  of  those  who  either  have  not  judg- 
ment to  contract,  as  in  the  case  of  infants,  or  who,  having  judgment  to 
contract,  cannot  in  law  have  any  funds  or  propeity  to  enable  them 
to  perform  the  contract,  as  in  the  case  of  a  feme  covert;   and  there- 

6  3  The  arguments  of  counsel  are  omitted. 


432  NEGOTIATION.  (Part  2 

fore  it  has  in  general  rendered  the  contracts  of  infants  voidable,  and 
those  of  married  women  absolutely  void.  Ch.  on  Bills,  18.  By  our 
law  an  infant  has  not  capacity  to  bind  himself  absolutely  by  a  prom- 
issory note,  as  maker  or  indorser.  Story,  Prom.  Notes,  §  78.  So  a 
married  woman  is  incapable,  in  any  case,  of  becoming  a  party  to  a 
note  or  bill  so  as  to  charge  herself  with  any  obligation  whatever  or- 
dinarily arising  therefrom.  So  contracts  made  with  an  alien  enemy 
are  absolutely  vofd,  upon  the  ground  of  disability  to  contract.  This 
principle  has  its  origin  and  confirmation  in  the  law  of  nations.  Per- 
sons insane,  or  imbecile  in  mind,  have  not  the  mental  capacity  to  con- 
tract. This  disability  flows  from  the  most  obvious  principles  of  nat- 
ural justice,  because  persons  in  that  condition — lunatics,  idiots,  and 
persons  non  compos  mentis — being  bereft  of  their  reason,  are,  by  the 
rules  not  only  of  municipal  law  but  of  universal  justice,  held  to  be 
utterly  incapable  of  making  contracts,  and  generally  their  contracts 
are  absolutely  void.  Story,  Prom.  Notes,  §§  85,  94,  100,  101;  Ed- 
wards, Bills  &  Notes,  c.  2.  There  are  some  other  parties  that  are  held 
to  be  incompetent  to  contract,  but  these  are  the  principal ;  and  there 
are  also  some  exceptions  to  some  or  all  of  the  general  rules  above 
stated,  which  are  not  now  important  to  be  noticed.  These  doctrines 
are  all  familiar  as  elementary  principles. 

Contracts,  therefore,  purporting  to  be  entered  into  by  either  of  the 
above  parties,  are  either  void,  or  voidable,  as  the  case  may  be,  alike 
as  against  the  other  party  to  the  original  contract,  and  also,  where  the 
contract  is  assignable,  they  are  void  as  to  such  incompetent  parties,  or 
are  voidable  by  them,  in  the  hands  of  any  assignee  or  indorsee.  These 
rules  of  law  are  founded  upon  the  most  common  principles  of  natural 
justice  and  of  public  policy. 

There  are  numerous  other  contracts,  which,  though  made  between 
competent  parties  on  both  sides,  are  nevertheless  void  as  between  such 
original  parties.  A  contract  made  on  Sunday,  where  the  transaction 
of  such  business  is  prohibited,  is  an  illegal  contract,  and  void  as  be- 
tween the  parties.  So  a  contract  based  upon  an  illegal  consideration — 
as  usury,  gaming,  spirituous  liquors  sold  without  license  contrary  to 
law,  the  compounding  of  a  felony,  etc. — is  void  as  between  the  parties. 
So  a  contract  without  consideration,  nudum  pactum,  and  one  where 
the  consideration  has  failed,  as  between  the  immediate  parties,  is 
void  or  voidable.  So  a  contract  entered  into  by  compulsion  under 
duress,  or  obtained  by  fraud,  or  circumvention  of  one  in  a  state  of  in- 
toxication, is  void  as  between  the  parties.  Other  cases  might  be  stated 
(see  Ch.  on  Bills,  82-87),  but  these  are  sufficient  for  our  present  pur- 
pose. Where  the  contract  itself  is  illegal,  or  is  founded  upon  an 
illegal  consideration,  the  parties  are  usually  both  violators  of  the  law, 
and  stand  in  pari  delicto.  In  such  case  any  contract  for  the  payment 
of  money  or  the  performance  of  any  service  cannot  be  enforced  as 
between  the  parties ;  nor,  if  money  has  been  paid  or  property  trans- 
ferred by  one  party  to  the  other  under  such  contract,  where  both  par- 


Ch.  2)  HOLDER    IN    DUE    COURSE.  43S 

ties  are  alike  in  fault,  can  it  be  recovered  back,  because  in  such  cases 
"potior  est  conditio  possidentis."  But  in  cases  of  duress,  fraud,  or 
circumvention,  the  fault  was  all  upon  one  side,  and  the  innocent  party, 
upon  whom  the  duress  or  the  fraud  was  practiced,  may  not  only  avoid 
the  contract  entered  into  under  these  circumstances,  but  if  he  pay 
money,  or  deliver  property,  he  may  recover  it  back  again.  Now  bills 
and  notes  stand  upon  the  same  foundation  as  all  other  contracts  do,  in 
all  the  above  respects,  so  long  as  they  remain  in  the  hands  of  the 
original  payee. 

But  bills  and  notes  have  another  attribute,  which  other  contracts 
ordinarily  do  not  possess ;  that  is,  negotiability.  Where  a  bill  or  note 
has  been  negotiated,  and  passed  into  the  hands  of  a  bona  fide  holder 
before  it  is  due,  and  for  a  valuable  consideration,  in  such  case  the 
holder  acquires  rights  which  did  not  belong  to  the  payee.  He  stands 
in  a  different  relation  to  the  promisor.  These  additional  rights  and 
privileges  have  been  conferred  upon  such  holder  by  law,  for  good  and 
sufficient  reasons,  too  well  known  and  understood  to  need  to  be  stated, 
but  which  are  incident  to  and  dependent  upon  the  attribute  of  negotia- 
bility, which  these  instruments  possess.  And  it  may  be  laid  down  as 
the  general  rule,  as  the  general  principle  applying  to  this  class  of  cases, 
that  such  a  note,  thus  negotiated  and  in  the  hands  of  such  a  holder,  is 
not  liable  to  any  defense  which  the  maker  had  as  against  the  original 
payee.  To  this  general  rule  there  are  some  exceptions,  among  which 
are: 

1.  When  a  statute  not  only  prohibits  the  making  of  a  contract,  but 
provides  that  the  same  shall  be  void  to  all  intents  and  purposes,  or 
where  the  law  provides  that  any  contract  made  or  securities  given 
upon  any  illegal  consideration  shall  be  absolutely  void,  then  the  note 
which  embodies  such  contract,  or  is  based  upon  such  consideration,  is 
held  void,  everywhere  and  in  the  hands  of  every  holder.  In  England, 
and  in  .most  of  the  United  States,  there  are  or  have  been  laws  against 
usury,  which  not  only,  by  a  general  prohibition  of  usury,  made  that  an 
illegal  consideration  for  a  note,  but  also  provided  that  all  bills  or  notes 
founded  upon  such  a  consideration  should  be  absolutely  void.  Such, 
however,  is  not  the  law  in  this  state  on  that  subject,  and  it  is  believed 
that  we  have  no  statutes  with  similar  provisions.  Hence  here  usury 
may  be  a  good  defense  to  a  note  as  against  the  original  party,  but  not 
as  against  an  innocent  indorsee,  for  value,  etc. 

2.  When  the  note  is  a  forgery,  it  is  void  everywhere. 

3.  When  the  maker  belongs  to  a  class  of  persons  who  are  ordinarily. 
and  as  a  general  rule,  on  grounds  of  public  policy,  held  incompetent 
to  contract  at  all,  such  as  infants,  married  women,  alien  enemies,  and 
insane  persons,  including  spendthrifts  and  others  under  guardianship, 
who  have  been  by  some  statute  declared  incompetent  to  contract. 

4.  Notes  signed  by  agents  without  authoritv. 

In  none  of  these  cases  (except  the  first,  which,  as  we  have  seen,  does 
Sm.&  M.B.&  N.— 28 


434  NEGOTIATION.  (Part  2 

not  apply  in  this  state)  is  a  note  valid  in  the  hands  of  any  one ;  and  the 
party  who  discounts  such  paper  is  bound  to  inquire,  at  his  peril, 
whether  the  note  offered  to  him  is  signed  by  a  party  capable  and  com- 
petent in  law  to  bind  himself,  or  by  an  agent  duly  authorized  to  bind 
his  principal.  Beside  this,  he  is  bound  to  inquire  whether  the  party 
from  whom  he  receives  it  is  competent  to  make  such  transfer  in  his 
own  right,  or  is  authorized  to  do  it  for  his  principal,  for  whom  he  as- 
sumes to  act. 

If  there  is  a  failure  in  either  of  these  points  of  capacity  or  authority, 
it  will  not  avail  the  party  that  he  is  a  bona  fide  holder,  for  value,  with- 
out notice.  He  must  look  to  his  indorser  if  he  has  one,  and  if  he  has 
not  he  must  suffer  loss. 

5.  Another  case  might  be  mentioned,  which  has  been  made  an  ex- 
ception to  the  general  rule  above  stated  by  express  provisions  of  the 
statute — as  where  a  note  is  attached  by  the  trustee  process.  There,  by 
operation  of  the  statute,  the  maker  of  a  note  may  have  a  perfect  de- 
fense against  an  indorsee,  for  value,  without  notice,  and  before  due. 
So  notes  discharged  by  operation  of  insolvent  laws  might  afterward 
be  transferred,  by  possibility,  so  as  to  form  another  exception,  where 
the  indorsee,  holding  the  note  bona  fide,  etc.,  might  be  met  with  a  per- 
fect defense  on  the  part  of  the  maker.  But  these  last  cases  throw  no 
light  upon  the  question  we  are  considering.  These  are  the  principal, 
perhaps  all  the  exceptions  to  the  general  rule  above  stated,  that  no  de- 
fense is  available  against  an  innocent  indorsee,  for  value  paid  before 
due.  But  where  the  contract  was  illegal,  being  prohibited  by  law,  or 
the  consideration  was  illegal,  as  usury,  wagers,  compounding  a  felony, 
restraint  of  trade  or  of  marriage,  etc.,  or  where  there  was  a  want  or 
failure  of  consideration,  and  even  where  the  note  has  been  paid — all 
these  defenses,  and  many  more,  cannot  be  made  against  the  note  in  the 
hands  of  such  a  holder.  And  the  question  here  raised  is  whether,  in 
case  of  duress  or  fraud,  where  there  is  mala  fides,  but  it  is  all  on  one 
side,  and  the  other  party  to  the  note  has  been  induced  to  sign  it  by 
force  or  by  fraud,  and  is  in  every  respect  an  innocent  party,  such 
defense  shall  avail  him  as  against  such  a  holder,  for  value,  etc.,  who 
seeks  to  collect  it. 

And  we  think  such  a  defense  cannot  avail  the  maker  against  such  an 
indorsee  of  the  note.  The  authorities  favor  this  view.  Kent,  in  his 
Commentaries  (volume  2,  §  39),  speaks  of  contracts  generally,  and 
on  page  453  says:  "If  a  contract  be  entered  into  by  means  of  violence 
offered  to  the  will,  or  under  the  influence  of  undue  constraint,  the  party 
may  avoid  it  by  plea  of  duress ;  and  it  is  requisite  to  the  validity  of 
every  agreement  that  it  be  the  result  of  a  free  and  bona  fide  exercise 
of  the  will.  Nor  will  a  contract  be  valid  if  obtained  by  misrepresenta- 
tion or  concealment,"  etc. 

He  here  speaks  evidently  of  the  contract  as  between  the  original 
parties  to  it,  or  of  contracts  in  general  as  distinguished  from  negotiable 


Ch.  2)  HOLDER    IN    DUE    COURSE.  435 

notes  and  bills ;  because  he  devotes  another  chapter  espeually  to  a  con- 
sideration of  bills  and  notes,  in  which  he  says,  in  speaking  of  the  right 
of  the  holder  (volume  3,  pp.  79,  80),  that  a  bona  fide  holder  can  re- 
cover upon  such  note,  though  it  came  to  him  from  a  person  who  had 
stolen  or  robbed  it  from  the  true  owner,  provided  he  took  it  innocently 
in  the  course  of  trade,  for  a  valuable  consideration,  and  under  circum- 
stances of  due  caution;  and  he  need  not  account  for  his  possession  of 
it  unless  suspicion  be  raised.  This  doctrine  is  founded  on  the  com- 
mercial policy  of  sustaining  the  credit  and  circulation  of  negotiable 
paper.  Suspicion  must  be  cast  upon  the  title  of  the  holder  by  showing 
that  the  instrument  had  got  into  circulation  by  force  or  fraud,  before 
the  onus  is  cast  upon  the  holder  of  showing  the  consideration  he  gave 
for  it. 

Chitty  says  (Ch.  on  Bills,  72):  "In  general  there  will  be  a  sufficient 
defense  between  the  original  parties  when  the  bill  or  note  was  obtained 
by  duress,  or  by  fraud,  or  by  circumvention,"  etc.  But  he  nowhere 
intimates  that  any  of  these  defenses  would  be  good  against  an  innocent 
indorsee;  but,  on  the  contrary,  he  expressly  says  (page  79):  "The 
circumstance  of  a  bill  or  note  having  been  obtained  without  adequate 
consideration,  or  even  by  duress  or  fraud,  or  misapplied  by  an  agent 
to  his  own  use,  affords  no  defense  where  the  instrument  comes  into 
the  possession  of  a  bona  fide  holder,  for  value,  without  notice,  and 
before  it  is  due." 

So  in  Edwards  on  Bills  and  Promissory  Notes  (page  325)  it  is  said 
that  "between  the  immediate  parties  it  may  be  shown,  by  way  of  de- 
fense, that  a  bill  or  note  was  obtained  by  duress,  or  by  fraud,  or  by  cir- 
cumvention," etc. ;  but  he  nowhere  intimates  that  any  of  those  circum- 
stances would  constitute  an  exception  to  the  rule  which  he  states  (page 
56),  that  the  bona  fide  holder  of  negotiable  paper,  who  has  paid  value 
for  it  before  its  maturity,  or  who  has  relinquished  some  available  se- 
curity or  valuable  rights  on  the  credit  thereof,  is  entitled  to  protection, 
and  may  recover  thereon  notwithstanding  some  of  the  previous  holders 
procured  the  same  by  fraud. 

So  in  Story  on  Promissory  Notes  (section  188)  it  is  said,  under  the 
head  of  want  of  consideration,  that  notes  obtained  under  duress  are 
void;  but  it  is  also  said  (section  191)  that  the  want  or  failure  of  consid- 
eration, or  mere  fraud  between  the  antecedent  parties,  will  be  no  de- 
fense or  bar  to  the  title  of  a  bona  fide  holder  of  the  note,  for  value,  etc 
Now  we  are  not  able  to  see  what  distinction  there  could  be,  in  fact,  be- 
tween a  note  the  signature  to  which  was  obtained  by  fraud  and  one 
where  the  signature  was  obtained  by  duress.  Both  are  equally  void  as 
between  the  original  parties ;  and  there  can  be  no  better  reason  in  the 
one  case  for  holding  the  note  void  in  the  hands  of  a  bona  fide  holder 
than  in  the  other.  "It  is  requisite  to  the  validity  of  every  agreement 
that  it  be  the  result  of  a  free  and  bona  fide  exercise  of  the  will."  2 
Kent,  Com.  453,  ante.     Upon  this  ground,  fraud  in  obtaining  the  sig- 


436  NEGOTIATION.  (Part  2 

nature  would  be  fatal  to  precisely  the  same  extent  as  would  duress ; 
there  would  be  no  "free  and  bona  fide  exercise  of  the  will"  in  the  one 
case  more  than  in  the  other. 

In  Doe  V.  Burnham,  31  N.  H.  431,  the  rule  is  laid  down  very  broadly, 
and  without  those  qualifications  and  exceptions  which  we  have  here- 
tofore seen  must  necessarily  always  accompany  it.  Eastman,  J.,  de- 
livering the  opinion  in  that  case,  says  that,  where  a  note  is  indorsed  in 
the  usual  and  ordinary  course  of  commercial  business,  all  the  authori- 
ties "sustain  the  broad  rule  that  a  bona  fide  holder  for  a  valuable  con- 
sideration, who  becomes  such  before  the  dishonor  of  the  note,  takes  it 
free  from  all  defenses  between  prior  parties."  And  see  cases  there 
cited.  He  also  quotes  Shaw,  C.  J.,  in  ^^'■heeler  v.  Guild,  20  Pick.  515, 
32  Am.  Dec.  231,  as  stating  the  rule  in  Massachusetts  substantially  in 
the  same  way,  and  then  adds :  "We  are  not  aware  that  in  this  state 
there  is  any  exception  to  the- universality  of  the  rule." 

Now  this  rule,  in  the  general  and  broad  terms  in  which  it  is  here  laid 
down,  is  at  once  seen  to  be  incorrect,  because  in  case  of  notes  forged, 
or  signed  by  an  agent  having  no  autliority,  or  by  an  infant,  a  married 
woman,  an  alien  enemy  in  time  of  war,  or  an  insane  person,  exceptions 
to  this  rule  have  been  seen  to  exist  necessarily.  But  if  the  intention 
was  merely  to  state  a  general  rule,  subject  to  such  limitations  and  ex- 
ceptions as  general  rules  are  usually  subject  to,  it  is  undoubtedly  cor- 
rect ;  and  in  that  view  it  is  broad  enough  to  cover  our  present  case,  be- 
cause in  this  case  the  signature  to  the  note  is  genuine,  and  no  forgery. 
No  question  of  agency  or  authority  arises,  nor  does  the  signer  belong 
to  either  of  the  classes  whom  the  law  holds  incompetent  to  contract. 

Suppose  an  individual,  then,  were  about  to  purchase  a  note  payable 
to  bearer,  before  it  was  due,  and  pay  a  fair  equivalent  for  it,  with  a 
view  of  collecting  it  of  the  maker,  and  where  he  is  to  have  no  indorser 
to  rely  upon ;  what  would  be  his  duty  in  order  to  proceed  safely?  First, 
he  must  assure  himself  of  the  genuineness  of  the  signature,  or,  if  it 
purported  to  be  signed  by  an  agent,  he  must  assure  himself  that  the 
agent  was  duly  authorized  to  bind  his  principal  in  that  particular ;  sec- 
ondly, he  must  make  such  inquiries,  which,  ordinarily,  he  mav  easily 
do,  as  to  ascertain  that  the  signer  is  not  an  infant,  a  married  woman, 
an  alien  enemy,  an  insane  person,  etc. — that  he  does  not  belong  to  a 
class  of  persons  who  are  always  presumed  by  the  law  to  be  incompetent 
to  contract ;  and,  thirdly,  he  might  need,  for  his  own  safety,  to  inquire 
whether  the  signer  of  the  note  had  been  trusteed,  or  whether  any  other 
special  statute  could  affect  his  claim  to  it.  When  he  has  satisfied  him- 
self upon  these  points,  if  he  learns  of  no  other  defects  and  the  signer 
is  of  sufficient  ability  to  respond,  he  may  purchase;  and  there  is  gen- 
erally very  little  trouble  in  ascertaining  these  facts.  Thev  are  usually 
matters  of  public  notoriety,  about  which  there  can  be  little  room  for 
mistake. 

But  suppose  that,  after  being  satisfied  upon  all  these  points,  and  hav- 
ing purchased  the  note,  it  should  prove  that  it  was  an  illegal  contract. 


Ch.  2)  HOLDER    IN    DUE    COURSE.  437 

or  was  for  an  illegal  consideration ;  who  shall  suffer,  the  maker,  or  the 
indorsee?  This  is  settled  on  the  best  of  authority.  The  original  par- 
ties stood  upon  equal  ground,  both  being  in  fault,  and  could  neither 
of  them  enforce  the  contract;  yet  neither  shall  be  allowed  to  take  ad- 
vantage of  his  own  wrong  as  against  an  innocent  indorsee. 

And  suppose  it  should  turn  out  that  his  note  was  obtained  of  the 
maker  by  fraud  or  by  duress,  a  case  in  which  the  maker  was  in  no 
fault;  what  rule  shall  be  applied  here?  The  long-established  one,  that 
where  one  of  two  innocent  persons  must  suffer  the  loss  should  fall  upon 
him  who  has  suffered  a  negotiable  security,  with  his  name  attached  to 
it,  to  get  into  circulation,  and  thereby  mislead  the  indorsee.  Such 
rules,  and  such  an  application  of  them,  are  necessary  to  give  security 
to  negotiable  paper. 

The  defendant's  counsel  claim  that  the  same  rule  that  would  hold  the 
maker  of  a  note,  who  signed  it  under  duress,  to  pay  it  to  the  innocent 
holder,  for  value,  would  hold  infants,  and  others  who  are  incompetent 
to  contract,  to  pay  their  notes  when  thus  held;  but  this  is  neither  a  legal 
nor  a  logical  sequence.  The  infant  belongs  to  a  class,  all  of  whom  are 
held  by  law  to  be  incompetent  to  bind  themselves  by  their  contracts. 
In  the  other  case,  the  man  belongs  to  a  class  amply  competent  to  con- 
tract, is  under  no  general  disability  as  the  infant  is,  is  never  to  be  pre- 
sumed to  have  signed  any  note  under  duress,  because  that  is  a  condi- 
tion never  to  be  presumed  in  case  of  a  free  man,  who  may  have  signed 
a  thousand  notes  and  never  have  signed  but  this  one  under  duress.  Is 
suspicion  to  be  cast  upon  all  notes  that  are  known  to  be  properly  signed, 
and  against  men  under  no  disability,,  simply  because  it  is  possible  that 
such  a  note  may  be  obtained  by  duress  or  fraud? 

Take  also  the  case  of  a  slave.  There  the  general  rule  is  that  he  is  in- 
competent to  contract;  and  if  a  man  were  about  to  purchase  a  note, 
and,  upon  inquiry  as  to  who  the  signer  was,  should  learn  that  he  was  a 
slave,  that  would  be  sufficient  notice  to  him  that  the  note  was  void,  be- 
cause all  contracts  made  by  all  slaves  usually  are  so,  because  while  in 
that  condition  they  must  necessarily  be  constantly  under  duress  of 
body,  mind  and  will.  But  when  it  is  ascertained  that  the  signer  is  a 
free  man,  then  the  presumption  is  that  he  is  never  under  duress,  and 
there  are  only  rare  exceptions  to  this  general  rule ;  and  to  say  that  in 
such  exceptional  cases  the  maker  shall  be  allowed  to  stand  upon  such  a 
defense  against  an  innocent  holder  for  value,  taking  it  in  the  ordinary 
course  of  mercantile  business  before  the  maturity  of  the  note,  would  be 
to  overthrow  all  confidence  in  negotiable  paper,  and  entirely  reverse  the 
policy  of  the  whole  system  of  mercantile  law.  The  exception  to  the 
ruling  of  the  court  upon  this  point  must  be  sustained ;  but  we  shall  find 
that  the  numerous  authorities  which  bear  upon  the  next  question  to  be 
considered  have  also  a  direct  bearing  upon  this  point. 

IL  Next  let  us  inquire,  upon  whom  is  the  burden  of  proof,  after 
duress,  or  fraud,  or  illegality  of  consideration  is  proved  ?  Must  the 
defendant  not  only  prove  that  he  had  a  perfect  defense  to  the  note 


438  NEGOTIATION.  (Part  2 

originally,  but  also  show  that  the  indorsee  had  notice  of  the  defect,  or 
that  he  paid  no  consideration  for  it,  or  that  he  is  not  in  some  way  the 
bona  fide  holder  of  the  note  ?  Or  must  the  plaintiff,  after  such  defense 
to  the  original  contract  is  proved,  assume  the  burden  of  proving  that 
he  is  a  bona  fide  holder,  for  a  valuable  consideration,  without  notice 
of  any  defect,  and  that  it  came  seasonably  into  his  hands? 

In  Collins  v.  Martin,  1  B.  &  P.  651,  Eyre,  C.  J.,  says:  "No  want  of 
consideration,  or  other  ground  to  impeach  the  apparent  value  received, 
was  ever  admitted  in  a  case  between  an  acceptor  or  drawer  and  a  third 
person  holding  the  bill  for  value ;  and  the  rule  is  so  strict  that  it  will 
be  presumed  that  he  does  hold  for  value  till  the  contrary  appears.  The 
onus  probandi  lies  on  the  defendant."  This  case  is  cited  approvingly 
in  Doe  v.  Burnham,  31  N.  H.  432,  though  the  question  we  are  now  con- 
sidering was  not  there  raised.  But  the  case  of  Collins  v.  Martin  goes 
further  than  this,  and  holds  that  where  the  defendant  has  first  proved 
that  the  note  or  acceptance  had  been  obtained  by  felony,  by  fraud,  or  by 
duress,  that  so  far  tended  to  throw  suspicion  upon  the  indorsement  as 
to  call  on  the  plaintiff,  the  indorsee,  to  prove  that  he  paid  value  for  it. 

This  is  unquestionably  the  correct  rule,  as  also  stated  by  Parker,  J., 
in  Heath  v.  Sansom,  2  B.  &  Ad.  201,  although  the  majority  of  the 
court  in  that  case  came  to  a  somewhat  different  conclusion,  and  held 
that  "in  all  cases  where,  from  defect  of  consideration,  the  original 
payees  cannot  recover  upon  the  note  or  bill,  the  indorsee,  to  maintain 
an  action  against  the  maker  or  acceptor,  must  prove  consideration  given 
by  himself,  or  a  prior  indorsee."  The  same  doctrine  is  held  in  Brown 
V.  Philpot,  2  M.  &  Rob.  285. 

But  these  decisions  were  soon  overruled,  so  far  as  a  mere  want  or 
failure  of  consideration  was  concerned. 

In  Bailey  v.  Bidwell,  13  M.  &  W.  73,  it  was  held  by  the  Court  of 
Exchequer  that  if,  to  an  action  on  a  bill  or  note,  the  defendant  pleads 
that  it  was  illegal  in  its  inception,  and  that  the  plaintiff  took  it  without 
value,  the  illegality  being  proved,  the  onus  is  cast  upon  the  plaintiff' 
of  proving  that  he  gave  value.  The  reason  of  the  rule  is  there  stated 
by  Parke,  B.,  who  says:  "It  certainly  has  been,  since  the  later  cases, 
the  universal  understanding  that  if  the  note  were  proved  to  have  been 
obtained  by  fraud,  or  affected  by  illegality,  that  afforded  a  presumption 
that  the  person  who  had  been  guilty  of  the  illegality  would  dispose  of 
it,  and  place  it  in  the  hands  of  another  person  to  sue  upon  it,  and  that 
such  proof  casts  upon  the  plaintiff  the  burden  of  showing  that  he  was 
a  bona  fide  indorsee  for  value."  Alderson,  B.,  adds:  "It  appears  to 
me  that,  though  the  defendant  is  bound  to  aver  in  his  plea  both  the  il- 
legality and  want  of  consideration,  yet  if  he  proves  the  illegality,  and 
the  plaintiff  does  not  prove  the  giving  of  the  consideration,  the  plea  is 
maintained." 

And  in  Smith  v.  Braine,  in  the  Queen's  Bench,  3  E.  L.  &  E.  379, 
Campbell,  C.  J.,  says:  "But  since  the  new  rules,  judges  have,  with 
entire  approbation,  directed  juries  that  where  the  bill  was  illegal  in  its 


Ch.  2)  HOLDER    IN    DUE    COURSE.  439 

inception,  or  where  the  immediate  inclorser  to  the  plaintiff  obtained 
possession  of  it  by  fraud,  the  want  of  consideration  as  between  him 
and  the  plaintiff  may  be  presumed." 

In  Duncan  v.  Scott,  1  Camp.  100,  which  was  an  action  by  the  in- 
dorsee against  the  drawer  of  a  bill,  the  defendant  had  given  the  bill 
without  consideration,  and  while  under  duress.  Lord  Ellenborough 
held  that,  upon  these  facts  being  proved  by  the  defendant,  the  plaintiff 
must  prove  that  he  gave  value  for  it  before  he  could  recover,  even 
though  it  was  indorsed  to  him  before  it  became  due. 

Rees  V.  Headfort,  2  Camp.  574,  was  an  action  by  an  indorsee  against 
the  acceptor  of  a  bill.  The  drawer  had  received  no  consideration,  but 
had  been  tricked  out  of  the  bill  by  a  gross  fraud.  Upon  proof  of  these 
facts  by  the  defendant,  Lord  Ellenborough  held  that  it  was  incumbent 
on  the  plaintiff  to  show  some  consideration  paid  for  the  bill;  and,  not 
doing  so,  he  was  nonsuited. 

Bayley,  in  his  work  on  Bills  (page  372),  says;  "In  many  cases  the 
plaintiff  is  compellable  to  prove  that  either  he,  or  some  preceding  par- 
ty, took  the  note  bona  fide,  or  for  value — as  in  case  of  a  bill  or  note 
originally  given  without  consideration,  and  while  the  person  giving  it 
was  under  duress,  or  in  case  of  a  bill  or  note  obtained  by  fraud,  or  in 
case  of  a  delivery  by  a  person  not  entitled  to  make  it,  as  in  the  instance 
of  bills  or  notes  that  have  been  stolen  or  lost." 

In  Mills  v.  Barber,  1  M.  &  W.  425,  Lord  Abinger,  C.  B.,  says: 
"Where  there  is  no  fraud,  nor  any  suspicion  of  fraud,  but  the  simple 
fact  is  that  the  defendant  received  no  consideration  for  his  acceptance, 
the  plaintiff  is  not  called  upon  to  prove  that  he  gave  value  for  the  bill ; 
but  if  the  bill  be  connected  with  some  fraud,  and  a  suspicion  of  fraud 
be  raised  from  its  being  shown  that  something  has  been  done  with  it 
of  an  illegal  nature,  or  that  it  has  been  clandestinely  taken  away,  or 
has  been  lost  or  stolen,  the  holder  will  be  required  to  show  that  he  gave 
value  for  it."  And  (page  432)  "if,  in  an  action  by  an  indorsee  against 
the  acceptor  of  a  bill,  the  ground  of  defense  be  that  the  bill  was  ob- 
tained illegally  from  the  defendant,  and  indorsed  to  the  plaintiff  with- 
out consideration,  the  defendant  will  be  bound  in  his  plea  to  aver  both 
the  illegality  and  the  want  of  consideration ;  and  if,  at  the  trial,  he 
proves  the  illegality,  such  proof  will,  according  to  the  rule  above  stat- 
ed, throw  upon  the  plaintiff  the  onus  of  showing  that  he  gave  consid- 
eration for  the  bill."  The  same  doctrine  is  held  in  Bingham  v.  Stan- 
ley, 2  A.  &  E.  (N.  S.)  117 ;   Berry  v.  Alderman.  24  E.  L.  &  E.  318. 

In  De  La  Chaumette  v.  Bank  of  England,  9  B.  &  C.  208,  where  the 
defendant  had  proved  that  the  bill  was  stolen,  it  was  held  that  it  was 
incumbent  on  the  plaintiff  to  show  that  the  foreign  merchant,  who  as- 
signed it  to  him,  gave  full  value  for  it. 

In  Harvey  v.  Towers,  4  E.  L.  &  E.  551,  6  Exch.  656,  Pollock.  C. 
B.,  says :  "This  is  an  action  on  a  bill  of  exchange,  with  a  plea  of  fraud, 
which,  according  to  the  ordinary  course  of  pleading,  contains  an  alle- 
gation not  merely  of  the  fraud  in  obtaining  the  bill,  but  that  the  plain- 


440  NEGOTIATION.  (Part  2 

tiff  gave  no  consideration  for  it.  In  point  of  law,  that  last  allegation 
was  necessary  to  make  the  plea  a  perfect  answer  to  the  action ;  for 
though  a  bill  of  exchange  may  have  been  originally  concocted  in  fraud, 
or  obtained  by  fraud,  though  it  may  have  been  stolen,  or  a  party  may 
have  been  swindled  out  of  it,  this  is  no  defense  to  an  action  by  the 
holder  unless  he  has  obtained  it  without  giving  value,  and  he  may  sue 
on  it  notwithstanding  such  defect  in  the  title  of  some  one  else."  He 
also  holds  that  proof  of  fraud  alone,  by  the  defendant,  is  a  sufficient 
sustaining  of  this  plea  to  throw  upon  the  plaintiff  the  burden  of  prov- 
ing consideration;  and  where  there  is  evidence  of  fraud  for  a  jury, 
the  judge  should  call  on  the  plaintiff'  for  such  proof,  with  instructions 
to  the  jury  that,  if  they  find  the  fact  of  fraud  proved,  the  plaintiff'  must 
satisfy  them  that  he  gave  consideration  for  the  bill. 

In  accordance  with  the  doctrine  of  these  cases  last  cited  is  Green- 
leaf  on  Evidence  (section  172),  where  it  is  said:  "In  an  action  by  the 
indorsee  against  the  original  party  to  the  bill,  if  it  is  shown  on  the 
part  of  the  defendant  that  the  bill  was  made  under  duress,  or  that  he 
was  defrauded  of  it,  or  if  a  strong  suspicion  of  fraud  be  raised,  the 
plaintiff  will  then  be  required  to  show  under  what  circumstances  and 
for  what  value  he  became  the  holder.  It  is,  however,  only  in  such 
cases  that  this  proof  will  be  demanded  of  the  holder.  It  will  not  be 
required  where  the  defendant  shows  nothing  more  than  a  mere  absence 
or  want  of  consideration  on  his  part."  See  also  Bramah  v.  Roberts, 
1  Bing.  N.  C.  469 ;  Low  v.  Chifney,  1  Bing.  N.  C.  267. 

So  in  2  Phill.  Ev.  (4  C.  &  H.)  8,  it  is  said  that  in  some  cases  the 
plaintiff,  in  an  action  upon  a  bill  of  exchange  or  promissory  note,  must 
prove  that  he  or  some  preceding  party  took  the  bill  or  note  bona  fide, 
and  for  value,  as  where  bills  or  notes  have  been  obtained  by  fraud,  or 
under  duress,  or  have  been  stolen  or  lost.  When  the  plaintiff'  has  es- 
tablished a  prima  facie  case,  it  then  remains. for  the  defendant,  if  he 
can,  to  impeach  his  title ;  and  until  he  has  first  cast  some  suspicion  on 
the  title  by  showing  that  the  note  was  lost,  or  obtained  by  force  or 
fraud,  he  cannot  cast  the  burden  of  proof  upon  the  plaintiff.  See,  also, 
Heyden  v.  Thompson,  1  A.  &  E.  210 ;  1  Saund.  on  PI.  &  Ev.  304,  305 ; 
Ch.'  on  Bills,  79 ;   Bayley  on  Bills,  500. 

And  in  Smith's  Mercantile  Law,  320,  it  is  said  that  the  defenses  of 
duress,  fraud,  etc.,  will  not  prevail  against  a  bona  fide  holder. 

The  same  doctrines  very  generally  prevail  in  this  country,  wherever 
the  subject  has  received  judicial  consideration.  INIunroe  v.  Cooper,  5 
Pick.  (Mass.)  412;  Woodhull  v.  Plolmes,  10  Johns.  (N.  Y.)  231 ;  Val- 
lett  V.  Parker,  6  Wend.  (N.  Y.)  615;  Small  v.  Smith,  1  Denio  (N. 
Y.)  583;  Worcester  County  Bank  v.  D.  &  M.  Bank.  10  Cush.  (Mass.) 
488,  57  Am.  Dec.  120;  Wyer  v.  D.  &  M.  Bank,  11  Cush.  (Mass.)  52, 
59  Am.  Dec.  137 ;  Rockwell  v.  Charles,  2  Hill  (N.  Y.)  499  ;  Bissell  v. 
Morgan,  11  Cush.  (Mass.)  198;  Crosby  v.  Grant,  36  N.  H.  273.  So 
in  Smith  on  Cont.  (3d  Am.  Ed.)  277  (*1S7),  in  a  note  by  Rawle,  it 
is  said  that  in  New  York  it  has  been  held  that,  as  soon  as  the  defend- 


Ch.  2)  HOLDER    IN    DUE    COURSE.  441 

ant  shows  there  has  been  usury  between  the  prior  parties,  he  casts  on 
the  plaintiff  the  burden  of  proving  that  he  is  a  holder  for  value,  as  is 
the  case  in  every  instance  where  fraud,  duress,  or  illegality  is  shown 
between  the  prior  parties. 

These  authorities  would  seem  conclusive  that  the  plaintiff's  exception 
— that  the  evidence  offered  would  have  been  no  defense  unless  it  were 
proved  that  he  was  not  the  bona  fide  holder — must  be  overruled.  When 
the  defendant  had  proved  the  duress,  he  had  made  a  good  defense  as 
against  the  original  party ;  and  because  of  the  legal  presumption  that 
in  such  cases  the  payee,  being  guilty  of  such  illegality,  would  dispose 
of  the  note  and  place  it  in  the  hands  of  some  other  person  to  sue  upon 
it  (Bailey  v.  Bidwell,  supra),  he  had  thereby  cast  a  suspicion  on  the 
plaintiff's  title,  which  threw  the  burden  upon  him  of  showing  affirma- 
tively that  he  was  a  bona  fide  holder  for  value.  Nor  can  we  see  that 
the  fact  that  this  evidence  was  offered  under  the  general  issue  alters 
the  position  of  the  parties  or  the  state  of  the  case. 

These  authorities  also  bear  directly  upon  the  first  point  taken  by 
the  defendant  that  duress  is  a  defense  against  any  holder,  however  in- 
nocent he  may  be,  and  however  valuable  a  consideration  he  may  have 
paid  for  the  note;  and  if  other  authorities  on  this  point  were  needed 
they  are  not  wanting.  In  Powers  v.  Ball,  27  Vt.  662,  Redfield,  C.  J., 
says :  "Illegality,  duress,  fraud,  and  want  or  failure  of  consideration 
are  no  defenses  as  against  a  bona  fide  holder  for  value."  See,  also, 
St.  Albans  Bank  v.  Dillon,  30  Vt.  122,  73  Am.  Dec.  295 ;  Ellicott  v. 
Martin,  6  Md.  509,  61  Am.  Dec.  327 ;  Minell  v.  Reed,  26  Ala.  730  ; 
Norris  v.  Langley,  19  N.  H.  423  ;  Knight  v.  Pugh,  4  Watts  &  S.  (Pa.) 
445,  39  Am.  Dec.  99. 

The  verdict  must  be  set  aside,  and  a  new  trial  granted. °* 


In  re  EUROPEAN  BANK. 

Ex  parte  ORIENTAL  COMMERCIAL  BANK. 

(Court  of  Appeal  in  Chancery,  1870.     L.  R.  5  Cb.  App.  358.) 

This  was  an  appeal  from  an  order  of  Vice  Chancellor  Malins  dis- 
missing a  summons  taken  out  by  the  Oriental  Commercial  Bank  with 
reference  to  certain  bills  drawn  on  and  accepted  by  the  European  Bank, 
which  was  now  in  course  of  winding  up,  but  able  to  pay  its  debts  in 
full.  The  Eastern  Commercial  Bank  were  the  holders  of  the  bills,  but 
the  Oriental  Commercial  Bank  claimed  the  proceeds  on  the  ground 
that  the  bills  were  bought  with  their  moneys  by  one  Demetrio  Pappa, 
that  the  Eastern  Commercial  Bank  had  notice  of  this  through  Deme- 

64  A  note  delivered  by  an  infant  to  the  payee  for  accessaries  is  unenforce- 
able in  the  hands  of  an  indorsee,  and  semble,  in  the  hands  of  the  payee.  In 
re  Soltykoff,  [1891]  1  Q.  B.  413. 


442  NEGOTIATION.  (Part  2 

trio  Pappa,  and  that,  whether  they  had  notice  or  not,  they  could  stand 
in  no  better  position  than  Demetrio  Pappa  would  have  stood  if  he  had 
not  parted  with  the  bills,  because  they  were  overdue  when  he  trans- 
ferred them. 

The  bills  in  question  were  bought  by  Demetrio  Pappa  on  the  21st 
of  March,  1SG7,  for  15s.  4d.  in  the  pound.  They  were  at  that  time 
overdue.  Demetrio  Pappa  had  an  account  with  the  National  Bank  of 
Scotland  in  the  name  of  George  John  Pappa,  a  relation  of  his,  which 
account,  in  his  affidavits,  he  alleged  to  be  his  own.  On  the  19th  of 
March,  1867,  a  sum  of  i2,o94.  6s.  Id.  was  paid  into  this  account,  and 
on  the  21st  of  March  a  sum  of  i2,300.  was  drawn  out  and  applied  in 
the  purchase  of  the  bills  in  question,  along  with  bills  of  the  Oriental 
Commercial  Bank  for  i2,000. 

In  18G6,  after  a  petition,  upon  which  an  order  for  winding  up  the 
Oriental  Commercial  Bank  was  afterwards  made,  had  been  presented, 
D.  Pappa,  who  was  the  manager  of  the  bank,  sent  out  G.  J.  Pappa  to 
Patras,  as  he  alleged,  on  his  private  business,  but,  as  he  admitted,  with 
instructions  also  to  receive  the  debts  due  to  the  bank  and  to  settle  its 
debts.  He  denied  that  the  bills  of  the  European  Bank  were  purchased 
with  moneys  of  the  Oriental  Commercial  Bank  collected  abroad  by  G. 
J.  Pappa,  and  the  Vice  Chancellor,  upon  the  evidence  before  him,  con- 
sidered that,  although  there  was  great  reason  to  suspect  that  D. 
Pappa  had  made  the  purchase  with  assets  of  the  Oriental  Commercial 
Bank,  it  was  not  proved  with  sufficient  distinctness  that  he  had  done 
so,  and  that  the  case  of  the  applicants  therefore  failed. 

On  the  appeal  motion  the  Oriental  Commercial  Bank  adduced  fresh 
evidence  which  proved  most  indisputably  that  the  £2,594.  6s.  Id.  paid 
into  the  account  of  G.  J.  Pappa  on  the  20th  of  March,  1867,  was  made 
up  of  two  sums  of  £2,094.  6s.  Id.  and  £500.,  and  that  the  larger  of 
these  two  sums  arose  from  assets  of  the  Oriental  Commercial  Bank 
which  G.  J.  Pappa  had  collected  abroad,  and  had  handed  over  to  D. 
Pappa  on  his  return. 

The  Eastern  Commercial  Bank  was  a  limited  company,  of  which 
Demetrio  Pappa  was  the  promoter.  It  was  registered  on  the  4th  of 
April,  1867,  under  a  memorandum  of  association  dated  the  2d  of  April, 
and  articles  dated  the  4th  of  April,  in  that  year.  Pappa  was  the  man- 
aging director,  and  until  July,  1867,  he  was  the  only  director.  He  sold 
the  bills  in  question  to  the  Eastern  Commercial  Bank  on  the  6th  of 
April,  1867,  at  16s.  in  the  pound,  and  paid  himself  for  them  by  a  check 
which  he,  as  managing  director,  drew  on  the  funds  of  that  company. 

Mr.  Jackson  and  Mr.  W.  W.  Karslake,  for  the  Oriental  Commer- 
cial Bank,  in  support  of  the  appeal  motion.'^ 

Mr.  Pearson.  Q.  C,  and  Mr.  Locock  Webb,  for  the  Eastern  Com- 
mercial Bank,  were  desired  by  the  court  to  confine  themselves  to  the 
question  as  to  the  bills  being  overdue  when  they  were  purchased. 

6  5  Their  argument  is  omitted. 


Ch.  2)  HOLDER    IN    DUE    COURSE.  443 

No  doubt  the  indorsee  of  an  overdue  bill  takes  it  subject  to  its  eq- 
uities, but  they  must  be  equities  attaching  to  the  bill,  equities  between 
the  holder  and  the  drawer  or  acceptor.  No  other  equity  is  recognized. 
This  is  the  result  of  the  cases  which  are  collected  in  Ex  parte  Swan ; 
and  Charles  v.  Marsden,  1  Taunt.  22-1,  contains  strong  dicta  showing 
that  the  equity  goes  no  further. 

Lord  Justice  Giffard.  Why  is  not  an  equity  between  the  indorser 
and  a  third  party  to  be  enforced? 

The  law,  we  submit,  is  that  it  is  not  to  be  enforced,  nor  is  it  ex- 
pedient that  it  should. 

Mr.  W.  W.  Karslake,  in  reply. 

Sir  G.  M.  Giffard,  L.  J.,  after  stating  the  facts  and  reviewing  the 
evidence,  continued: 

I  have  read  the  evidence  at  some  length  in  consequence  of  the  nature 
of  the  charge,  and  I  do  not  hesitate  to  say  that  it  is  proved  to  demon- 
stration that  the  i2,09-i.  6s.  Id.  was  the  amount  arising  from  the  dis- 
count of  bills  belonging  to  the  Oriental  Commercial  Bank,  and  that 
this,  with  a  sum  of  £500.,  forms  the  sum  which  appears  in  the  trust 
account  under  date  of  the  19th  of  March  as  a  sum  of  £2,594.  6s.  Id., 
and  that  the  sum  of  i2,300.  under  date  the  21st  of  March,  on  the  other 
side  of  the  account,  was  drawn  out  and  applied  in  the  purchase  of  the 
bills  from  Melas  Bros.,  of  which  the  bills  in  question,  amounting  in 
all  to  il,000.,  formed  part,  the  rest  being  bills  for  £2,000.  on  the  Ori- 
ental Commercial  Bank.  To  speak  plainly,  and  in  such  a  case  there 
ought  to  be  plain  speaking,  Demetrio  Pappa  has  sworn  that  which  is 
not  true,  and  has  applied  to  his  own  purposes  the  moneys  arising  from 
the  discount  of  bills,  which  bills,  he  knew,  belonged  to  the  Oriental 
Commercial  Bank.  A  grosser  fraud  there  cannot  be.  Now  at  all 
events  the  facts  have  been  proved,  and  it  remains  to  be  seen  what  the 
law  is  as  applicable  to  these  facts.  The  bills  and  moneys  belonging  to 
the  Oriental  Commercial  Bank  were  not  received  either  by  George  John 
Pappa  or  Demetrio  until  after  the  presentation  of  the  petition  for  wind- 
ing up  that  bank.  Therefore  no  question  of  account  as  between  the 
bank  and  Demetrio  Pappa  arises.  The  £237.  paid  over  by  John  George 
Pappa  to  the  Hquidator  has  nothing  to  do  with  this  matter.  It  is  in 
no  way  concluded  by  any  receipt  given  by  or  settlement  of  accounts 
with  the  official  liquidator;  and  if  the  bills  in  question  were  now  ir 
the  hands  of  Demetrio  Pappa,  beyond  all  question  the  Oriental  Com- 
mercial Bank  could  follow  their  moneys  into  them,  and  assert  a  right 
to  a  proportional  part  of  the  proceeds.  Is,  then,  the  Eastern  Com- 
mercial Bank  in  any  better  position  than  Demetrio  Pappa  would  have 
been?  In  my  opinion  they  were  not  affected  with  notice  through  De- 
metrio Pappa.  He  purchased  the  bills  before  the  Eastern  Commercial 
Bank  was  formed.  He  stood  in  the  relation  of  vendor  to  that  bank, 
and  though  he  was  managing  director  and  something  more,  and  paid 
himself  by  check,  he  is  not  in  the  position  of  a  partner  in  an  ordinary 
firm,  but  of  agent  acting  for  the  bank  as  principal.    He  cannot  be  taken 


444  NEGOTIATION.  (Part  2 

to  have  disclosed  his  own  fraud.  Kennedy  v.  Green,  3  My,  &  K.  699, 
therefore  applies. 

But  the  want  of  notice  is  not  conclusive  on  the  case.  The  bills  were 
overdue  when  the  Eastern  Commercial  Bank  took  them,  there  were 
equities  affecting  the  bills,  and  the  Eastern  Commercial  Bank  has  no 
better  title,  either  legal  or  equitable,  than  Demetrio  Pappa  had.  The 
law  on  this  subject  cannot  be  better  stated  than  is  done  by  Vice  Chan- 
cellor Malins  in  his  judgment  in  Ex  parte  Swan,  Law  Rep.  6  Eq.  359, 
360. 

In  this  case  there  is  an  equity  attaching  directly  to  the  bills.  The  re- 
sult therefore  is  that  the  Oriental  Commercial  Bank  can  follow  their 
moneys  into  the  bills  in  the  possession  of  the  Eastern  Commercial 
Bank,  precisely  in  the  same  way  as  though  Demetrio  Pappa  had  not 
parted  with  them.  I  have  not  calculated  the  exact  amount  which  was 
applied  in  payment  of  these  bills,  but  as  the  amount  applied  in  pay- 
ment of  them  and  the  other  bills  was  £2,300.,  and  the  £2,300.  was 
drawn  against  a  sum  of  £2,594.  6s.  Id.,  which  was  made  up  of  a  sum 
of  £2,09-4.  6s.  Id.  belonging  to  the  Oriental  Commercial  Bank  and  of 
£500.  belonging  to  Demetrio  Pappa,  and  it  must  be  taken,  according  to 
the  case  of  Pennell  v.  Deffell,  4  D.,  M.  &  G.  372,  that  these  two  sums 
contributed  ratably,  it  will  follow  that  the  Oriental  Commercial  Bank 
is  entitled  to  so  much  of  the  proceeds  of  the  bills  as  is  represented  by 
their  proportion  of  the  purchase  money,  and  the  Eastern  Commercial 
Bank  to  so  much  as  is  represented  by  the  £500.  The  proportion  will 
be  somewhere  about  four-fifths  and  a  fraction,  and  a  fraction  less  than 
one-fifth.  There  will  be  a  declaration  to  this  effect  and  payment  ac- 
cordingly. The  amounts  can  be  calculated.  As  regards  costs,  the 
European  Bank  are  in  the  position  of  plaintififs  in  an  interpleader  suit, 
and  must  have  them  both  here  and  below  out  of  the  fund.  The  other 
parties  must  bear  their  own  costs.  The  Oriental  Commercial  Bank 
have  failed  in  part,  that  is  as  regards  the  £500.,  and  they  completed 
their  case  by  evidence  which  was  not  before  the  Vice  Chancellor.  The 
practice  of  the  court  admits  of  the  introduction  of  new  evidence  on 
an  appeal  motion ;  but  where  there  is  an  incomplete  case  in  the  court 
below,  and  a  complete  one  only  on  the  appeal,  I  shall  as  a  general  rule 
adopt  the  course  of  refusing  to  give  any  costs. 

The  order  of  the  Vice  Chancellor  will  be  discharged,  and  the  order 
I  have  suggested  substituted  for  it.  If  the  additional  evidence  had 
been  before  him,  I  gather  from  his  judgment  that  his  order  would 
have  been  the  same  as  that  which  I  now  make.^' 

08  See  Alcock  v.  Smith,  [1892]  1  Ch.  238. 


Ch.  2)  HOLDER    IN    DUE    COUKSE.  445 

HILL  V.  SHIELDS. 

(Supreme  Court  of  North  Carolina,  1879.     81  N.  C.  250,  31  Am.  Rep.  499.) 

The  facts  appear  in  the  opinion.  There  was  a  verdict  and  judgment 
for  plaintiff,  and  defendant  appeals. ^^ 

DiiviyARD,  J.  From  the  case  of  appeal  sent  up  to  this  court  the  case 
is  that  defendant  was  payee  in  a  promissory  note  executed  to  him  by 
Edward  Anderson,  payable  at  12  months  for  a  large  sum  of  money 
and  secured  by  a  mortgage  on  property,  and  on  the  23d  day  of  Janu- 
ary, 1875,  after  its  dishonor,  he  transferred  the  same  by  a  blank  in- 
dorsement thereon  to  the  Mercantile  Bank  of  Norfolk,  which  carried 
with  it  the  mortgage  as  an  incident,  and  the  bank  afterwards  trans- 
ferred the  same  to  the  present  plaintiff  by  delivery  for  full  value.  Aft- 
er receiving  several  payments  on  the  note  and  realizing  all  the  proceeds 
of  the  property  conveyed  in  the  mortgage,  there  still  remained  a  bal- 
ance unpaid  on  the  note  and  for  that  this  action  was  brought. 

On  the  trial  in  the  court  below  the  plaintiff  tendered  the  issue :  "Was 
the  plaintiff  a  bona  fide  purchaser  of  said  note  for  full  value  and  with- 
out notice?"  Defendant  admitted  the  affirmative  of  that  issue  and 
tendered  on  his  own  behalf  the  following  issues : 

1.  Did  defendant  and  the  bank,  when  the  former  indorsed  the  note 
in  blank,  agree  that  defendant  was  not  to  be  held  responsible  on  his 
indorsement  ? 

2.  Did  any  consideration  pass  from  the  bank  to  defendant  for  his 
indorsement  ? 

The  plaintiff  objected  to  said  issues  upon  the  ground  that  an  af- 
firmative response  thereto  could  in  no  way  affect  the  liability  of  the 
defendant  to  the  plaintiff,  who  was  admitted  to  be  a  remote  indorsee 
for  full  value  and  without  notice;  and  his  honor,  being  of  opinion 
with  the  plaintiff  on  the  objection,  refused  to  submit  the  said  issues, 
and  thereupon  pronounced  judgment,  upon  said  admission  of  defend- 
ant and  other  facts  not  denied  in  the  pleadings,  for  the  plaintiff  for  the 
unpaid  balance  of  his  debt  from  which  judgment  the  appeal  is  taken. 

The  question  presented  by  the  appeal  for  our  determination  is  :  Does 
the  plaintiff,  a  remote  indorsee  of  defendant's  note  put  into  circulation 
past  due,  hold  the  same  subject  to  the  special  agreement  of  defend- 
ant with  the  Mercantile  Bank,  his  immediate  indorsee,  not  to  hold  him 
responsible  on  his  indorsement?  the  plaintiff  being  a  purchaser  for 
full  value,  and  without  notice  of  the  alleged  special  agreement. 

We  concur  in  the  opinion  of  his  honor  that  the  plaintiff  held  the 
legal  title  to  the  note,  unaffected  by  the  special  agreement  between  the 
defendant  and  the  bank,  supposing  such  agreement  to  have  been  made. 

A  promissory  note,  by  the  statute  of  3  &  4  Anne  in  England  and  by 
statute  in  this  state,  is  made  negotiable  as  inland  bills  of  exchange, 

B7  The  arguments  of  counsel  are  omitted. 


446  NEGOTIATION.  (Part  2 

and  the  legal  title  may  be  passed  by  indorsement  thereon  in  full  or  in 
blank,  absolute  or  restricted,  in  honor  or  dishonor,  with  incidents  how- 
ever to  the  holder  and  to  the  parties  to  the  note  raised  by  the  fact  of 
its  being  made  before  or  after  its  maturity.  If  acquired  before  due, 
by  the  law  merchant,  the  holder  takes  the  title  clear  of  all  objections; 
but  if  after,  he  is  put  on  inquiry  and  is  held  to  take  subject  to  all  eq- 
uities and  legal  defenses  of  the  maker  at  the  date  of  the  transfer  or 
before  notice  thereof  against  the  payee  under  the  English  law,  but 
against  the  payee  and  all  intermediate  holders  under  our  Code  as  de- 
cided in  the  case  of  Harris  v.  Burwell,  65  N.  C.  584. 

This  liability  of  the  holder  of  overdue  paper  to  equities  and  legal 
exceptions  extends  only  to  those  that  the  maker  has,  as  explained 
above,  but  does  not  apply  as  between  the  holder  and  others  taking  be- 
fore him  by  indorsement,  except  between  the  holder  and  his  immediate 
indorser.  There  is  no  adverse  presumption  from  the  paper  being  in 
dishonor  as  between  successive  indorsers,  as  there  is  between  the  hold- 
er and  the  maker.  Each  indorser,  including  the  payee,  down  the  line, 
has  and  passes  the  legal  title,  and  his  indorsement  in  legal  import  is 
a  contract  with  his  indorsee,  and  all  subsequent  holders  by  indorse- 
ment, that  the  maker  will  pay  the  note,  or  on  notice  he  will.  Parker 
V.  Stallings,  Phill.  L.  590;  National  Bank  of  Washington  v.  Texas,  20 
Wall.  89,"  22  L.  Ed.  295  (Swayne's  opinion). 

Here  the  defendant  put  the  paper  overdue  afloat  with  his  name  mere- 
ly written  on  the  back,  and  that  in  legal  effect  passed  the  title  to  the 
Mercantile  Bank  and  gave  it  the  unqualified  power  of  disposing  of 
the  same,  and  imported  a  promise  to  the  bank,  and  not  only  to  it,  but 
to  the  plaintiff,  a  subsequent  indorsee,  that  the  maker  would  pay  the 
note,  and  if  he  did  not  that  he  (the  defendant)  would.  2  Parsons  on 
Bills,  23.  The  indorsement  being  in  blank,  and  the  contract  implied 
bv  law  with  his  indorsee  and  subsequent  holders  giving  such  unquali- 
fied power  as  we  have  seen,  it  has  been  much  debated  and  variously 
decided  as  to  the  competency  of  the  indorser  by  parol  proof  to  rebut 
the  implication  of  the  law  and  to  annex  a  qualification  when  none  is 
expressed. 

It  is  settled  in  this  state,  however,  that  parol  testimony  may  be  ad- 
duced under  a  blank  indorsement  to  annex  a  qualification  or  special 
contract  as  between  the  immediate  parties.  Davis  v.  Morgan,  64  N.  C. 
570;  Mendenhall  v.  Davis,  72  N.  C.  150.  But  between  indorser  in 
blank  and  remote  parties  without  notice,  the  weight  of  authority  is 
that  parol  proof  is  inadmissible  and  the  contract  implied  by  law  stands 
absolute.  2  Parsons,  23;  Hill  v.  Ely,  5  Serg.  &  R.  363,' 9  Am.  Dec. 
376 ;   1  Daniel  on  Neg.  Inst.  §§  699  and  719. 

In  treating  of  this  subject,  Daniel,  in  his  work  on  Negotiable  Instru- 
ments, says  a  parol  agreement  in  the  indorsement  of  a  note  to  the  ef- 
fect that  the  transfer  should  be  without  recourse  on  the  indorser  can- 
not be  interposed  as  a  defense  against  a  subsequent  bona  fide  holder 
without  notice ;  nor  would  the  case  be  varied  by  the  fact  that  the  trans- 


Oh.  2)  HOLDEli    IN    DUE    COUKSE.  447 

fer  was  to  such  a  holder  by  delivery  and  that  he  declared  on  the  prior 
indorsement  as  though  made  to  him.     1  Daniel,  Neg.  Inst.  §  G99. 

It  appears  in  the  case  that  the  plaintiff  purchased  the  notes  of  the 
Mercantile  Bank,  and  it  is  admitted  by  defendant  it  was  for  full  value 
and  without  notice  of  the  special  agreement  between  him  and  the  bank 
as  to  his  alleged  nonresponsibility ;  and  the  defendant  having  by  this 
act  put  it  into  the  power  of  his  immediate  indorsee  to  circulate  the 
paper  to  the  plaintiff'  upon  the  faith  of  an  absolute  responsibility  on 
his  part  as  imported  by  his  indorsement,  ought  not  to  be  allowed,  in 
our  opinion,  by  parol  to  vary  the  legal  eff'ect  of  his  indorsement  as 
against  this  plaintiff.  To  this  extent  the  principle  decided  in  Parker 
V.  Stallings,  supra,  goes.  There  the  payee  indorsed  to  his  attorney 
for  collection  merely,  but  not  so  expressed  in  the  terms  of  the  indorse- 
ment, and  the  attorney  indorsed  to  a  stranger  for  value  and  without 
notice  of  the  special  purpose  of  the  indorsement,  and  the  indorser 
sought  to  escape  liability  to  the  holder  by  proof  of  the  circumstances 
of  the  indorsement,  and  the  court  in  the  course  of  their  opinion  say : 
The  payor,  "who  puts  a  note  in  circulation,  ought  no  more  to  be  pro- 
tected from  the  claim  of  a  subsequent  bona  fide  purchaser  for  value 
than  would  be  the  indorser  of  a  bill  of  exchange  not  yet  due  as  against 
an  innocent  holder  for  value."  And  they  further  say :  Promissory 
notes  overdue  being  by  law  assignable,  "the  unchecked  circulation  of 
them  must  be  upheld  by  the  same  principles  as  are  applied  to  bills  of 
exchange." 

It  seems  to  us,  therefore,  that  the  defendant,  having  indorsed  the 
note  in  blank,  and  thereby  put  it  into  the  power  of  his  indorsee  to  im- 
pose on  the  plaintiff  by  relying  on  the  legal  import  of  the  indorsement, 
ought  not  to  be  allowed  as  against  the  plaintiff,  a  purchaser  for  value 
and  without  notice,  to  make  proof  of  the  alleged  special  agreement, 
and  in  that  aspect  of  the  case  it  was  immaterial  to  have  any  response 
by  the  jury  to  the  issues  tendered  by  the  defendant. 

No  error.^* 


GEO.  ALEXANDER  &  CO.  v.  HAZELRIGG. 

(Court  of  Appeals  of  Kentucky,  1906.    123  Ky.  677,  97  S.  W.  3."3.) 

This  action  was  instituted  by  appellant,  doing  business  as  Geo.  Alex- 
ander &  Co.,  against  the  appellee,  upon  the  following  promissory  note : 
"$1,592.90.  Mt.  Sterling,  Ky.,  Sept.  14th,  1904.  Sixty  days  after 
date,  we  jointly  and  severally  promise  to  pay  to  Desha  Lucas,  or  order, 
fifteen  hundred  and  ninety-two  and  ^°/ioo  dollars,  negotiable  and  pay- 
able at  the  Montgomery  National  Bank,  Mt.  Sterling,  Ky.,  value  re- 
ceived, with  interest  at  6  per  cent,  per  annum.     [Signed]   John  W. 

88  To  the  same  effect,  see  Crosby  v.  Tanner,  40  Iowa,  13G  (1S74) ;  niberni- 
an  Bank  v.  Everman,  52  Miss.  500  (187(1) ;  Etberidue  v.  Gallaghei-,  55  Miss. 
458  (1877):    Reardan  v.  Cockrell,  54  Wash.  400,   103  Pac.  457  (1909). 


448  NEGOTIATION.  (Part  2 

Hazelrigg."  From  a  judgment  in  favor  of  defendant,  plaintiff  ap- 
peals.'*® 

NuNN,  J.  The  real  question  to  be  determined  is  whether  a  negotia- 
ble note  executed  for  money  lost  on  a  bet  or  wager  can  be  successfully- 
defended,  when  owned  and  held  by  an  innocent  purchaser  for  value 
without  notice  of  the  infirmity  or  illegal  consideration  of  the  note.  As 
we  understand  the  appellant's  petition,  he  concedes  that  prior  to  the 
passage  and  the  taking  effect  of  the  negotiable  instrument  act,  referred 
to,  such  a  note  could  be  successfully  defended  in  the  hands  of  an  inno- 
cent purchaser ;  but  since  that  act  took  effect  he  contends  that  all  laws 
inconsistent  with  that  act  stood  repealed.  He  claims  that  under  sec- 
tion 57  the  question  of  consideration  cannot  be  inquired  into  as  against 
the  holder  in  due  course.  He  takes  the  paper  free  from  defenses. 
And  in  support  of  this  position  we  are  referred  to  the  case  of  Wirt 
V.  Stubblefield,  17  App.  D.  C.  283.  In  that  case  it  was  held  that  the 
section,  the  same  as  section  57  referred  to  above,  changed  the  law 
of  the  District  of  Columbia  as  to  a  note  given  for  a  gambling  debt  in 
the  hands  of  a  holder  in  due  course ;  the  court  saying :  "We  know, 
moreover,  that  the  great  and  leading  object  of  the  act,  not  only  with 
Congress,  but  with  the  larger  number  of  the  principal  states  of  the 
Union  that  have  adopted  it,  has  been  to  establish  a  uniform  system  of 
law  to  govern  negotiable  instruments  wherever  they  might  circulate 
or  be  negotiated.  It  was  not  only  uniformity  of  rules  and  principles 
that  was  designed,  but  to  embody  in  a  codified  form,  as  fully  as  pos- 
sible, all  the  law  upon  the  subject,  to  avoid  conflict  of  decisions,  and  the 
effect  of  mere  local  laws  and  usages  that  have  hitherto  prevailed.  The 
great  object  sought  to  be  accomplished  by  the  enactment  of  the  statute 
is  to  free  the  negotiable  instrument  as  far  as  possible  from  all  latent 
local  infirmities  that  would  otherwise  inhere  in  it  to  the  prejudice  and 
disappointment  of  innocent  holders  as  against  all  the  parties  to  the  in- 
strument professedly  bound  thereby.  This  clearly  could  not  be  effected 
so  long  as  the  instrument  was  rendered  absolutely  null  and  void  by 
local  statute." 

It  has  been  the  policy  of  this  state  to  suppress  gaming,  and  the  stat- 
utes making  gaming  contracts  void  are  founded  upon  what  the  Legis- 
lature has  for  many  years  deemed  to  be  sound  public  policy.  It  is 
inconceivable  that  the  General  Assembly,  in  the  passage  of  the  act  of 
1904  for  the  protection  of  innocent  holders  of  negotiable  instruments, 
intended  to  or  did  repeal  section  1955,  Ky.  St.  1903,  which  declares  all 
gaming  contracts  void.  In  our  opinion,  the  disappointment  now  and 
then  of  an  innocent  holder  of  a  negotiable  instrument  would  not  be  as 
hurtful  and  injurious  to  the  best  interests  of  the  state  as  the  removal  of 
the  ban  from  gaming  contracts.     Mr.  Daniel,  in  his  work  on  Negotiable 


5  9  The  statement  of  the  case  is  taken  from  the  opinioQ  of  the  court.    Part  of 
the  opinion  is  omitted. 


Ch.  2)  HOLDER    IN    DUE    COURSE.  449 

Instruments  (section  197),  says:  "The  bona  fide  holder  for  value, 
who  has  received  the  paper  in  the  usual  course  of  business,  is  unaf- 
fected by  the  fact  that  it  originated  in  an  illegal  consideration,  without 
any  distinction  between  cases  of  illegality  founded  in  moral  crime  or 
turpitude,  which  are  termed  mala  in  se,  and  those  founded  in  positive 
statutory  prohibition,  which  are  termed  mala  prohibita.  The  law  ex- 
tends this  peculiar  protection  to  negotiable  instruments,  because  it 
would  seriously  embarrass  mercantile  transactions  to  expose  the  trader 
to  the  consequences  of  having  a  bill  or  note  passed  to  him  impeached 
for  some  covert  defect.  There  is,  however,  one  exception  to  this  rule 
— that  when  a  statute,  expressly  or  by  necessary  implication,  declares 
the  instrument  absolutely  void,  it  gathers  no  vitality  by  its  circulation 
in  respect  to  the  parties  executing  it." 

In  the  case  of  Sondheim  v.  Gilbert,  117  Ind.  71,  18  N.  E.  687,  5  L. 
R.  A.  432,  reported  in  10  Am.  St.  Rep.,  at  page  23,  the  court  said :  "In 
order,  therefore,  to  uphold  a  judgment  which  invalidates  commercial 
paper  in  the  hands  of  innocent  holders,  such  as  plaintiffs  are  conceded 
to  be,  it  is  essential  that  a  statute  should  be  shown  governing  the  case, 
which  in  direct  terms  declares  that  transactions  such  as  those  here  in- 
volved are  unlawful,  and  that  notes  given  under  circumstances  ex- 
hibited by  the  facts  in  this  case  are  absolutely  void.  The  principle  may 
be  considered  as  well  established  that  when  a  statute  in  express  terms 
pronounces  contracts,  bills,  securities,  and  the  like,  resulting  from  or 
growing  out  of  wagering  or  gambling  transactions,  which  are  pro- 
hibited by  statute,  absolutely  void,  no  recovery  can  be  had  thereon ;  and 
the  doctrine  that  transactions  which  a  statute  in  direct  terms  declares 
to  be  unlawful  cannot  acquire  validity  by  the  transfer  of  commercial 
paper  based  thereon,  which  is  also  under  direct  legislative  denunciation, 
is  fully  supported  by  authorities."  And  the  authorities  are  referred  to, 
and  the  court  continues :  "In  such  a  case,  the  note  will  be  declared 
void  in  the  hands  of  an  innocent  holder." 

In  the  case  of  Bohon's  Assignees  v.  Brown,  etc.,  101  Ky.  355,  41  S. 
W.  275,  38  T.  R.  A.  503,  72  Am.  St.  Rep.  420,  the  court  said :  "In  the 
case  of  Cochran  v.  German  Insurance  Bank,  9  Ky.  Law  Rep.  196,  the 
superior  court  held  that  'a  bill  or  note  based  upon  a  gambling  consider- 
ation is  absolutely  void,  and  the  drawer  or  maker  is  not  bound  to  even 
an  innocent  holder.'  And  in  the  case  of  Farmers'  &  Drovers'  Bank  of 
Louisville  v.  Unser,  13  Ky.  Law  Rep.  9G6,  the  court  says:  'The  whole 
current  of  authority  is  that  the  obligor  may  insist  upon  the  illegality  of 
the  contract  or  consideration,  notwithstanding  the  note  is  in  the  hands 
of  an  innocent  holder  for  value,  in  all  those  cases  in  which  he  can  point 
to  an  express  declaration  of  the  Legislature  that  such  an  illegality 
makes  the  contract  void.'  " 

For  these  reasons,  the  judgment  of  the  lower  court  is  affirmed.'** 

60  Accord:  Lawson  v.  Bank,  102  S.  W.  324,  31  Ky.  Law  Rep.  318  (1907), 
semble,  statutory  defense ;    McAfee  v.  Bank,  104  S.  W.  287,  31  Ky.  Law  Repv 

Sm.&  M.B.&  N.— 29 


450  NEGOTIATION.  (Part  2 

MARLING  V.  JONES  et  al. 
(Supmne  Court  of  Wisconsin,  1909.    13S  Wis.  82,  119  N.  W.  931.) 

Appeal  from  a  jiulgiiient  dismissing  plaintiff's  complaint.  The  ac- 
tion was  against  Jones  as  maker  of  a  note,  which  he  had  made  for  the 
accommodation  of  Herman.  After  maturity  Herman  negotiated  the 
note  to  the  plaintiff,  who  paid  value  for  it.'^ 

Timlin*.).  ♦  *  ♦  \Vas  the  action  properly  dismissed  as  to  Jones? 
No  consideration  moving  to  the  accommodation  maker  is  necessary  to 
uphold  an  accommodation  note.  The  very  name  of  the  paper  suggests 
this.  The  consideration  in  such  case  which  supports  the  promise  of 
the  accommodation  maker  is  that  parted  with  by  the  person  taking  the 
uT'tnmodation  note  and  received  by  the  person  accommodated.  Nor 
!n  It  any  defense  by  the  maker  of  an  accommodation  note  that  tlie  taker 
other  than  the  person  accommodated,  whether  indorsee  or  transferee 
for  value,  knew  before  and  when  he  took  the  note  that  the  accommo- 
dation maker  received  no  consideration.  This  would  be  merely  show- 
ing that  such  taker,  indorsee,  or  transferee  knew  that  it  was  an  accom- 
niixlation  note.  H  this  were  sufficient  to  defeat  the  note,  there  could 
be  no  such  thing  as  accommodation  paper,  except  in  cases  of  ignorance, 
of  this  fact  on  the  part  of  the  taker,  indorsee,  or  transferee,  and  this 
would  be  contrary  to  common  experience,  and  avoid  many  of  the  daily 
transactions  in  banking  and  other  branches  of  business.  Section 
IGTr) — 55,  vol.  3,  Sanborn's  St.  Supp.  1^06.  But  the  accommodation 
note  in  question  was  transferred  by  the  party  accommodated,  namely, 
the  payee  therein,  after  it  became  due. 

Does  this  circumstance  permit  the  accommodation  maker  to  avoid  the 
note  on  the  ground  that  he  received  no  consideration?  If  the  effect  of 
a  transfer,  after  due,  is  merely  to  leave  the  transferee  subject  to  notice 
or  knowledge  of  the  true  circumstances  attending  the  execution  of  the 
note  in  question,  and  for  this  reason  subject  him  to  defenses,  then,  as 
actual  knowledge  that  the  note  was  accommodation  paper  would  be  no 
defense  by  the  accommodation  maker  as  against  the  transferee  for 
value  from  the  party  accommodated,  it  would  seem  that  it  could  make 
no  difference  in  the  liability  of  the  accommodation  maker  upon  this 

803  (1907).  statiitory  defense;    Stlckland  v.   Henry.  66  Ann    Div    23    73   N 
\.  Supp.  12  (HXJl).  usury.  ,    .c,   x,. 

i«?^   v*^;  .'I'.^i^""'*^  op\TiloTi  of  Cullen,  C.  J.,  in   Sclilesinger  v.  Gilhooly, 
ilw  >.  Y.  1  (1!»07),  usury. 

Contra:    Wirt  v.  StubModold.  17  App.  D.  C.  2S3  (1900),  wajrer  •    Arnd  v    Sio- 

V  r  Vm      ,"'•  ^-    ^^'"'-  "rr-  ^•*^-  ^^^  -'^'-  ^-  ^"I^P-  683  (1909).  usury; 

V.  Gllhooly.  suprn.  spinhle.  usury;    Schlesinjier  v    Kellv    114  Ann 


Ch.  2)  HOLDER    IN    DUB    COURSE.  451 

ground  whether  the  note  was  transferred  before  or  after  due.  Aside 
from  this  imputed  notice  or  knowledge,  or  actual  notice  or  knowledge, 
it  is  not  true  that  the  taker  for  value  from  the  party  accommodated 
stands  in  the  shoes  of  the  latter.  The  difference  between  them  is  that 
one  has  parted  with  value  for  the  note  and  the  other  has  not.  In 
neither  case  has  the  maker  received  a  consideration  moving  to  him. 
So  that  between  the  party  accommodated  and  the  accommodation 
maker  there  is  no  consideration  parted  with  or  received  by  either,  while 
between  the  transferee  for  value  and  the  accommodation  maker  there 
is  a  consideration  moving  from  the  former  at  the  instance  of  the  latter 
sufficient  to  support  the  contract.  There  is  considerable  conflict  among 
the  decisions  on  this  point,  and  those  text-writers  who  profess  to  have 
made  a  thorough  examination  of  the  cases  seem  to  incline  to  the  belief 
that  the  weight  of  authority  upholds  the  view  that  the  transferee  of 
accommodation  paper  after  due  may  enforce  the  same  against  the  ac- 
commodation maker.  Joyce,  Defenses  to  Com.  Paper,  §  282  (A.  D. 
1907);  1  Dan.  Neg.  Inst.  (5th  Ed.)  §  726  (A.  D.  1903);  2  Randolph, 
Com.  Paper  (2d  Ed.)  §  677  (A.  D.  1899);  Story,  Prom.  Notes  (7th 
Ed.)  §  194  (A.  D.  1878);  2  Parsons,  Notes  and  Bills,  p.  29  (A.  D. 
1865) ;  Mersick  v.  Alderman,  77  Conn.  634,  60  Atl.  109 ;  Black  v.  Tar- 
bell,  89  Wis.  390,  61  N.  W.  1106;  1  Am.  &  Eng.  Ency.  Law  (2d 
Ed.)  364. 

The  uniform  Negotiable  Instrument  Law  (Sanborn's  St.  Supp.  1906, 
§§  1675  to  1684 — 7)  enacted  by  the  Legislature  of  this  state,  and  in  like 
manner  adopted  by  34  states  of  the  Union,  and  by  Congress  for  the 
District  of  Columbia,  in  the  effort  to  bring  about  more  uniformity  of 
decision  regarding  these  instruments  of  commerce,  appears  to  distin- 
guish between  a  holder  for  value  and  a  holder  in  due  course.  Brannan, 
Neg.  Inst.  Law  (A.  D.  1908);  Bunker,  Neg.  Inst.  Law  (A.  D.  1905). 
Section  1675 — 55,  Sanborn's  St.  Supp.  1906,  defines  who  is  an  accom- 
modation party,  and  provides  that  such  party  is  liable  on  an  instrument 
to  a  holder  for  value,  notwithstanding  such  holder  at  the  time  of  taking 
the  instrument  knew  him  to  be  only  an  accommodation  party.  Section 
1675,  Sanborn's  St.  Supp.  1906,  defines  "holder"  to  mean  the  payee  or 
indorsee  of  a  bill  or  note  who  is  in  possession  of  it,  or  the  bearer 
thereof,  and  defines  "value"  to  mean  a  valuable  consideration.  On  the 
other  hand,  a  holder  in  due  course  is  defined  in  section  1676 — 22,  San- 
born's St.  Supp.  1906,  to  be  one  who  has  taken  the  instrument  under 
the  following  conditions:  (1)  That  it  is  complete  and  regular  upon 
its  face;  (2)  that  he  became  the  holder  before  it  was  overdue,  and 
without  notice  that  it  had  been  previously  dishonored,  if  such  was  the 
fact;  (3)  that  he  took  it  in  good  faith  and  for  value;  (4)  that  at  the 
time  it  was  negotiated  to  him  he  had  no  notice  of  any  infirmity  in  the 
instrument  or  defect  in  the  title  of  the  person  negotiating  it;  (5)  that 
he  took  it  in  the  usual  course  of  business. 

In  the  hands  of  a  holder  otherwise  than  in  due  course  such  note  is 
subject  to  the  same  defenses  as  if  the  notes  were  not  negotiable.     Sec- 


452  NEGOTIATION.  (Part  2 

tion  1676— ?8.  Sanborn's  St.  Supp.  1906.  A  negotiable  instrument  is 
discJ;  the  payment  in  due  course  by  the  party  accommodated. 

It  is  I.  irgcd  by  payment  by  a  party  secondarily  liable  thereon, 

but  remits  such  party  to  his  rights  against  him  primarily  liable  (section 
1679—2.  SanlKjm's  St.  Supp.  1906),  except  where  it  is  made  for  accom- 
nuxlation  and  paid  by  the  party  accommodated  (Id.).  On  the  other 
hand,  there  are  the  cases  of  Chester  v.  Dorr,  41  N.  Y.  279,  Peale  v. 
Addicks,  174  Pa.  513,  34  Atl.  201,  Bacon  v.  Harris,  15  R.  I.  599,  10  Atl. 
647,  Battle  v.  VVeems,  44  Ala.  105,  and  Simons  v.  Morris,  53  Mich.  155, 
18  N.  W.  625.  See,  however,  in  Alabama  the  later  case  of  Connerly  v. 
Planters*  &  M.  Ins.  Co.,  66  Ala.  432 ;  in  Michigan  the  later  case  of 
Warder  B.  &  G.  Co.  v.  Gibbs,  92  Mich.  29,  52  N.  W.  73. 

No  doubt  there  exists  a  class  of  defenses  in  favor  of  the  accommo- 
dation maker  of  negotiable  paper  which  may  not  be  urged  in  cases 
where  the  note  is  fair  on  its  face  and  negotiated  in  due  course  before 
due  to  a  purchaser  for  value,  without  notice  or  knowledge  of  any  in- 
firmity, but  which  might  be  urged  in  favor  of  the  accommodation 
maker  if  the  note  were  overdue  when  negotiated.  But  the  fact  that 
the  accommodation  maker  received  no  consideration  is  not  one  of  these 
defenses,  so  long  as  the  note  was  negotiated  by  his  express  or  implied 
authority.  The  fact  is  here  established  that  this  note  was  in  its  incep- 
l\«n  accommodation  paper.  Jones  made  to  Herman  no  express  re- 
striction upon  its  use  for  that  purpose.  We  do  not  overlook  the  tes- 
timony of  Brand  with  reference  to  conversations  between  him  and  Her- 
man not  in  behalf  of  Jones,  which  the  court  below  from  its  findings 
must  have  rejected  as  incredible.  We  approve  this  rejection.  The 
testimony  is  overborne  by  the  circumstantial  evidence.  It  is  a  question 
upon  which  the  precedents  are  at  some  variance  whether  or  not  the 
agency  of  the  party  accommodated  to  use  the  accommodation  paper  to 
raise  money  thereon  (no  express  agreement  appearing)  expires  with 
the  maturity  of  the  paper.  The  greater  number  of  courts  seem  to 
favor  the  view  that  the  agency  to  negotiate  an  accommodation  paper 
and  raise  money  thereon  is  not  so  limited.     See  citations  supra. 

The  courts  of  this  state  are  not  yet  committed  upon  the  question 
presented,  and  it  seems  more  in  harmony  with  the  uniform  negotiable 
instalment  law.  and  with  the  weight  of  judicial  authority,  to  hold,  as 
we  do.  that  the  mere  fact  that  the  accommodation  note  was  transferred 
by  the  party  accommodated  after  due  to  a  holder  for  value  does  not 
permit  the  accommodation  maker  to  defeat  recovery  at  the  suit  of  the 
holder  for  value  merely  upon  the  ground  that  the  note  was  an  accom- 
modation note,  and  without  consideration  moving  to  the  accommodation 
maker.  This  necessitates  a  modification  of  the  judgment  of  the  court 
below  so  as  to  permit  the  appellant  to  take  judginent  against  the  ac- 
commodation maker.  Jones.    *    *    *  «2 

•  !*  ^"^JJ^'    ^'"^  ^"'^  ^-  ^"""^  ''^  ^'<^  3"^-  ^^'  Am.  Rep.  334  (1S80) ;    Mer- 

•Ick  T.  AMprrnnn   77  Conn.  G.-.4.  r.0  Atl.  100  (1005).     Contra:     Chester  v.  Dorr, 

••1   >.   Y.  J79  (I860):    Sears  v.   Moore,  171   Mass.  514,  50  N.  E    1027   (1898) 

Tbe  court  are  ananlmoiisly  of  opinion  in  this  case— and  after  some  little 


PART  III 
LIABILITY  OF  PARTIES 


CHAPTER  I 
MAKER  AND  ACCEPTOR 


RUMBALIv  V.  BALL. 
(Court  of  Queen's   Bench,   1711.     10   Mod.   39.) 

Action  of  debt  upon  a  note  to  this  effect:  "I  acknowledge  myself 
indebted  to  such  a  one  so  much,  which  I  promise  to  pay  upon  demand." 

It  was  moved  in  arrest  of  judgment,  that  though  upon  a  note  ac- 
knowledging a  debt  it  was  not  necessary  to  allege  a  demand,  yet  where 
it  is  part  of  the  agreement  there  a  demand  is  necessary. 

But  The  Court  was  of  another  opinion,  for  it  is  a  debt  in  presenti 
and  the  words  "promise  to  pay"  import  no  more  than  that  I  am  ready 
to  pay  the  money  at  any  time,  and  shall  not  restrain  or  qualify  the 
other  words,  this  being  no  debt  arising  upon  the  performance  of  a 
certain  condition,  but  a  debt  plainly  precedent  to  the  demand.  Besides, 
supposing  the  demand  necessary,  the  action  itself,  perhaps,  is  a  de- 
mand.^ 

doubt  at  first  entertained  by  one  of  its  members — that  there  should  be  a 
venire  de  novo.  The  case  mainly  relied  on  for  the  defendant  in  error  was 
that  of  Charles  v.  Marsden,  1  Taunt.  224,  where  it  was  held  that  it  is  not  a 
defense  to  an  action  by  the  indorsee  of  a  bill  of  exchange  to  plead  that  it 
was  accepted  for  the  accommodation  of  the  drawer,  without  consideration,  and 
Nvas  indorsed  over  after  it  became  due.  But  in  that  case  the  question  arose 
upon  the  pleadings ;  whereas,  here  it  is  presented  upon  the  evidence.  And 
we  think  that,  under  the  circumstances  stated  in  this  bill  of  exceptions,  there 
was  evidence  for  the  jury  of  an  engagement  on  the  part  of  Allen  not  to  ne- 
gotiate the  bill  mentioned  in  the  second  count  after  it  became  due.  There- 
fore, without  going  further  into  the  case,  it  is  enough  to  say  that  there  must 
be  a  venire  de  novo."  Parr  v.  Jewell,  16  C.  B.  6S4,  712  (1855).  Compare  Red- 
fern  v.  Rosenthal,  86  L.  T.  R.  855  (1902). 

1  "There  is  no  divided  opinion,  here  or  in  England,  that  upon  such  a  note, 
with  or  without  interest,  an  action  may  be  maintained  against  the  maker  with- 
out any  demand  because  it  is  due.  No  demand  can  be  sued  before  due ;  no 
action  will  lie  upon  any  claim  of  any  description  arising  upon  contract  be- 
fore it  is  due.  To  say  that  the  suit  is  the  demand  is  to  repeat  an  unmeaning 
phrase  as  thus  used,  which  no  number  of  repetitions  can  make  sensible.  A 
demand  note  is  due  forthwith,  and  hence  mav  be  sued  without  demand." 
Peckham,  J.,  in  Wheeler  v.  Warner,  47  N.  Y.  519,  520,  7  Am.  Rep.  478  (1872). 

Accord :     Church  v.  Stevens,  56  Misc.  Rep.  572,  107  N.  Y.  Supp.  310  (1907). 

r453) 


4oi  LIABILITY   OF    PARTIES.  (Part  3 

HOLMES  V.  KERRISON. 

(Court  of  Common  Pleas.  1810.     2  Taunt.  323.) 

This  was  an  action  directed  by  the  Court  of  Chancery,  The  defend- 
ant was  a  banker  at  Norwich  and  had  failed.  The  plaintiff  had  some 
years  since  deposited  money  with  him,  for  which  she  held  his  promis- 
sory notes  payable  at  a  certain  number  of  days  after  sight,  and  bear- 
ing 3  per  cent,  interest.  Upon  these  notes  the  action  was  brought,  and 
the  defendant  pleaded  the  statute  of  limitations.  Upon  the  trial  of 
this  cause  at  Guildhall,  at  the  sittings  after  last  Hilary  term,  before 
Mansfield.  C.  J.,  the  defendant  insisted  on  the  statute,  but  offered  no 
evidence  that  the  bills  had  ever  been  presented  for  payment  six  years 
before  the  action  commenced,  and  there  was  on  the  other  hand  some 
evidence  that  the  bills  were  still  unpaid ;  for  the  chief  clerk  of  the 
banking  house  produced  a  book  containing  an  account  of  the  notes  of 
this  description  which  had  been  issued,  and  such  of  them  as  were  paid 
from  time  to  time,  were  marked  in  this  book  as  paid,  but  no  such  mark 
stood  against  the  entry  of  the  plaintiff's  notes.  The  jury  found  a  ver- 
dict for  the  plaintiff. 

Best,  Serjt..  now  moved  for  a  rule  nisi  to  set  aside  the  verdict  and 
have  a  new  trial. 

But  The  Court  were  clearly  of  opinion  that,  since  no  debt  arose 
upon  a  bill  payable  after  sight  until  a  presentment  for  payment,  and 
since  there  was  no  evidence  that  these  bills  had  ever  been  presented 
for  payment,  there  was  no  proof  of  a  complete  cause  of  action  at  any 
previous  time,  from  which  the  statute  of  limitations  could  run.  They 
had  therefore  no  doubt  upon  the  question,  and  refused  the  rule.* 


SANDERSON  v.  BOWES  et  al. 
(Court  of  King's  Bench,  1811.  14  East,  500.) 
The  plaintiff  declared  in  assumpsit  upon  a  promissory  note,  as  bearer 
thereof,  against  the  defendants  as  the  makers,  and  stated  in  his  first 
count  that  whereas  M.  F.  (one  of  the  defendants),  for  himself  and  the 
other  defendants,  heretofore,  to  wit,  on  the  1st  of  September,  1808,  at 
Workington,  in  the  county  of  Cumberland,  to  wit,  at  London,  etc.,  ac- 
cording to  the  form  of  the  statute,  made  a  certain  note  in  writing  com- 
monly called  a  promissory  note,  and  thereby  on  demand  promised  to 
pay  at  the  banking  house  there,  to  wit,  at  Workington  aforesaid,  to 
one  R.  Nelson  or  bearer,  the  sum  of  £1.  Is.  value  received ;  and  the 
plamtiff  afterwards,  to  wit,  on  the  same  day  and  year  aforesaid,  at 

ai^n%  ^i".r'"„"i'^^"\?*'l*  S*  ^'^^*  required  presentment  to  mature  it 
(Dixon  V.  Nut  tall  1  Cr.M.  &  R.  307  mm.  before  St.  34  &  35  Vict  c.  74 
demind.''  '^'^^"^  ^a*  such  instrumeuts  should  be  deemed  payable  on 


Ch.  1)  MAKER   AND    ACCEPTOR.  455 

London,  etc.,  duly  became,  and  before  and  at  the  time  of  the  exhibit- 
ing of  this  bill  was  and  still  is,  the  bearer  of  the  said  note,  whereof  the 
defendants  afterwards,  to  wit,  on  the  day  and  year  aforesaid,  at  Lon- 
don, etc.,  had  notice,  by  reason  of  which  premises,  and  by  force  of  the 
statute,  etc.,  the  defendants  became  liable  to  pay  to  the  plaintifif  the 
said  sum  of  money  in  the  said  note  specified,  according  to  the  tenor 
and  effect  of  the  said  note.  And  being  so  liable,  the  defendants,  in 
consideration  thereof,  afterwards,  to  wit,  at  London,  etc.,  undertook 
and  promised  the  plaintiff  to  pay  him  the  said  sum  of  money  in  the 
said  note  specified,  according  to  the  tenor  and  effect  of  the  said  note. 
There  were  several  other  counts  on  similar  notes,  and  also  the  com- 
mon counts  for  money  paid,  money  had  and  received,  and  upon  an  ac- 
count stated ;  and  then  the  declaration  concluded :  Yet  the  defend- 
ants, not  regarding  their  said  several  promises  and  undertakings  so  by 
them  in  manner  and  form  aforesaid  made,  etc.,  have  not  yet  paid  the 
said  several  sums  of  money,  etc.,  to  the  plaintiff,  although  often  re- 
quested :  but  the  defendants  to  pay  the  same,  or  any  part  thereof,  have 
hitherto  altogether  refused,  and  still  do  refuse,  to  the  damage  of  the 
plaintiff  of  f30.,  etc.  The  defendants  demurred  generally  to  all  the 
counts  on  the  promissory  notes,  and  pleaded  the  general  issue  to  the 
money  counts.' 

Lord  Elle^nbgrough,  C.  J.  This  case  is  materially  different  from 
that  of  Fenton  v.  Goundry,  13  East,  459,  lately  decided  by  this  court, 
which  was  the  case  of  a  bill  drawn  generally,  but  accepted  payable  at 
a  particular  place,  which  special  acceptance  we  considered  merely  as 
importing  the  intention  of  the  party  that  he  would  be  found  when  the 
bill  became  due  at  that  place  as  his  house  of  business,  where  he  should 
be  prepared  to  pay  it.  There  the  acceptance  payable  at  the  place  was 
no  part  of  the  original  conformation  of  the  bill  itself;  but  here  the 
words  restrictive  of  payment  at  the  place  named  are  incorporated  in 
the  original  form  of  the  instrument,  which  alone  creates  the  contract 
and  duty  of  the  party.  This  is  not  like  cases  cited  of  duties  which 
are  transitory  with  the  person ;  but  here  the  duty  is  to  be  performed, 
and  the  money  is  made  payable,  at  a  specific  place,  viz.  the  defendants' 
banking  house,  at  Workington.  Under  such  circumstances  a  demand 
there  by  the  holder  is  a  condition  precedent,  in  order  to  give  himself 
a  title  to  receive  the  money.  Neither  is  it  like  the  case  of  bonds  with 
conditions,  where  the  party  is  originally  liable  to  the  sum  named  in 
the  bond ;  and  he  is  to  found  his  defense,  and  relieve  himself  against 
the  payment  of  the  penalty,  by  showing  performance  of  the  condition. 
That  must  come  from  him  by  way  of  defence:  but  here  the  defend- 
ant's duty  was  limited  by  the  instrument  itself,  and  nothing  was  de- 
mandable  of  him  but  upon  the  instrument.  If  the  action  for  money 
lent,  or  money  had  and  received,  would  lie  merely  upon  the  evidence 

8  The  arguments  of  counsel,  and  the  opinious  of  Grose  and  Le  Blanc,  JJ., 
are  omitted. 


466 


UABILITY    OF   PARTIES.  (Part  3 


of  the  note  in  question,  let  the  plaintiff  bring  such  an  action;  but  this 
action  upon  the  note  will  not  lie,  unless  Uie  plaintiff  has  demanded 
payment  at  the  appointed  place.  And  I  cannot  but  say  that  it  is  very 
convenient  that  such  a  condition  should  be  incorporated  in  the  note 
itself;  for  it  would  be  very  inconvenient  that  the  makers  of  notes  of 
this  description  sho'.:Id  be  liable  to  answer  them  everywhere,  when  it  is 
notorious  that  they  have  made  provision  for  them  at  a  particular  place, 
where  only  they  engage  to  pay  them.  Then  i  f  the  request  at  the  place 
be  a  condition  precedent,  it  should  have  been  averred,  and  for  want  of 
such  an  averment  the  declaration  is  bad.  But  I  still  think  that  this 
is  distinguishable  from  the  case  of  Fentcn  v.  Ooundry. 

Baylev,  J.  In  the  case  of  a  bond  the  defendant  is  liable  to  the  debt, 
unless  he  bring  himself  within  the  saving  of  the  condition.  It  lies 
therefore  upon  the  defendant  in  that  case  to  show  that  he  has  done  all 
required  by  the  condition  in  order  to  excuse  himself  from  the  penalty. 
But  in  assumpsit  upon  a  contract  the  plaintiff  must  show  that  he  has 
done  everything  that  lay  upon  him  to  do,  in  order  to  bring  himself 
witliin  the  contract,  and  entitle  him  to  sue  upon  it.  Now  here  the 
terms  of  the  contract  are  a  promise  by  the  defendants  to  pay  on  demand 
at  a  certain  place.  Then  the  plaintiff  must  bring  himself  within  those 
terms,  by  showing  that  he  made  a  demand  upon  the  defendants  at  that 
place;  and  the  defendants  cannot  be  made  liable  beyond  the  terms  of 
their  contract,  which  is  to  pay  at  Workington.  Where  a  person  con- 
tracts generally  to  pay  a  sum  of  money,  he  is  liable  to  the  creditor  ev- 
er)*where;  but  where  a  person  binds  himself  even  by  bond  to  pay  at 
a  particular  place,  there  he  is  not  liable  at  any  other  place,  and  the 
demand  must  be  made  upon  him  there.  So  here  the  defendants,  hav- 
ing contracted  to  pay  on  demand  at  a  particular  place,  are  not  liable 
but  upon  a  demand  at  that  place. 

Judgment  for  the  defendants. 


THORPE  v.  COOMP.E. 

(Court  of  King's  Bench,  1,82G.     8  Dowling  &  R.  .347.> 

Assumpsit  on  a  promissory  note,  made  by  the  defendant  in  the  year 
1810,  "payable  two  years  after  demand."  Pleas:  (1)  Non  assumpsit ; 
(2)  the  statute  of  limitations.  At  the  trial  before  Abbott,  C.  J.,  at 
the  London  sittings  after  last  term,  it  appeared  that  the  note  was  pre- 
sented to  the  defendant,  and  payment  demanded  for  the  first  time,  on 
the  18th  June,  1823,  The  defendant  said  something  about  interest  due 
o"  the  note,  and  promised  that  he  would  write  to  his  sister,  the  plain- 
tiff's wife,  about  it.  Other  applications  were  made  to  the  defendant 
before  action  brought  for  payment  of  the  note,  but  without  success. 
The  action  was  commenced  in  Michaelmas  term  last.  The  jury,  un- 
der the  learned  judge's  directions,  found  for  the  plaintiff. 

Scarlett  now  moved  to  enter  a  nonsuit,  on  the  ground  that  the  stat- 


Ch.  1)  MAKER   AND    ACCEPTOR.  457 

ute  of  limitations  was  a  bar  to  the  action,  inasmuch  as  it  must  be  pre- 
sumed, after  the  lapse  of  13  years,  that  payment  of  the  note  had  been 
before  demanded,  and  the  amount  paid.  He  cited  Holmes  v.  Kerri- 
son,  2  Taunt.  323,  and  Christie  v.  Tonseck,  M.  T.  52  Geo.  HI,  Cor. 
Sir.  J.  Mansfield  cited  from  M.  S.  Selw.  N.  P.  126,  Ed.  3. 

Bayley,  J.  I  am  clearly  of  opinion  that  the  statute  of  limitations 
did  not  begin  to  run  until  two  years  after  demand  of  payment  of  this 
note  had  been  made.  Here  the  cause  of  action  did  not  arise  until  the 
two  years  after  demand  had  elapsed,  and  consequently  the  statute  af- 
fords the  defendant  no  protection.  But  after  the  evidence  given  in 
this  case,  there  could  be  no  ground  for  the  jury  to  presume  that  there 
had  been  previous  payment  or  satisfaction  of  the  note. 

The  other  judges  concurred. 

Rule  refused. 


HALSTEAD  v.  SKELTON. 

(Court  of  Exchequer  Chamber,  1843.     5  Q.  B.  86.) 
See,  ante,  p.  181,  for  a  report  of  the  case.* 


CALDWELL  v.  CASSIDY. 

(Supreme  Court  of  New  York.   1828.     8  Cow.  271.) 

On  error  from  the  Common  Pleas  of  Albany.  Cassidy  declared 
against  Caldwell  in  the  court  below,  as  the  maker  of  a  promissory  note 
for  $70,  payable  to  Cassidy,  or  order,  60  days  after  date,  at  the  Frank- 
lin Bank  in  the  city  of  New  York.  The  defendant  pleaded  that  he 
was,  at  the  time  and  place  of  payment  mentioned  in  the  note,  ready 
and  willing  to  pay  the  money,  and  ever  since  had  been,  and  now  is, 
ready  and  willing  to  pay  at  the  bank,  but  that  the  plaintiff  never  de- 
manded payment,  nor  presented  the  note  for  payment  at  the  bank.  On 
demurrer  and  joinder,  the  court  gave  judgment  for  the  plaintiff  below. 

Savage,  C.  J.  The  question  raised  by  the  demurrer  has,  I  appre- 
hend, been  already  decided  by  this  court.  The  case  of  Wolcott  v.  Van 
Santvoord,  17  Johns.  218,  8  Am.  Dec.  396,  contains  all  the  law  neces- 
sary to  its  decision.  In  that  case,  the  declaration  was  demurred  to, 
because  a  demand  at  the  place  of  payii.ent  was  not  averred.  Chief 
Justice  Spencer  reviewed  most  of  the  cases,  and  discussed  the  subject 
with  his  usual  ability.  A  majority  of  the  court  held  that  such  an  aver- 
ment was  not  necessary,  but  that  if  the  defendant  was  ready,  at  the 
time  and  place,  to  pay  the  money,  that  was  matter  of  defense  in  bar  of 
damages,  and  might  be  pleaded  by  bringing  the  money  into  court,  the 

4  St.  1  &  2  Geo.  IV,  c.  78  (1821),  was  held  applicable  to  bills  drawn  payable 
at  a  particular  place,  as  well  as  to  bills  drawn  generally  and  accepted  pay- 
able at  a  particular  place.     Selby  v.  Eden.  3  Bing.  611  (1S2G). 

See  Rowe  v.  Young,  2  Bro.  &  B.  165  (1820). 


458  LiAHiLiTT  OF  I'AKTiES.  (Part  3 

same  as  a  tender.  The  Chief  Justice  says:  "It  is  perfectly  well  set- 
tled that  when  a  debt  or  duty  exists,  such  as  the  payment  of  a  sum  of 
money,  a  tender  of  tlic  money,  though  it  be  refused,  does  not  extinguish 
the  debt  or  duty."  So  in  Teuton  v.  Gouudry,  13  East,  473,  Bayley, 
Ju>ticc.  says:  "If  this  were  to  be  taken  to  be  a  place  fixed  on  by  the 
contract  for  the  payment  of  the  money,  and  if  the  defendant  had  his 
money  there  on  the'  day,  ready  to  pay  it  if  demanded,  he  might  have 
picadcvl  tliat  lie  was  ready  to  pay  the  money  at  the  day  and  place  ap- 
pointed, and  bring  the  money  into  court ;  and  that  would  not  be  a  plea 
in  bar  of  the  action,  but  in  bar  only  of  damages."  These  remarks  were 
made  in  an  action  by  the  holder  of  a  bill  of  exchange  against  the  ac- 
ceptor, where  the  acceptance  specified  the  place  of  payment. 

There  is  certainly  much  confusiun  in  the  English  cases  on  this  ques- 
tion. In  Sanderson  v.  Bowes,  14  East,  507,  Lord  Ellenborough  takes 
a  distinction  between  the  case  of  Fenton  v.  Goundry  and  the  case  then 
before  the  court,  which  was  a  note  payable  on  demand  at  the  Working- 
ton P>ank.  And  Bayley,  Justice,  says :  "Where  a  person  contracts  gen- 
erally to  pay  a  sum  of  money,  he  is  liable  to  the  creditor  everywhere ; 
but  when  a  person  binds  himself,  even  by  bond,  to  pay  at  a  particular 
place,  then  he  is  not  holden  at  any  other  place,  and  the  demand  must 
be  made  upon  him  there.  So  here  the  defendants,  having  contracted 
to  pay  on  demand  at  a  particular  place,  are  not  liable  but  upon  a  de- 
mand at  that  place."  In  the  case  of  Ruggles  v.  Patten,  8  Mass.  480, 
the  action  was  on  a  note  payable  at  the  Penobscot  Bank.  The  defend- 
ant's fourth  plea  was,  after  protesting  that  he  was  ready  and  willing 
to  pay  at  the  time  and  place  mentioned,  that  the  plaintiff  was  not  pres- 
ent to  receive  payment,  and  did  not  demand  it.  The  court  say  this  is 
no  bar  to  an  action  on  a  promise  to  pay  money. 

Whatever  be  the  rule  in  other  courts,  the  rule  of  this  court  must  be 
considered  settled  in  the  case  of  Wolcott  v.  Van  Santvoord :  That, 
when  a  promissory  note  is  payable  at  a  particular  place  on  a  dav  cer- 
tain, the  holder  of  the  note  is  not  bound  to  make  a  demand  at  the  time 
and  place,  by  the  way  of  condition  precedent  to  the  bringing  of  an  ac- 
tion apainst  the  maker.  But  if  the  maker  was  ready  to  pay  at  the  time 
and  place,  he  may  plead  it  as  he  would  plead  a  tender,  in  bar  of  dam- 
ages and  co.sts,  by  bringing  the  money  into  court.* 

In  the  case  of  a  note  payable  on  demand  at  a  certain  place,  a  bank, 
for  instance.  T  apprehend  a  demand  would  be  necessary,  and  must  be 
averred.  5  Taunt.  30;  16  East,  112.  But  in  the  case  now  under  con- 
sideration the  plaintiff  in  error  did  not  state  enough  in  his  plea  in  the 
court  below.  The  plea  is  bad  in  two  particulars:  (1)  It  should  not 
have  been  pleaded  in  bar  of  the  action,  but  of  the  damages.  (2)  It 
should  have  shown  that  the  defendant  was  then  ready,  by  bringing  the 
money  into  court. 

Judgment  affirmed. 

•  Accord:     Florence  Oil  Co.  v.  Rank.  PA  Colo.  110.  <^S  Pac.  182  0906). 


Ch.  1)  MAKER  AND  ACCEPTOR.  459 

FARMERS'  NAT.  BANK  OF  ANNAPOLIS  v.  VENNER  et  al. 
VENNER  V.  FARMERS'  NAT.  BANK  OF  ANNAPOLIS. 

(Supreme  Judicial  Court  of  Massachusetts,  Suffolk,  1906.     192  Mass.  531,  78 

N.  E.  540.) 

Morton,  J.  These  two  actions  were  tried  together  before  a  judge 
of  the  superior  court  sitting  without  a  jury.  The  first  is  an  action  of 
contract  by  the  plaintiff  bank,  as  the  holder  of  a  certain  promissory 
note,  against  the  defendants  as  makers,  to  recover  the  balance  alleged 
to  be  due  after  the  sale  and  application  of  the  collateral.  The  note  is 
dated  "New  York  City,  May  14,  1893,"  and  is  payable  on  demand  after 
date  to  the  order  of  the  makers  at  the  office  of  Wilson,  Colston  &  Co., 
Baltimore,  and  is  indorsed  by  the  defendants.  The  writ  is  dated  May 
13,  1898,  the  last  day  before  the  action  would  have  been  barred  by  the 
statute  of  limitations.  The  plaintiff  is  a  banking  association  organized 
under  the  laws  of  the  United  States  and  having  its  usual  place  of  busi- 
ness at  Annapolis  in  the  state  of  Maryland.  The  defendants  formerly 
were  copartners  doing  business  in  New  York  City  under  the  name  of 
C.  H.  Venner  &  Co.  Personal  service  was  made  in  this  state  on  the 
defendant  Venner,  but  no  service  was  made  on  either  of  the  other  two 
defendants.  The  firm  of  C.  H.  Venner  &  Co.  was  dissolved  July  31, 
1892,  and  the  assets  became  the  sole  property  of  the  defendant  Venner. 

The  second  action  is  tort  for  the  alleged  conversion  of  $26,000,  par 
value,  bonds  of  the  American  Waterworks  of  Omaha,  Neb.,  pledged 
as  collateral  to  secure  the  payment  of  the  above  note.  The  note  pro- 
vided, amongst  other  things,  that  the  holder  might  sell  the  collateral 
or  any  part  thereof  on  nonperformance  of  his  promise  by  the  maker 
"in  such  manner  as  the  holder  hereof  may  deem  proper  without  notice 
at  any  stock  exchange  or  at  public  or  private  sale  at  the  option  of  the 
holder  hereof,  and  with  the  right  on  the  part  of  the  holder  hereof  to 
become  purchaser  thereof  at  such  sale."  It  also  contained  a  provision 
that  "in  case  of  depreciation  in  the  market  value  of  the  security  hereby 
pledged  *  *  *  ^  payment  is  to  be  made  on  account  or  additional 
approved  security  given  upon  demand,  so  that  the  market  value  of 
the  security  shall  always  be  at  least  ten  (10)  per  cent,  more  than  the 
amount  unpaid  on  this  note.  In  case  of  failure  to  do  so  this  note  shall 
be  deemed  to  be  due  and  payable  forthwith  *  *  *  ^Lnd  the  holder 
hereof  may  immediately  reimburse  himself  by  a  sale  of  the  security  in 
the  manner  provided  for  above."  The  note  is  signed  "C.  H.  Venner 
&  Co."  and  the  words  "Due  on  demand"  immediately  precede  the  sig- 
nature. 

There  was  evidence  tending  to  show,  or  from  which  it  could  have 
been  found,  that  the  note  and  bonds  were  presented  to  the  defendant 
V^enner  in  person  at  his  office  in  New  York  City  and  a  demand  for 
payment  was  made.  There  also  was  evidence  that  a  demand  was  made 
upon  him  for  the  payment  of  $5,000  on  account,  and  for  additional  col- 


4r,o  LiAHiLiTY  OF  PARTIES.  (Part  3 

lateral  under  circumstances  which  justified  the  latter  according  to  the 
terms  of  the  note.  Neither  of  the  demands  thus  made  was  complied 
witli.  There  was  no  evidence  of  a  presentment  or  demand  at  the  office 
of  Wilson,  Colston  &  Co.  in  Baltimore,  or  that  there  were  funds  there 
to  meet  the  note  if  it  had  been  presented.  The  collateral  was  sold 
through  the  firm  of  A.  H.  Muller  &  Son  in  New  York  City  and  was 
bid  in  lor  the  bank  at  a  price,  except  as  to  one  bond,  very  much  less,  as 
there  was  testimony  tending  to  show,  than  other  bonds  of  the  same 
issue  were  sold  for  before  and  after  the  sale  in  question.  This  con- 
stitutes the  conversion  complained  of.  It  is  conceded,  or,  at  least,  is 
stated  in  the  bill  of  exceptions  as  a  fact,  that  A.  H.  Muller  and  Son 
were  proper  auctioneers,  and  that  the  place  where  the  bonds  were  sold 
was  a  proper  place  to  sell  them. 

The  judge  found  for  the  plaintiff  in  the  first  action  in  the  sum  of 
$2l,8Go.26,  and  for  the  defendant  in  the  second  action.®  The  cases 
arc  here  on  exceptions  by  the  defendant  \'enner  to  the  refusal  of  the 
judge  to  give  certain  rulings  requested  by  him  and  to  the  finding  that 
was  made. 

We  see  no  error  in  the  rulings  or  refusals  to  rule,  or  in  the  finding 
that  was  made. 

The  defendant  Venner  contends  in  the  first  place  that  no  action  can 
be  maintained  on  the  note  because  no  demand  was  made  for  its  pay- 
ment at  the  office  of  Wilson,  Colston  &  Co.,  in  Baltimore.  It  is  set- 
tled in  this  state  both  at  common  law  and  recently  by  statute  and  by 
the  weight  of  authority  in  this  country,  contrary  to  the  law  in  England. 
that,  where  a  note  or  bill  of  exchange  is  payable  at  a  particular  time 
and  place,  no  demand  or  presentment  at  the  place  named  is  necessary 
in  order  to  entitle  the  holder  to  maintain  an  action  upon  the  note  or 
bill  against  the  maker  or  acceptor.  Ruggles  v.  Patten,  8  Mass.  480 ; 
Carley  v.  Vance.  17  Mass.  389;  Payson  v.  Whitcomb,  15  Pick.  212; 
Wright  v.  Vermont  Life  Ins.  Co.,  164  Mass.  302,  41  N.  E.  303.  Rev. 
I^ws,  c.  73,  §  87.  For  a  collection  of  cases  see  1  Dan.  Neg.  Inst.  (3d 
Ed.)  643;  1  Pars.  Notes  and  Bills  (1st  Ed.)  p.  305  et  seq. ;  4  Am.  & 
Eng.  Ency.  of  Law  (2d  Ed.)  373.  We  see  no  valid  distinction  between 
a  note  payable  on  time  at  a  particular  place  and  a  note  payable  on  de- 
mand at  a  particular  place.  No  demand  is  necessary,  before  suit,  where 
a  note  is  payable  generally  on  demand.  And  as  we  have  seen  no  de- 
mand is  necessary  when  a  note  is  payable  on  time  at  a  particular  place. 
It  seems  to  us  that  the  fact  that  both  circumstances  are  found  in  the 
same  note  cannot  operate  to  change  the  rule  and  render  a  demand  nec- 
essary when  it  would  not  otherwise  be  required.  McKenney  v.  Whip- 
ple. 21  Me.  98;  Gammon  v.  Everett,  25  Me.  66,  43  Am  '  Dec  255- 
Haxton  v.  Bishop,  3  Wend.  (N.  Y.)  13 ;  Montgomery  v.  Elliott  6  Ala' 
701 ;  Dougherty  v.  Western  Bank,  13  Ga.  287 ;  Bowie  v  Duvall  1 
G1II&  J.  (Md.)  175. 

•  That  part  of  the  opinion  relating  to  the  second  action  is  omitted. 


Ch.  1)  MAKER   AND    ACCEPTOR.  461 

We  think,  therefore,  that  the  refusal  of  the  judge  to  rule  as  re- 
quested, that  in  order  to  maintain  the  action  the  plaintiff  was  bound 
to  prove  a  demand  at  the  office  of  Wilson,  Colston  &  Co.  and  that  a 
refusal  of  a  demand  to  pay  the  note  at  any  other  place  did  not  consti- 
tute a  default  in  the  payment  of  the  note,  was  correct,  and  that  the 
judge  was  right  in  ruling,  as  he  did,  that  a  sufficient  demand  was  made 
though  not  made  at  the  office  of  Wilson,  Colston  &  Co.  in  Baltimore. 
The  note  is  dated  and  apparently  was  made  in  New  York.  But  it  was 
given  in  renewal  of  a  note  previously  held  by  Wilson,  Colston  &  Co. 
and  was  to  be  paid  in  Baltimore,  and,  it  fairly  may  be  inferred,  was 
delivered  to  the  plaintiff  bank  at  its  usual  place  of  business  in  An- 
napolis. It  must  be  regarded,  therefore,  either  as  a  New  York  or 
Maryland  contract.  If  it  is  to  be  regarded  as  a  Maryland  contract 
then  the  decisions  by  the  highest  court  in  that  state  which  were  put  in 
by  the  plaintiff  bank  would  seem  to  show,  so  far  as  they  bear  upon 
the  question,  that  a  demand  at  the  office  of  Wilson,  Colston  &  Co.  was 
not  necessary  in  order  to  enable  the  plaintiff  to  maintain  its  action. 
Bowie  V.  Duvall,  1  Gill  &  J.  (Md.)  175.  No  evidence  was  introduced 
as  to  the  law  of  New  York  and  in  the  absence  of  such  evidence  it  is  to 
be  assumed  that  the  law  of  that  state  is  the  same  as  the  law  of  this. 
Hazen  v.  Mathews,  184  Mass.  388,  68  N.  E.  838.     *    *    * 

Exceptions  overruled.'' 


PRICE  V.  NEAL. 
(Court  of  King's  Bench,  1762.     3  Burr.  1354.) 

This  was  a  special  case  reserved  at  the  sittings  at  Guildhall  after 
Trinity  term,  1762,  before  Lord  Mansfield. 

It  was  an  action  upon  the  case  brought  by  Price  against  Neal ;  where- 
in Price  declares  that  the  defendant  Edward  Neal  was  indebted  to  him 
in  i80.  for  money  had  and  received  to  his  the  plaintiff's  use :  and  dam- 
ages were  laid  to  ilOO.  The  general  issue  was  pleaded ;  and  issue 
joined  thereon. 

It  was  proved  at  the  trial,  that  a  bill  was  drawn  as  follows :  "Lei- 
cester, 22d  November,  1760.  Sir :  Six  weeks  after  date  pay  Mr.  Rog- 
ers Ruding  or  order  forty  pounds,  value  received  for  Mr.  Thomas 
Poughfor;  as  advised  by,  sir,  your  humble  servant  Benjamin  Sutton. 
To  Mr.  John  Price  in  Bush  lane.  Cannon  street,  London."  Indorsed : 
"R.  Ruding;  Antony  Topham;  Hammond  and  Laroche.  Received 
the  contents.    James  Watson  and  Son.    Witness,  Edward  Neal." 

That  this  bill  was  indorsed  to  the  defendant  for  a  valuable  consid- 
eration ;  and  notice  of  the  bill  left  at  the  plaintiff's  house,  on  the  day 
it  became  due.  Whereupon  the  plaintiff  sent  his  servant  to  call  on  the 
defendant,  to  pay  him  the  said  sum  of  £40.  and  take  up  the  said  bill, 
which  was  done  accordingly, 

7  Accord:     Hyman  v.  Doyle,  53  Misc.  Rep.  597.  103  N.  Y.  Supp.  778  (1007). 


4G2  LIABILITY   OF    PARTIES.  (Part   3 

That  another  bill  was  drawn  as  follows :  "Leicester,  1st  February, 
1761.  Sir:  Six  weeks  after  date  pay  Mr.  Rogers  Ruding  or  order 
forty  pounds,  value  received  for  Mr.  Thomas  Ploughfor;  as  advised 
by,  sir,  your  humble  servant  Benjamin  Sutton.  To  Mr.  John  Price 
in  Dush  lane.  Cannon  street,  London."  That  this  bill  was  indorsed: 
"R.  Rudincj;  Thomas  Watson  and  Son.  Witness  for  Smith:  Right 
&  Co."  That  the  plaintiff  accepted  this  bill,  by  writing  on  it,  "Accepted 
John  Price,"  and  that  the  plaintiff  wrote  on  the  back  of  it:  "Messieurs 
Frcamc  ami  P>arclay :    Pray  pay  forty  pounds  for  John  Price." 

That  this  bill  being  so  accepted  was  indorsed  to  the  defendant  for 
a  valuable  consideration,  and  left  at  his  banker's  for  payment,  and  was 
paid  by  order  of  the  plaintiff,  and  taken  up. 

Both  these  bills  were  forged  by  one  Lee,  who  has  been  since  hanged 
for  forgery. 

The  defendant  Neal  acted  innocently  and  bona  fide,  without  the 
least  privity  or  suspicion  of  the  said  forgeries  or  of  either  of  them, 
and  paid  the  whole  value  of  those  bills. 

The  jury  found  a  verdict  for  the  plaintiff;  and  assessed  damages 
£S0.  and  costs  40s.  subject  to  the  opinion  of  the  court  upon  this  ques- 
tion: 

"Whether  the  plaintiff,  under  the  circumstances  of  the  case,  can  re- 
cover back,  from  the  defendant,  the  money  he  paid  on  the  said  bills, 
or  either  of  them." 

Mr.  Stowe,  for  the  plaintiff,  argued  that  he  ought  to  recover  back 
the  money,  in  this  action ;  as  it  was  paid  by  him  by  mistake  only,  on 
supposition  "that  these  were  true  genuine  bills ;"  and  as  he  could  nev- 
er recover  it  against  the  drawer,  because  in  fact  no  drawer  exists ;  nor 
against  the  forger,  because  he  is  hanged. 

He  owned  that  in  a  case  at  Guildhall,  of  Jenys  v.  Fawler  et  al.  (an 
action  by  an  indorsee  of  a  bill  of  exchange  brought  against  the  ac- 
ceptor). Lord  Raymond  would  not  admit  the  defendants  to  prove  it  a 
forged  bill,  by  calling  persons  acquainted  with  the  hand  of  the  drawer, 
to  swear  "that  they  believed  it  not  to  be  so ;"  and  he  even  strongly  in- 
clined, "that  actual  proof  of  forgery  would  not  excuse  the  defendants 
against  their  own  acceptance,  which  had  given  the  bill  a  credit  to  the 
indorsee." 

But  he  urged,  that  in  the  case  now  before  the  court,  the  forgery  of 
the  bill  does  not  rest  in  belief  and  opinion  only ;  but  has  been  actually 
proved,  and  the  forger  executed  for  it. 

Thus  it  stands  even  upon  the  accepted  bill.  But  the  plaintiff's  case 
is  much  stronger  upon  the  other  bill  which  was  not  accepted.  It  is 
not  stated,  "that  that  bill  was  accepted  before  it  was  negotiated ;"  on 
the  contrary,  the  consideration  for  it  was  paid  bv  the  defendant,  before 
the  plamtiff  had  seen  it.  So  that  the  defendant'took  it  upon  the  credit 
of  the  indorsers,  not  upon  the  credit  of  the  plaintiff;  and  therefore 
the  reason,  upon  which  Lord  Raymond  grounds  his  inclination  to  be 


Ch.  1)  MAKER   AND    ACCEPTOR.  463 

of  opinion  "that  actual  proof  of  forgery  would  be  no  excuse,"  will  not 
hold  here. 

Mr.  Yates,  for  the  defendant,  argued  that  the  plaintiff  was  not  en- 
titled to  recover  back  this  money  from  the  defendant. 

He  denied  it  to  be  a  payment  by  mistake;  and  insisted  that  it  was 
rather  owing  to  the  negligence  of  the  plaintiff;  who  should  have  in- 
quired and  satisfied  himself  "whether  the  bill  was  really  drawn  upon 
him  by  Sutton,  or  not."  Here  is  no  fraud  in  the  defendant;  who  is 
stated  "to  have  acted  innocently  and  bona  fide,  without  the  least  privity 
or  suspicion  of  the  forgery ;  and  to  have  paid  the  whole  value  for  the 
bills." 

Lord  Mansfield  stopt  him  from  going  on  ;  saying  that  this  was  one 
of  those  cases  that  could  never  be  made  plainer  by  argument. 

It  is  an  action  upon  the  case,  for  money  had  and  received  to  the 
plaintiff's  use.  In  which  action,  the  plaintiff  can  not  recover  the 
money,  unless  it  be  against  conscience  in  the  defendant,  to  retain  it; 
and  great  liberality  is  always  allowed,  in  this  sort  of  action. 

But  it  can  never  be  thought  unconscientious  in  the  defendant,  to  re- 
tain this  money,  when  he  has  once  received  it  upon  a  bill  of  exchange 
indorsed  to  him  for  a  fair  and  valuable  consideration,  which  he  had 
bona  fide  paid,  without  the  least  privity  or  suspicion  of  any  forgery. 

Here  was  no  fraud;  no  wrong.  It  was  incumbent  upon  the  plain- 
tiff, to  be  satisfied,  "that  the  bill  drawn  upon  him  was  the  drawer's 
hand,"  before  he  accepted  or  paid  it;  but  it  was  .not  incumbent  upon 
the  defendant,  to  inquire  into  it.  Here  was  notice  given  by  the  defend- 
ant to  the  plaintiff  of  a  bill  drawn  upon  him;  and  he  sends  his  serv- 
ant to  pay  it  and  take  it  up.  The  other  bill,  he  actually  accepts ;  after 
which  acceptance,  the  defendant  innocently  and  bona  fide  discounts  it. 
The  plaintiff  lies  by,  for  a  considerable  time  after  he  has  paid  these 
bills ;  and  then  found  out  "that  they  were  forged ;"  and  the  forger 
comes  to  be  hanged.  He  made  no  objection  to  them,  at  the  time  of 
paying  them.  Whatever  neglect  there  was,  was  on  his  side.  The  de- 
fendant had  actual  encouragement  from  the  plaintiff  himself,  for  nego- 
tiating the  second  bill,  from  the  plaintiff's  having  without  any  scruple 
or  hesitation  paid  the  first:  and  he  paid  the  whole  value,  bona  fide. 
It  is  a  misfortune  which  has  happened  without  the  defendant's  fault  or 
neglect.  If  there  was  no  neglect  in  the  plaintiff,  yet  there  is  no  reason 
to  throw  off  the  loss  from  one  innocent  man  upon  another  innocent 
man ;  but.  in  this  case,  if  there  was  any  fault  or  negligence  in  any  one, 
it  certainly  was  in  the  plaintiff,  and  not  in  the  defendant. 

Per  Cur'.     Rule-^that  the  postea  be  delivered  to  the  defendant.' 

8  "Both  the  referee  and  the  judse  who  wrote  the  prevailing  opinion  below 
thought  that  the  case  was  controlled  by  section  112  of  the  negotiable  instru- 
ments law  (Consol.  Laws,  c.  38),  which  provides  that  the  acceptor  of  a  nego- 
tiable Instrument  admits  'the  existence  of  a  drawer,  the  genuineness  of  his 
signature,  and  his  capacity  and  authority  to  draw  the  instrument.'  This  en- 
actment is  merely  declaratory  of  the  common  law.  The  leading  English  case 
In  which  it  is  enunciated  is  Price  v.  Neal,  3  Burrow,  1354,  decided  by  Lord 


404  LIABILITY  OF  PARTIES.  (Part  3 

MINET  et  al.  v.  GIBSON  et  al. 
(Court   of   King's  Bench,   17S9.     3   Term   R.  481.) 

This  was  an  action  on  a  bill  of  exchang-e;  and  the  first  count  in  the 
declaration  stated  that  Livesey  &  Co.  on  the  18th  February,  1788,  made 
a  bill  of  exchange,  directed  to  the  defendants,  requiring  them  three 
months  after  date  to  pay  £72.  5s.  to  John  White,  or  order,  Livesey  <>■ 
Co.  well  knowing  that  no  such  person  as  J.  White  existed ;  on  which 
bill  an  indorsement  was  made,  purporting  to  be  the  indorsement  of  J. 
White  named  in  the  bill,  requiring  the  contents  to  be  paid  to  Livesey  & 
Co.  or  order ;  that  Livesey  and  Co.  (by  one  Absalom  Goodrich,  by  proc- 
uration of  Livesey  &  Co.)  indorsed  to  the  plaintiffs ;  and  that  the  de- 
fendants accepted  it,  knowing  that  no  such  person  as  J.  White  existed. 
and  that  the  name  of  J.  White  so  indorsed  was  not  the  handwriting  of 
any  person  by  that  name. 

The  second  count,  after  stating  the  drawing  of  the  bill,  as  above, 
proceeded  thus :  Livesey  &  Co.  knowing  that  J.  White  was  not  a 
person  dealing  with,  or  known  to,  Livesey  &  Co.  and  using  the  name 
of  J.  White  in  the  bill  as  a  nominal  person  only,  and  intending  not  to 
deliver  the  same  to  him.  or  to  procure  the  same  to  be  actually  indorsed 
by  him ;  upon  which  bill  a  certain  indorsement  was  made,  requiring 
the  payment  to  be  made  to  Livesey  &  Co. ;  and  that  Livesey  &  Co. 
indorsed  to  the  plaintiffs,  without  having  delivered  the  bill  to  J.  White, 
and  without  any  actual  indorsement  or  assignment  of  the  bill  by  White. 

The  third  count  stated  that  the  bill  was  made  payable  to  themselves. 
Livesey  &  Co.,  by  the  name  and  description  of  J.  White. 

The  fourth  treated  it  as  a  common  bill  payable  to  J.  White  or  order, 
and  that  J.  White  indorsed  it  to  the  plaintiffs. 

Mansfield  In  1762.  The  leading  New  York  case  to  the  same  effect  is  National 
Park  Bank  v.  Ninth  National  Bank.  4<^  X.  Y.  77,  7  Am.  Rep.  .'ilO.  But  the 
doctrine  of  the-^se  decisions,  now  found  in  the  rule  formulated  by  section  112 
of  the  negotiable  instruments  law,  applies  only  in  favor  of  one  who  is  a 
holder  for  value  of  the  instrument  which  turns  out  to  have  been  forged. 
Thus  Lord  Mansfield  in  Price  v.  Xeal.  supra,  dwelt  upon  the  fact  that  the 
bill  of  excliam:e  there  in  question  had  been  indorsed  to  the  defendant  'for 
a  fair  and  valuable  consideration  which  he  had  bona  fide  paid,'  and  in  the 
leading  New  York  case  (National  Park  Bank  v.  Ninth  National  Bank,  supra) 
it  ajipeared  that  the  draft  had  been  discounted  by  the  Livingston  National 
Bank  and  indorsed  to  the  defendant,  which  was  a  bona  fide  holder.  The 
rule  therefore  that  he  who  accepts  a  negotiable  instrument  to  which  the 
drawer's  name  is  forged  is  bound  by  the  act,  and  can  neither  repudiate  the 
acceptance  nor  recover  the  money  paid,  has  no  application  in  behalf  of  one 
who  has  acquired  the  paper  in  the  absence  of  any  consideration  whatever 
therefor,  either  present  or  past.  Such  was  the  case  here  according  to  the 
finding  of  the  referee.  So  far  as  appears,  the  check  of  the  Green  estate, 
which  proved  to  be  forged,  was  not  given  in  payment  of  any  existing  or  an- 
tecedent indebtedness  either  on  the  part  of  that  estate  or  even  of  the  forger. 
For  these  reasons  we  agree  with  the  learned  judge  who  wrote  for  the  minority 
in  the  Appellate  Division,  saying:  'Se<.tion  112  of  the  negotiable  instruments 
law,  upon  which  the  referee  based  his  decision,  has  nothing  to  do  with  the 
question.'  "  Title  Guarantee  and  Trust  Co.  v.  Haven,  19G  N.  Y  487  89  N  E. 
1U.S2.   1083   (1909). 


Oh.  1)  MAKER    AND    ACCEPTOR.  465- 

The  fifth  as  payable  to  bearer ;  and  that  plaintiffs  were  the  bearers. 

The  sixth  payable  to  J.  White  or  order,  with  an  averment  that,  when 
the  bill  was  made,  there  was  no  such  person  as  J.  White,  the  supposed 
payee,  but  that  the  name  was  merely  fictitious ;  by  reason  whereof  the 
sum  mentioned  in  the  bill  became  and  was  payable  to  the  bearer  thereof, 
according  to  the  effect  and  meaning  of  the  bill — averring  also  that  the 
plaintiffs  were  the  bearers  and  proprietors  thereof. 

The  seventh  count  stated  that  there  was  a  partnership,  or  house,  of 
certain  persons  using  trade  as  well  in  the  name  and  firm  of  Livesey  & 
Co.  as  in  the  name  and  firm  of  J.  White ;  that  the  last  mentioned  persons 
made  a  certain  other  bill  (the  hand  of  one  of  them  on  their  joint  ac- 
count, and  in  their  copartnership  name  and  firm  of  Livesey  &  Co.  being 
thereto  subscribed),  and  directed  it  to  the  defendants,  requiring  them 
three  months  after  date  to  pay  to  the  said  last  mentioned  copartners,  by 
the  name  of  J.  White  or  order,  £721.  5s. ;  and  that  the  said  last  men- 
tioned copartners  afterwards  by  a  certain  indorsement  in  writing  ap- 
pointed the  contents  to  be  paid  to  the  plaintiffs,  and  delivered  the  bill  so 
indorsed  to  them. 

There  were  also  other  counts  for  money  had  and  received  by  the 
defendants  to  the  use  of  the  plaintiffs ;  for  money  paid,  laid  out,  and 
expended  by  the  plaintiffs  to  the  use  of  the  defendants ;  and  for  money 
lent  and  advanced  by  the  plaintiffs  to  the  defendants.  The  defendants 
pleaded  the  general  issue. 

A  special  verdict  was  found  (this  question  first  came  before  the  court 
on  a  motion  for  a  new  trial ;  but,  as  it  was  of  so  much  importance,  bill? 
to  the  value  of  near  a  million  a  year  having  passed  through  these 
houses  only,  the  court  recommended  it  to  the  parties  to  consent  to  have 
a  special  verdict,  in  order  that  the  record  might  be  carried  to  the  house 
of  Lords,  and  the  counsel  for  both  parties,  without  going  to  another 
trial,  agreed  upon  stating  this  verdict),  stating  (in  substance)  that 
Livesey  &  Co.  made  a  certain  instrument  in  writing,  directed  to  the 
defendants,  requiring  them,  three  months  after  date,  to  pay  to  John 
White  or  order  £721.  5s. ;  that  Livesey  &  Co.  at  the  time  of  making  it 
well  knew  that  no  such  person  as  J.  White,  in  the  bill  mentioned,  ex- 
isted; that  a  certain  indorsement  in  writing  was  afterwards  made  by 
Livesey  &  Co.  purporting  to  be  the  indorsement  of  J.  White,  and  re- 
quiring the  contents  of  the  bill  to  be  paid  to  Livesey  &  Co.,  or  their  or- 
der; that  Livesey  &  Co.  afterwards  indorsed  (by  A.  Goodrich  by  pro- 
curation of  Livesey  &  Co.)  to  the  plaintiffs  for  a  full  and  valuable  con- 
sideration, when  the  plaintiffs  became  and  still  are  the  holders  of  the 
bill ;  that  the  defendants  afterwards  accepted,  well  knowing  that  no  such 
person  as  J.  White,  in  the  bill  named,  existed,  and  that  the  name  of 
J.  White  so  indorsed  thereon  was  not  the  handwriting  of  any  person 
of  that  name;  that  the  defendants  at  the  time  of  the  making,  and  ac- 
cepting, the  bill  had  not,  nor  had  they  at  any  time  since,  any  money, 
goods,  or  effects,  whatsoever  of  or  belonging  to  Livesey  &  Co.  or  of 
Sm.&M.B.&N.— 30 


466  LIABILITY    OF    PARTIES.  (Fart   3 

the  plaintiffs  in  their  hands;  and  that  the  defendants  have  not  paid  the 
bill  (although  often  requested).  But  whether  upon  the  whole  matter 
the  defendants  are  liable,  etc.,  the  jurors  are  ignorant,  and  pray  the 
advice  of  the  court,  etc. 

This  verdict  was  set  down  in  this  day's  paper  for  argument ;  but 
The  Court,  being  of  opinion  that  this  case  was  decided  by  that  of 
Vere  v.  Lewis,  3  Term  R.  182,  gave  judgment  for  the  plaintiffs,  with- 
out hearing  any  argument,  adding  that  they  understood  that  the  reason 
why  it  was  agreed  to  be  turned  into  the  shape  of  a  special  verdict  was 
that  it  might  be  carried  up  to  the  dernier  resort 
Judgment  for  the  plaintiffs." 


DRAYTON  et  al.  v.  DALE. 
(Court  of  King's  Bench,   1823.     2   Barn.  &  C.   293.) 

Assumpsit  by  the  plaintiffs,  as  indorsees,  against  the  defendant,  as 
the  maker,  of  a  promissory  note,  dated  the  22d  of  September,  1818,  for 
£50.,  for  value  received,  payable  24  months  after  date,  to  one  Gauntlett 
Clarke,  or  his  order,  and  by  the  said  G.  Clarke  indorsed  to  Messrs. 
Knight  and  Freeman,  and  by  them  indorsed  to  the  plaintiffs.  Pleas, 
first,  general  issue,  and  secondly,  the  bankruptcy  of  the  said  G.  Clarke 
and  one  G.  Whitehead  the  younger,  by  virtue  of  a  commission  of  bank- 
rupt dated  and  issued  the  19th  November,  1814,  and  an  assignment 
therefore  by  the  commissioners  to  Messrs.  Gibson,  Wilson  and  Howell, 
dated  the  1st  December,  1814,  by  reason  of  which  and  by  force  of  the 
statute  in  such  case,  etc.,  the  interest,  title,  and  right  to  indorse  the 
said  promissory  note  in  the  declaration  mentioned,  before  and  at  the 
time  of  the  indorsement  by  G.  Clarke,  became  and  was  vested  in  the 
>aid  assignees,  and  not  in  the  said  Clarke,  and  thereby  the  indorsement 
of  Clarke  became  void,  and  created  no  right  in  the  plaintiffs  to  sue. 
The  plaintiffs  joined  issue  on  the  first  plea,  and  replied  to  the  second, 
that  after  the  assignment  to  the  assignees,  the  indorsement  of  Clarke 
was  made  by  him  by  and  with  the  consent  of  the  said  assignees.  Re- 
joinder denying  such  consent,  whereupon  issue  was  joined.  At  the 
trial,  before  Abbott,  C  J.,  at  the  adjourned  sittings  at  Guildhall,  after 
Hilary  term.  1821,  a  verdict  was  found  for  the  plaintiffs  for  £51.  10s.. 
subject  to  the  opinion  of  the  court  upon  a  case  which  stated  the  issuing 
of  the  commission,  and  the  assignment  to  the  assignees  named  in  the 
plea,  and  that  they  executed  a  power  of  attorney  to  Clarke  to  collect 
debts,  and  sue  in  their  names,  etc.  At  the  time  of  the  bankruptcy  the 
defendant  was  indebted  to  Clarke's  separate  estate  in  a  sum  much 
e.xceeding  the  amount  for  which  the  promissory  note  was  given.  Wil- 
son was  the  sole  acting  assignee,  and  he  having  desired  Clarke  to  pro- 

•  Adirmed  in  the  Iluuse  of  Lords,  1  II.  Bl.  509. 


Ch.  1)  MAKER    AND    ACCEPTOR.  467 

ceed  against  the  defendant  for  the  recovery  of  the  debt,  Clarke  pro- 
posed to  take  that  debt  upon  his  own  account,  and  Wilson  assented  to 
that  proposal.  Clarke  informed  the  defendant  of  this  arrangement, 
and  he  gave  the  promissory  note  in  question  in  part  payment  of  his 
debt ;  Clarke  indorsed  it  for  a  bona  fide  debt  to  Knight  and  Freeman, 
and  the  latter  indorsed  it  for  a  valuable  consideration  to  the  plaintiffs. 
Neither  Knight  and  Freeman  nor  the  plaintiff  knew  of  the  circum- 
stances under  which  the  note  was  given.  Upon  counsel  being  heard 
in  a  former  term,  the  court  were  of  opinion  that  there  was  not  any 
evidence  that  the  note  was  indorsed  by  Clarke  with  the  consent  of  all 
the  assignees,  and  they  ordered  the  verdict  to  be  entered  for  the  plain- 
tiffs on  the  first  issue,  and  for  the  defendant  on  the  second  issue,  and 
that  the  case  should  be  submitted  for  argument  upon  the  following 
question,  whether  or  not  the  plaintiffs  were  entitled  to  the  judgment  of 
the  court  upon  the  whole  record  so  framed,  notwithstanding  the  ver- 
dict found  for  the  defendant  on  the  special  plea.^° 

Bayley,  J.  I  am  of  opinion  that  the  plaintiffs  are  entitled  to  retain 
their  verdict  on  the  general  issue,  and  that  the  verdict  on  the  special 
plea  is  not  sufficient  to  deprive  them  of  the  judgment  in  this  case. 
This  is  an  action  upon  a  note  payable  to  Clarke  or  to  the  order  of 
Clarke.  The  defendant,  therefore,  by  making  such  note,  intimates  to 
all  persons  that  he  considers  Clarke  capable  of  making  an  order  suffi- 
cient to  transfer  the  property  in  the  note.  The  defense  now  set  up  is, 
that  although  he  has  issued  a  security  to  the  world,  importing  on  the 
face  of  it  that  Clarke  was  capable  of  making  such  an  order,  yet  that 
in  fact  he  was  incapable.  Now  this  is  a  fraud  upon  the  public.  It  is 
a  general  principle,  applicable  to  all  negotiable  securities,  that  a  person 
shall  not  dispute  the  power  of  another  to  indorse  such  an  instrument, 
when  he  asserts  by  the  instrument  which  he  issues  to  the  world,  that 
the  other  has  such  power.  Thus  in  Taylor  v.  Croker,  4  Esp.  187,  be- 
fore Lord  Ellenborough,  a  bill  was  drawn  by  two  infants ;  the  defend- 
ants accepted,  and  the  two  infants  indorsed,  and  it  was  held  that  inas- 
much as  the  defendants  had,  by  accepting  the  bill,  admitted  that  the 
infants  were  competent  to  indorse,  they  should  not  be  permitted  after- 
wards to  say  that  they  were  incompetent.  So  in  this  case  the  defendant 
has  affirmed  to  the  world  that  Clarke  was  capable  of  making  an  or- 
der. The  facts  are,  that  the  bankrupt  indorsed  to  Knight  and  Free- 
man, and  that  they  indorsed  to  the  plaintiffs,  and  that  neither  the  plain- 
tiffs or  Knight  and  Freeman  knew  that  Clarke  was  a  bankrupt.  It  is 
settled  by  many  decided  cases,  that  though  an  uncertificated  bankrupt 
cannot  resist  the  claim  of  his  assignees  to  any  property  which  he  has 
acquired  since  his  bankruptcy,  yet  that  he  may  acquire  property  and 
maintain  actions  in  respect  of  it,  unless  the  assignees  interfere  to  pre- 
vent him.  This  question  was  much  discussed  in  Chippendale  v.  Tom- 
linson.     That  was  an  action  upon  an  attorney's  bill.     The  defendant 

10  The  arguments  of  counsel  and  the  opinions  of  Abbott,  C.  J.,  and  Holroyd. 
J.,  are  omitted. 


468  LIABILITY  OF  PARTIES.  (Part  3 

pleaded  the  bankruptcy  of  the  plaintiff  before  the  bill  was  incurred, 
and  that  plea  was  held  insufficient,  on  the  ground  that  the  rights  of  the 
assignees  were  not  to  be  taken  into  consideration,  unless  they  them- 
selves interfered.  That  case  has  since  been  followed  by  Fowler  v. 
Downe,  and  other  cases.  It  appears  to  me  that  as  the  defendant,  by 
the  form  of  his  note,  has  stated  that  he  will  pay  to  Clarke's  order,  he 
cannot  now  allege  Clarke's  inability  to  make  an  order  as  a  ground  of 
defense  to  this  action;  and,  secondly,  that  the  bankrupt  may  acquire 
property  subsequently  to  his  bankruptcy,  and  retain  that  property 
against  all  the  world,  except  his  assignees. 
Judgment  for  the  plaintiffs. 


HALIFAX  et  al.  v.  LYLE. 
(Court   of   Exchequer,    ISiO.     3   Exch.   446.) 

Assumpsit.  The  first  count  stated,  that  the  Governor  and  Company 
of  Copper  Miners  in  England,  on  the  15th  of  July,  A.  D.  1847,  made 
their  bill  of  exchange  in  writing,  and  directed  the  same  to  the  defend- 
ant, and  thereby  required  him  to  pay  to  the  order  of  the  said  Governor 
and  Company  of  Copper  Miners  in  England  £2,000.  twelve  months  aft- 
er the  date  thereof,  which  period  had  elapsed  before  the  commencement 
of  this  suit,  and  the  defendant  then  accepted  the  said  bill,  and  the  said 
Governor  and  Company  of  Copper  Miners  in  England  then  indorsed 
the  same  to  the  plaintiff's,  and  the  defendant  then  promised  the  plain- 
tiffs to  pay  them  the  amount  of  the  said  bill,  according  to  the  tenor  and 
effect  thereof,  and  of  the  said  acceptance  and  indorsement.  Breach, 
nonpayment.     *     *     *  ^^ 

The  defendant  also  pleaded,  fifthly,  that  the  said  Governor  and  Com- 
pany of  the  Copper  Miners  in  England,  by  whom  the  said  bill  is  al- 
leged to  have  been  made,  as  in  that  count  mentioned,  before  and  at 
the  time  of  the  making  and  indorsing  of  the  said  bill  of  exchange, 
^respectively  \Vere,  and  from  thence  .-liitlierto  have  been,  and  still  are, 
a  body  politic  and  corporate  in  name  and  in  deed,  made,  created,  con- 
stituted aftd  incorporated  by  and  under  the  name  and  style  of  the  Gov- 
ernor and  Company  of  the  Copper  Miners  in  England,  under  and  by 
virtue  of  certain  letters  patent,  etc. ;  and  that  the  said  bill  of  exchange 
purported  to  be  and  was  a  bill  made  and  drawn  by  the  said  body  cor- 
porate, and  was  accepted  by  him  the  defendant,  as  a  bill  so  made  and 
drawn  by  the  said  body  corporate,  and  not  otherwise;  and  that  the 
said  body  corporate  had  not,  at  the  time  of  the  said  indorsement,  or  at 
any  time  whatever,  authority  to  indorse  any  bill  or  bills  of  exchange, 
or  to  issue  or  negotiate  any  such  bill  or  bills,  or  to  pass  or  transfer 
the  right  to  receive  payment  of  such  bill  or  bills,  by  an  indorsement 
thereof  in  the  name  or  under  the  designation  of  the  Governor  and 

11  Tbe  fourth  plea  aud  the  arguments  of  counsel  are  omitted. 


Ch.  1)  MAKER    AND    ACCEPTOR.  469 

Company  of  Copper  Miners  in  England,  or  otherwise  howsoever.  Ver- 
ification. 

Special  demurrer  to  the  fourth  plea,  on  the  ground  that  it  was  an 
argunientative  denial  of  the  indorsement  as  alleged  in  the  declaration. 

Special  demurrer  to  the  fifth  plea,  assigning  for  causes  that  it  was 
an  argumentative  denial  of  the  indorsement ;  that  it  attempted  to  put 
in  issue  matter  which  the  defendant  was  estopped  from  denying,  viz., 
that  the  Governor  and  Company  of  Copper  Miners  ever  had  authority 
to  indorse  the  bill,  as  in  the  declaration  mentioned ;  that  it  appeared 
on  the  face  of  the  declaration,  that  the  bill  was  payable  to  the  or- 
der of  the  said  drawers  thereof,  and  therefore  that  the  defendant  could 
not  deny  the  authority  of  the  drawers  of  the  bill  to  indorse,  as  in  the 
declaration  mentioned;  that  the  plea  left  it  doubtful  whether  the  de- 
fendant meant  to  deny  that  the  Governor  and  Company  of  Copper  Min- 
ers ever  had  authority  to  indorse,  etc.,  bills,  or  whether  their  authority 
to  indorse,  etc.,  bills,  expired  or  determined  after  the  accepting  of  the 
bill,  and  if  the  latter,  that  the  plea  should  have  shown  how  and  in 
what  way  such  power  and  authority  ceased  or  was  determined;  that 
the  plea  attempted  to  put  in  issue,  and  did  put  in  issue,  matter  of  law ; 
that  the  plea  was  bad,  for  stating  that  the  drawers  had  not  authority 
to  indorse  any  bill  of  exchange,  instead  of  showing  how  or  why,  or 
facts  from  which  the  court  could  judge  whether  such  drawers  of  the 
bill  had  such  power  or  not ;  that  the  plea  should  have  shown  that  the 
drawers  of  the  bill  were  not  a  trading  corporation  at  the  time  of  the 
indorsement  of  the  bill.    Joinder  in  demurrer. 

The  defendant's  points  for  argument  were,  that  the  fourth  plea  ad- 
mitted an  indorsement  in  fact  by  writing  on  the  back  of  the  bill,,  but 
avoided  the  efifect  of  it,  by  showing  that  such  indorsement  could  not 
transfer  the  right  to  sue  upon  the  bill,  for  that  a  corporate  body  can- 
not, unless  specially  authorized  by  act  of  Parliament,  transfer  any 
property  or  right,  except  by  or  under  its  common  seal ;  and  if  there 
were  any  such  special  authority  enabling  them  so  to  do,  the  plaintiffs 
should  have  shown  it  by  their  replication ;  that  the  fifth  plea  was  a 
sufficient  answer,  because  the  doctrine,  that  an  acceptor  is  estopped 
from  denying  that  the  bill  is  the  bill  of  the  supposed  maker,  does  not 
apply  to  an  indorsement  of  the  bill  by  the  maker,  inasmuch  as  the  es- 
toppel rests  on  the  ground  that  the  bill  was  accepted  after  it  was  made, 
and  with  full  knowledge  by  the  acceptor  of  the  manner  of  making  it ; 
whereas  the  indorsement  may  be  subsequent  to  the  acceptance,  and  con- 
sequently not  admitted  by  it ;  also,  that  the  objection  was  not  an  objec- 
tion of  fact,  which  could  be  met  by  an  estoppel,  but  an  objection  of 
law,  arising  out  of  the  fact  that  the  company  were  a  corporate  body, 
and  not  authorized  to  indorse  bills. 

The  judgment  of  the  court  was  now  delivered  by 

Parke,  B.  We  think  our  judgment  in  this  case  must  be  for  the 
plaintififs.  [After  stating  the  pleadings,  his  Lordship  proceeded :]  On 
the  argument,  the  learned  counsel  for  the  defendant  very  properly  gave 


470  LIABILITY  OF  PAUTiES.  (Part  3 

up  the  fourth  plea,  and  admitted  that  the  judgment  of  the  court  upon 
that  must  be  against  him. 

He  argued  very  ably  in  support  of  the  fifth;  but  we  think  that  also 
is  bad,  on  the  ground  that  the  acceptor  of  a  bill,  payable  to  the  order 
of  the  drawer,  cannot  deny  the  authority  of  the  drawer  to  draw  and 
indorse.  The  case  of  Sanderson  v.  CoUman,  4  Man.  &  G.  209,  was 
relied  upon  on  the  part  of  the  defendant.  That  case  shows,  that  an 
estoppel  in  pais  may  be  replied ;  it  does  not  follow  that  it  must.  My 
Brother  Cresswell  gives  his  opinion,  that  the  plea  itself  was  clearly 
bad,  because  it  set  up  as  a  defense  what,  if  true,  would  be  no  answer 
to  the  action ;  and  we  think  that  opinion  is  correct.  The  law  is  well 
settled  by  that  and  former  cases  (Drayton  v.  Dale,  2  B.  &  C.  293; 
Taylor  v.  Croker,  4  Esp.  187)  that  the  acceptor  of  a  bill,  or  maker  of  a 
note,  payable  to  the  order  of  another,  cannot  be  permitted  to  deny  the 
authority  of  that  person  to  indorse.  It  is,  in  truth,  a  contract  with  that 
other  person,  prima  facie  for  a  valuable  consideration,  to  pay  to  his 
order,  and  which  is  transferable  by  the  law  merchant;  and  that  con- 
tract he  is  bound  to  perform,  as  he  is  all  other  valid  contracts ;  and  if, 
for  the  want  of  such  a  consideration,  it  be  not  a  binding  contract,  he 
must  show  it  by  an  affirmative  allegation.  If  the  fact  be  that  he  ac- 
cepted the  bill  or  made  the  note,  leaving  a  blank  for  the  payee's  name, 
and  the  name  was  filled  in  without  his  authority,  he  ought  to  have  de- 
nied the  acceptance  of  the  bill,  or  the  making  of  the  note.  On  this 
plea  it  must  be  assumed  that  the  acceptance  was  put  on  the  bill  after 
it  was  drawn ;  or  that,  if  it  was  accepted  with  the  name  of  the  drawer 
and  payee  in  blank,  the  name  was  afterwards  filled  up  by  the  defend- 
ant's authority.  That  being  so,  and  the  plaintififs  being  assumed  to  be 
holders  for  value,  and  bona  fide,  the  contrary  not  being  pleaded,  what 
is  termed  an  estoppel  appears  on  the  declaration,  and  the  plea  is  there- 
fore bad.  There  is  stated  on  the  face  of  the  pleadings  a  valid  contract, 
and  binding  by  the  law  merchant  on  the  defendant,  to  pay  to  the  in- 
dorsee of  the  corporation. 

Judgment  for  the  plaintififs. 


GOVERNOR  &  CO.  OF.  BANK  OF  ENGLAND  v.  VAGLI^ 

ANO  BROS. 

(House   of  Lords,   [1891]    App.    Cas.   107.) 

Action  by  Vagliano  Bros,  against  the  Bank  of  England  for  a  decla- 
ration that  the  defendant,  which  was  plaintiffs'  banker,  was  not  entitled 
to  debit  plaintiffs  with  the  amounts  paid  on  their  behalf  by  defendant 
upon  certain  forged  bills  of  exchange  drawn  upon  and  accepted  by 
them  payable  at  defendant's  bank.  Judgment  for  plaintififs.  Defend- 
ant appeals. 


Ch.  1)  MAKER    AND    ACCEPTOR.  471 

Lord  Herschell.  My  Lords,  I  propose  to  deal  at  the  outset  with 
the  question  of  the  construction  of  the  Bills  of  Exchange  Act,  which 
gave  rise  to  a  difference  of  opinion  in  the  court  below. 

The  facts  material  to  this  part  of  the  case  I  take  to  be  these.  The 
bills  in  question  purported  to  be  drawn  by  Vucina,  but  were,  in  fact, 
entirely  the  production  of  Glyka,  a  clerk  in  the  service  of  Vagliano 
Bros.,  the  respondents.  He  fraudulently  procured  the  necessary  forms 
to  be  printed  and  filled  them  up,  inserting  the  name  of  Vucina  as  draw- 
er and  of  C.  Petridi  &  Co.  as  payees.  A  firm  of  C.  Petridi  &  Co.  car- 
ries on  business  at  Constantinople,  and  had  been  the  payee  of  some 
genuine  bills  previously  drawn  by  Vucina  upon  Vagliano  Bros.  I  think 
there  can  be  no  doubt  that  this  fact  suggested  to  Glyka  the  insertion  of 
the  name  of  C.  Petridi  &  Co. ;  but  I  do  not  believe  that  he  made  this 
choice  with  the  idea  that  it  would  assist  his  fraud.  I  entertain  no 
doubt,  under  the  circumstances  disclosed  bv  the  evidence,  that  Vagli- 
ano Bros,  would  equally  have  accepted  the  bills  if  any  other  name  had 
been  inserted,  and  that  Glyka  knew  this.  It  was  of  course  never  in- 
tended by  Glyka  that  Petridi  &  Co.  should  be  the  persons  to  whom  the 
bill  should  be  paid.  The  name  was  inserted  merely  to  make  the  bills 
complete  in  form.  The  bills  were  accepted  by  Vagliano  Bros,  payable 
at  the  Bank  of  England,  who  were  requested  by  Vagliano  Bros,  to  pay 
them  at  maturity.  They  were  presented  for  payment  with  indorse- 
ments to  all  appearance  regular,  these  having  been  written  by  Glyka, 
and  were  paid  to  the  persons  presenting  them  at  maturity. 

The  conclusion  at  which  the  majority  of  the  Court  of  Appeal  ar- 
rived with  reference  to  the  construction  of  the  subsection  of  the  Bills 
of  Exchange  Act  with  which  your  Lordships  have  to  deal  is  thus  stat- 
ed: "The  word  'fictitious'  must  in  each  case  be  interpreted  with  due 
regard  to  the  person  against  whom  the  bill  is  sought  to  be  enforced. 
If  the  drawer  is  the  person  against  whom  the  bill  is  to  be  treated  as  a 
bill  payable  to  bearer,  the  term  'fictitious'  may  be  satisfied  if  it  is  fic- 
titious as  regards  himself,  or  in  other  words  fictitious  to  his  knowl- 
edge. If  the  obligations  of  the  acceptor  are  in  question,  and  the  ac- 
ceptor is  the  person  against  whom  the  bill  is  to  be  so  treated,  'fictitious' 
must  mean  fictitious  as  regards  the  acceptor,  and  to  his  knowledge. 
Such  an  interpretation  is  based  on  good  sense  and  sound  commercial 
principle."  ^^ 

The  conclusion  thus  expressed  was  founded  upon  an  examination 
of  the  state  of  the  law  at  the  time  the  Bills  of  Exchange  Act  was  pass- 
ed. The  prior  authorities  were  subjected  by  the  learned  judges  who 
concurred  in  this  conclusion  to  an  elaborate  review,  with  the  result  that 

12  In  reaching  this  conclusion  the  Court  of  Appeal  reviewed  the  following 
cases-.  Bennett  v.  Farnell,  1  Camp.  130,  180c  (1807);  Tatlock  v.  Harris,  3 
Term  Rep.  174  (1789) ;  Vere  v.  Lewis,  3  Terra  Rep.  182  (1789) ;  Gibson  v. 
Minet,  1  H.  Bl.  5G9.  288  (1791) ;  Cooper  v.  JMeyer,  10  B.  &  C.  468  (1830) ; 
Beeman  v.  Duck.  11  M.  &  W.  251  (1843) ;  Phillips  v.  Imthurn,  L.  R.  1  C.  P. 
463  (1866);    Ashphitel  v.  Bryan,  5  B.  &  S.  723   (1864). 


47J  LIABILITY  OF  PAitTiES.  (Part  3 

it  was  established  to  their  satisfaction  that  a  bill  made  payable  to  a  fic- 
titious person  or  his  order  was,  as  against  the  acceptor,  in  effect  a  bill 
payable  to  bearer,  only  when  the  acceptor  was  aware  of  the  circum- 
stance that  the  payee  was  a  fictitious  person,  and,  further,  that  his  lia- 
bility in  that  case  depended  upon  an  application  of  the  law  of  estoppel. 
It  appeared  to  those  learned  judges  that  if  the  exception  was  to  be 
further  extended,  it  would  rest  upon  no  principle,  and  tliat  they  might 
well  pause  before  holding  that  section  7,  subsec.  3,  of  the  statute  was 
"intended  not  merely  to  codify  the  existing  law,  but  to  alter  it  and  to 
introduce  so  remarkable  and  unintelligible  a  change." 

My  Lords,  with  sincere  respect  for  the  learned  judges  who  have 
taken  this  view,  I  cannot  bring  myself  to  think  that  this  is  the  proper 
way  to  deal  with  such  a  statute  as  the  Bills  of  Exchange  Act,  which 
was  intended  to  be  a  code  of  the  law  relating  to  negotiable  instru- 
ments. I  think  the  proper  course  is  in  the  first  instance  to  examine 
the  language  of  the  statute  and  to  ask  what  is  its  natural  meaning,  un- 
infiuenced  by  any  considerations  derived  from  the  previous  state  of  the 
law,  and  not  to  start  with  inquiring  how  the  law  previously  stood,  and 
then,  assuming  that  it  was  probably  intended  to  leave  it  unaltered,  to 
see  if  the  words  of  the  enactment  will  bear  an  interpretation  in  con- 
formity with  this  view. 

If  a  statute,  intended  to  embody  in  a  code  a  particular  branch  of  the 
law,  is  to  be  treated  in  this  fashion,  it  appears  to  me  that  its  utility 
will  be  almost  entirely  destroyed,  and  the  very  object  with  which  it 
was  enacted  will  be  frustrated.  The  purpose  of  such  a  statute  surely 
was  that  on  any  point  specifically  dealt  with  by  it,  the  law  should  be 
ascertained  by  interpreting  the  language  used  instead  of,  as  before,  by 
roaming  over  a  vast  number  of  authorities  in  order  to  discover  what 
the  law  was,  extracting  it  by  a  minute  critical  examination  of  the  prior 
decisions,  dependent  upon  a  knowledge  of  the  exact  etifect  even  of  an 
obsolete  proceeding  such  as  a  demurrer  to  evidence.  I  am  of  course 
far  from  asserting  that  resort  may  never  be  had  to  the  previous  state  of 
the  law  for  the  purpose  of  aiding  in  the  construction  of  the  provisions 
of  the  code.  If,  for  example,  a  provision  be  of  doubtful  import,  such 
resort  would  be  perfectly  legitimate.  Or,  again,  if  in  a  code  of  the  law 
of  negotiable  instruments  words  be  found  which  have  previously  ac- 
quired a  technical  meaning,  or  been  used  in  a  sense  other  than  their 
ordinary  one,  in  relation  to  such  instruments,  the  same  interpretation 
might  well  be  put  upon  them  in  the  code.  I  give  these  as  examples 
merely  ;  they,  of  course,  do  not  exhaust  the  category.  What,  however, 
I  am  venturing  to  insist  upon,  is  that  the  first  step  taken  should  be  to 
interpret  the  language  of  the  statute,  and  tliat  an  appeal  to  earlier  de- 
cisions can  only  be  justified  on  some  special  ground. 

One  further  remark  I  have  to  make  before  I  proceed  to  consider  the 
language  of  the  statute.  The  Bills  of  Exchange  Act  was  certainly  not 
intended  to  be  merely  a  code  of  the  existing  law.     It  is  not  open  to 


Ch.  1)  MAKER    AND    ACCEPTOR.  473 

question  that  it  was  intended  to  alter,  and  did  alter  it  in  certain  re- 
spects. And  I  do  not  think  that  it  is  to  be  presumed  that  any  particu- 
lar provision  was  intended  to  be  a  statement  of  the  existing  law,  rather 
than  a  substituted  enactment. 

Turning  now  to  the  words  of  the  subsection,  I  confess  they  appeal 
to  me  to  be  free  from  ambiguity.  "Where  the  payee  is  a  fictitious  or 
nonexistent  person"  means,  surely,  according  to  ordinary  canons  of 
construction,  in  every  case  where  this  can,  as  a  matter  of  fact,  be  predi- 
cated of  the  payee. 

I  can  find  no  warrant  in  the  statute  itself  for  inserting  any  limitation 
or  condition.  I  am  putting  aside  for  the  present  the  question  by  whom 
a  bill  answering  the  description  of  the  subsection  may  be  treated  as 
payable  to  bearer,  and  I  am  accepting  too  for  the  moment  the  meaning 
attributed  by  the  majority  of  the  Court  of  Appeal  to  the  word  "ficti- 
tious," viz.  a  creation  of  the  imagination,  confining  myself  to  the  ques- 
tion in  what  cases  a  bill  purporting  on  the  face  of  it  to  be  payable  to 
order  may  be  treated  as  payable  to  bearer.  I  find  it  impossible,  with- 
out doing  violence  to  the  language  of  the  statute,  to  give  any  other  an- 
swer than  this — In  all  cases  in  which  the  payee  is  a  fictitious  or  non- 
existent person.  The  majority  of  the  Court  of  Appeal  read  the  sec- 
tion thus :  "Where  the  payee  is  a  fictitious  or  nonexistent  person,  the 
bill  may,  as  against  any  party  who  had  knowledge  of  the  fact  be  treat- 
ed as  a  bill  payable  to  bearer."  It  seems  to  me  that  this  is  to  add  to 
the  words  of  the  statute  and  to  insert  a  limitation  which  is  not  to  be 
found  in  it  or  indicated  by  it.  It  is  said  that  when  the  acceptor  is  the 
person  against  whom  the  bill  is  to  be  treated  as  payable  to  bearer,  "  'fic- 
titious' must  mean  fictitious  as  regards  the  acceptor,  and  to  his  knowl- 
edge." With  all  respect,  I  am  unable  to  see  why  it  must  mean  this.  I 
confess  I  cannot  altogether  follow  the  meaning  of  the  words  fictitious 
"as  regards"  the  acceptor.  I  have  a  difficulty  in  seeing  how  a  payee, 
who  is  in  fact  a  "fictitious"  person  in  the  sense  in  which  that  word  is 
being  used,  can  be  otherwise  than  fictitious  as  regards  all  the  world — 
how  such  a  payee  can  be  "fictitious"  as  regards  one  person  and  not 
another.  The  truth  is  the  words  "as  regards"  the  acceptor  are  treat- 
ed as  equivalent  to  the  words  "to  the  knowledge  of"  the  acceptor.  But 
I  do  not  think  these  expressions  are  synonymous.  It  seems  to  me  that 
to  import  into  the  statute  after  the  words  "fictitious  person"  the  words 
"as  regards"  the  acceptor  or  drawer,  as  the  case  may  be,  and  then  to 
interpret  those  words  as  meaning  "to  the  knowledge  of,"  only  tends 
to  obscure  the  fact  that  the  condition  that  the  payee  must  be  fictitious 
to  the  knowledge  of  the  person  sought  to  be  charged  as  upon  a  bill 
payable  to  bearer  is  being  introduced  into  the  enactment. 

For  the  reasons  I  have  given  I  find  myself  compelled  to  the  conclu- 
sion, notwithstanding  my  respect  for  those  who  have  expressed  a  con- 
trary view,  that  in  order  to  establish  the  right  to  treat  a  bill  as  paya- 
ble to  bearer  it  is  enough  to  prove  that  the  payee  is  in  fact  a  fictitious 


474  LIABILITY    OF    I'AHTIES.  (Part    S 

person,  and  that  it  is  not  necessary  if  it  be  sought  to  charge  the  accept- 
or to  prove  in  addition  that  he  was  cognizant  of  the  fictitious  character 
of  the  payee. 

My  Lords,  if  the  conclusion  which  I  have  indicated  as  being,  in  my 
opinion,  the  sound  one,  involved  some  absurdity  or  led  to  some  mani- 
festly unjust  result,  I  might  perhaps,  even  at  the  risk  of  straining  the 
language  used,  strive  to  put  some  other  interpretation  upon  it.  But  I 
cannot  see  that  this  is  so,  or  that  the  interpretation  I  have  adopted  does 
any  violence  to  good  sense,  or  is  otherwise  than  in  accordance  with 
sound  commercial  principle.  I  will  assume  that  as  the  law  stood  at 
the  time  the  Bills  of  Exchange  Act  was  passed,  a  bill  drawn  to  the 
order  of  a  fictitious  payee  could  have  been  treated  as  a  bill  payable  to 
bearer  only  as  against  a  party  who  knew  that  the  payee  was  fictitious. 
This  decision  even  was  arrived  at  little  more  than  a  century  ago,  and 
was  dissented  from  by  distinguished  judges,  and  it  is  obvious  from  the 
observations  of  Lord  Ellenborough  in  Bennett  v.  Farnell,  1  Camp.  130, 
ISOc,  that  by  some  eminent  lawyers  at  least  it  was  regarded  rather  as 
a  departure  from  strict  principle,  which  ought  not  to  be  further  ex- 
tended than  as  an  embodiment  of  sound  commercial  principle. 

But  is  it  impossible  to  take  any  step  beyond  this  without  violating 
sound  principle  and  working  injustice?  Let  me  draw  attention  for  a 
moment  to  the  relative  position  and  rights  of  the  drawer  and  acceptor 
of  a  bill  of  exchange.  A  drawee  who  accepts  a  bill  does  so  either  be- 
cause he  has  in  his  hands  moneys  of  the  drawer,  or  expects  to  have 
them  before  the  bill  falls  due,  or  because  he  is  willing  to  give  the  cred- 
it of  his  name  to  the  drawer,  and  to  make  him  an  advance  by  payment 
of  his  draft.  It  is  immaterial  to  the  acceptor  to  whom  the  drawer  di- 
rects him  to  make  payment ;  that  is  a  matter  for  the  choice  of  the 
drawer  alone.  The  acceptor  is  only  concerned  to  see  that  he  makes 
the  payment  as  directed,  so  as  to  be  able  to  charge  the  drawer.  It  is 
in  truth  only  with  the  drawer  that  the  acceptor  deals ;  it  is  at  his  in- 
stance that  he  accepts ;  it  is  on  his  behalf  that  he  pays ;  and  it  is  to 
him  that  he  looks  either  for  the  funds  to  pay  with,  or  for  reimburse- 
ment if  he  holds  no  funds  of  the  drawer  at  the  time  of  payment. 

In  the  ordinary  case,  where  the  payee  designated  in  the  bill  is  a  real 
person  intended  by  the  drawer  to  receive  payment,  either  by  himself  or 
by  some  transferee,  the  acceptor  can  only  charge  the  drawer,  if  he  pays 
the  person  so  designated,  or  some  one  deriving  title  through  him.  If 
payment  be  made  to  any  other  person,  the  drawer's  liability  on  the  bill 
is  not  discharged  by  payment ;  he  will  or  may  remain  liable  to  the  real 
payee,  or  those  claiming  under  him,  and  the  acceptor  having  paid  oth- 
erwise than  according  to  the  directions  of  the  drawer  cannot  justify 
the  use  of  his  funds  in  making  the  payment,  or  claim  to  be  reimbursed 
by  him.  But  now  suppose  the  drawer  inserts  as  payee  the  name  of  a 
fictitious  person,  requests  the  drawee  to  accept  a  bill  so  drawn,  indor- 
ses the  payee's  name,  and  puts  the  bill  into  circulation.  He  certainly 
intended  it  to  obtain  currency  and  to  be  paid  at  maturity,  and  he  as. 


Ch.  1)  MAKER    AND    ACCEPTOR.  475 

certainly  did  not  intend  it  to  be  paid  only  to  the  payee  named,  or  some 
one  deriving  title  through  him.  Nor,  as  it  seems  to  me,  can  it  reason- 
ably be  said  that  he  intended  to  direct  the  drawee  to  pay  such  person 
and  such  person  only. 

What,  then,  is  the  position  of  a  lawful  holder  of  a  bill  so  drawn? 
I  do  not  understand  it  to  be  doubted  that  even  before  the  Bills  of  Ex- 
change Act  such  a  holder  could  enforce  payment  of  the  bill  against 
the  drawer,  for  he  not  merely  knew  that  the  payee  designated  was  a 
fictitious  person,  but  was  himself  the  author  of  the  fiction.  As  against 
the  drawer,  then,  such  a  bill  could  be  treated  as  payable  to  bearer.  But 
if  it  cannot  be  so  treated  as  against  the  acceptor,  the  holder,  who,  it 
may  be,  bought  or  discounted  it  on  the  faith  of  the  acceptance,  relying 
on  the  credit  of  the  acceptor,  and  unwilling  to  trust  to  that  of  the 
drawer  alone,  is  deprived  of  that  upon  which  he  relied,  of  the  liability 
which  he  regarded  as  his  security  for  payment.  The  holder  in  such 
a  case  suffers  wrong.  Would  any  injustice  result  if  the  bill  could,  as 
against  the  acceptor  also,  be  treated  as  payable  to  bearer?  Tlie  drawer 
must  be  taken  to  have  intended  the  bill  to  be  paid  by  the  acceptor  at 
maturity — but  to  whom?  Not  to  the  fictitious  payee,  or  some  one 
claiming  through  him.  Why  not,  then,  to  the  bearer,  who  can  hold  the 
drawer  liable  upon  the  bill,  and  treat  it  as  payable  to  him?  And  if  it 
were  the  law  that  the  acceptor  was  bound  in  such  a  case  to  pay  the 
bearer,  who  would  suffer?  Not  the  drawer,  for  payment  would  have 
been  made  to  a  person  who  could  compel  him  to  make  payment,  and 
he  could  have  no  ground  for  complaint  if  the  acceptor  used  his  funds 
in  thus  discharging  his  liability  on  the  bill,  or  in  case  he  had  not  pro- 
vided such  funds  if  he  were  held  liable  to  reimburse  the  acceptor. 
And  how  would  the  acceptor  suffer  in  such  a  case?  It  was  his  object 
in  accepting  the  bill  to  render  himself  liable  to  make  payment  to  the 
person  intended  by  the  drawer  to  receive  it,  either  out  of  moneys  pro- 
vided by  him,  or  looking  to  him  for  reimbursement.  His  position  un- 
der such  circumstances  would  be  precisely  what  it  would  have  been  if 
he  had  made  payment  to  a  real  person  designated  as  payee  or  to  those 
claiming  under  him.  And  it  might,  I  think,  fairly  be  said  that  he  was 
making  the  payment  in  accordance  with  the  intention  of  the  drawer. 

It  may  be  that  the  right  of  the  holder  to  treat  such  a  bill,  as  against 
an  acceptor  ignorant  of  the  fictitious  character  of  the  payee,  as  a  bill 
payable  to  bearer,  could  not  be  established  merely  by  an  appeal  to  the 
law  of  estoppel,  and  that  such  estoppel  would  exist  only  against  the 
drawer  who  knew  that  the  payee  was  a  fictitious  person.  I  will  assume 
that  this  was  the  law  prior  to  the  recent  statute.  But  why  should  not 
the  Legislature  have  intervened  with  a  positive  enactment  imposing 
this  liability  upon  the  acceptor — an  enactment  which,  it  seems  to  me, 
would  wrong  no  one,  and  would  prevent  a  holder  for  value  from  suf- 
fering wrong?  Estoppel  is  not  the  only  sound  principle  upon  which  a 
law  can  be  based.  The  law  of  estoppel  was  not  thought  to  afford  suf- 
ficient protection  to  those  dealing  with  the  apparent  owner  of  goods. 


470  LIABILITY    OF    PARTIES.  (Part    3 

The  Legislature  deemed  it  necessary  to  intervene,  and  the  Factors 
Acts  were  passed,  each  of  which  added  something  to  the  protection  of 
persons  so  deaHng.  Why,  then,  should  it  be  thought  improbable  that 
the  Legislature  should  have  created  in  the  holder  of  a  bill  drawn  pay- 
able to  a  fictitious  person  a  new  right  against  the  acceptor?  If  I  am 
correct  in  thinking  that  this  added  right  would  obviate  and  not  entail 
injustice,  that  it  would  make  the  law  more  reasonable  and  bring  it 
more  into  conformity  with  the  course  of  commercial  transactions,  I 
can  see  no  reason  for  doubting  that  the  Legislature  so  intended,  if  this 
be  the  plain  natural  meaning  of  the  words  they  have  used,  or  for  en- 
deavoring so  to  construe  the  language  as  to  find  in  it  no  more  than  a 
statement  of  the  previous  law. 

I  have  dwelt  at  some  length  upon  this  point  because  it  appeared  to  me 
important  to  show  that  the  words  of  the  enactment  might  have  their 
natural  effect  given  to  them  without  leading  to  results  either  unjust  or 
commercially  inconvenient.  But  I  desired  also  to  elucidate  the  prin- 
ciple upon  which  the  enactment  was,  in  my  opinion,  based;  because  this 
is  not  without  its  bearing  upon  the  next  question  to  be  considered,  and 
to  which  I  will  now  pass.     It  is  to  my  mind  one  of  greater  difficulty. 

Even  assuming,  it  is  said,  that  where  the  payee  is  a  "fictitious"  per- 
son the  bill  may  be  treated  as  against  the  acceptor  as  a  bill  payable  to 
bearer,  the  word  "fictitious"  is  only  applicable  to  a  creature  of  the  im- 
agination, having  no  real  existence,  whilst  in  the  present  case  "C.  Pe- 
tridi  &  Co."  was  the  name  of  a  firm  having  a  real  existence,  so  that  the 
payee  here  cannot  be  termed  a  fictitious  person.  But  are  the  words 
"where  the  payee  is  a  fictitious  person"  incapable  of  legitihiate  applica- 
tion in  any  other  case  than  that  suggested  ?  The  first  observation  I 
have  to  make  is  that,  if  so.  there  was  no  necessity  for  the  introduction 
of  the  word  "fictitious"  in  the  enactment ;  the  word  "nonexistent" 
would  have  sufficed.  It  was  argued  that,  whilst  a  fictitious  person  is 
one  who  has  never  existed,  a  nonexistent  person  is  one  who  has  existed 
but  whose  existence  has  ceased.  But  even  if  this  be  admitted,  the  word 
"nonexistent"  would  have  sufficed,  for  it  can  hardly  be  doubted  that  it 
is  employed  as  suitably  in  reference  to  that  which  has  never  existed  as 
to  that  which,  having  existed,  exists  no  longer. 

Without,  however,  dwelling  too  much  on  this  point,  which  may  per- 
haps have  a  historical  explanation,  let  me  call  attention  to  the  incon- 
venient complexity  and  strange  and  unmeaning  distinctions  to  which, 
as  it  seems  to  me,  the  construction  adopted  by  the  Court  of  Appeal 
would  give  rise.  If,  for  example,  a  drawer  inserts,  after  the  words 
"Pay  to  the  order  of,"  a  name  which  he  invents,  himself  indorses  that 
name,  and  puts  the  bill  into  circulation,  it  is  within  the  terms  of  the 
•statute,  and  may  be  treated  as  a  bill  payable  to  bearer.  But  if  he  in- 
serts the  first  name  that  occurs  to  him,  though  he  never  intends  a  bearer 
of  that  name  to  be  the  payee,  or  that  title  shall  only  be  made  through 
him,  but  himself  indorses  this  bill  and  puts  it  into  circulation  just  as 
he  did  the  other,  this  bill,  as  I  understand  the  court  below,  stands  in  a 


Ch.  1)  MAKER    AND    ACCEPTOR.  477 

different  position.  The  case  is  not  within  the  statute,  and  if  the  bill 
can  be  treated,  even  as  against  the  drawer,  as  a  bill  payable  to  bearer, 
this  does  not  depend  upon  the  words  of  the  enactment,  but  must  result 
from  the  rules  of  the  common  law,  which,  in  so  far  as  they  are  not  in- 
consistent with  the  express  provisions  of  the  act,  are  by  section  97, 
subsec.  2,  still  to  apply  to  bills  of  exchange. 

It  follows  that,  according  to  the  view  of  the  majority  of  the  Court 
of  Appeal,  the  Legislature  has  dealt  by  express  enactment  with  one 
case  of  estoppel — that  is  to  say,  where  the  payee  is  a  "fictitious  per- 
son" in  the  sense  which  they  attribute  to  those  words — but  has  left 
the  analogous  case,  where,  though  the  payee  was  not  fictitious  in  that 
sense,  the  name  was  inserted  as  a  mere  pretense,  and  without  any  in- 
tention that  payment  should  be  made  to  the  person  designated,  undealt 
with,  and  the  rights  and  liabilities  upon  the  bill  to  be  ascertained  by 
an  appeal  to  the  rules  of  the  common  law.  Certainly  a  strange  pro- 
ceeding in  a  code  of  this  description,  and  one  for  which  it  would  be 
difficult  to  find  a  satisfactory  explanation. 

But  this  is  not  all.  If  I  am  right  in  thinking  that  in  the  case  of  a 
payee  who  is  a  fictitious  person  (whatever  be  the  meaning  of  that  ex- 
pression) a  bill  may,  as  against  the  acceptor,  be  treated  by  a  lawful 
holder  as  payable  to  bearer,  whether  the  acceptor  knew  of  the  fiction 
or  not,  why  should  this  right  and  liability  differ  according  as  the  name 
inserted  as  payee  be  a  creature  of  the  imagination  or  correspond  to 
that  of  a  real  person ;  the  drawer  in  neither  case  intending  a  person  so 
designated  to  receive  payment,  and  in  each  case  himself  indorsing  the 
bill  in  the  name  of  the  nominal  payee  before  putting  it  into  circulation  ? 
I  am  at  a  loss  for  any  reason  why  this  distinction  should  exist.  It  is 
true  that  there  is  this  difference  between  the  two  cases — that  in  the  one 
an  indorsement  by  the  named  payee  is  physically  impossible,  whilst  in 
the  other  it  is  not.  But  I  do  not  think  this  dift'erence  affords  a  sound 
basis  for  a  distinction  between  the  respective  rights  and  liabilities  of 
the  drawer,  acceptor,  and  holder.  It  seems  to  me  that  it  would  in  each 
case  be  reasonable,  and,  on  the  same  grounds,  that  the  acceptor  should 
be  liable  to  the  holder  of  the  bill,  indemnifying  himself  out  of  the 
funds  of  the  drawer  or  obtaining  reimbursement  from  him. 

It  must  be  admitted,  of  course,  that  if  the  language  of  the  statute  is 
not  reasonably  capable  of  any  other  interpretation  than  that  adopted 
by  the  majority  of  the  Court  of  Appeal,  if  it  will  not  allow  of  a  con- 
struction which  would  cover  the  case  we  have  been  considering,  then 
one  must  submit  to  the  conclusion  that  the  Legislature  has  left  the  law 
in  this  respect  in  an  unsatisfactory  position  and  full  of  distinctions 
devoid  of  any  sound  principle.  But  are  we  compelled  to  this  con- 
clusion? Do  the  words  "where  the  payee  is  a  fictitious  person"  apply 
only  where  the  payee  named  never  had  a  real  existence?  I  take  it  to 
be  clear  that  by  the  word  "payee"  must  be  understood  the  payee  named 
on  the  face  of  the  bill ;  for  of  course  by  the  hypothesis  there  is  no 
intention  that  payment  should  be  made  to  any  such  person.     Where, 


478  LiAiui-iTY  OF  PARTIES.  (Part  3 

then,  the  payee  named  is  so  named  by  way  of  pretense  only,  without 
the  intention  that  he  shall  be  the  person  to  receive  payment,  is  it  doing 
violence  to  lan!:;-uage  to  say  that  the  payee  is  a  fictitious  person?  I 
think  not.  I  do  not  think  that  the  word  "fictitious"  is  exclusively  used 
to  qualify  that  which  has  no  real  existence.  When  we  speak  of  a 
fictitious  entry  in  a  book  of  accounts,  we  do  not  mean  that  the  entry 
has  no  real  existence,  but  only  that  it  purports  to  be  that  which  it  is 
not — that  it  is  an  entry  made  for  the  purpose  of  pretending  that  the 
transaction  took  place  which  is  represented  by  it. 

In  his  report  of  the  case  of  Stone  v.  Freeland.  1  H.  Bl.  316,  note. 
the  learned  reporter  speaks  of  there  havins^  been  in  that  case  "a  ficti- 
tious indorsement."  The  facts  were  that  a  bill  had  been  drawn  payable 
to  Butler  &  Co.,  and  indorsed  in  that  name.  There  was  a  house.  But- 
ler &  Co..  with  whom  Cox.  the  drawer,  had  dealings;  but  the  bill  had 
never  been  in  their  hands,  and  appeared  to  have  been  indorsed  by  Cox. 
Now,  in  what  sense  was  the  word  "fictitious"  here  used?  Not,  surely. 
to  convey  the  idea  that  the  indorsement  had  no  real  existence  and  was 
a  mere  creature  of  the  imagination,  but  that  it  was  put  forward  as  being 
that  which  it  was  not. 

These  seem  to  me  to  be  instances  (and  other  illustrations  might  be 
given)  of  an  analogous  use  of  the  word  "fictitious"  to  that  which,  I 
think,  may  be  attributed  to  it  in  the  statute.  Turning  to  the  interpre- 
tation of  the  word  "fictitious"  in  Dr.  Johnson's  Dictionary,  I  find 
amongst  the  meanings  given  are  "counterfeit."  "feigned."  It  seems 
to  me.  then,  that  where  the  name  inserted  as  that  of  the  payee  is  so  in- 
serted by  way  of  pretense  only,  it  may,  without  impropriety,  be  said 
that  the  payee  is  a  feigned  or  pretended,  or,  in  other  words,  a  fictitious 
person.  Stress  was  laid  upon  the  fact  that  the  words  of  the  statute 
are  "where  the  payee  is  a  fictitious  person."  and  not  "where  the  payee 
is  fictitious."  There  is  not.  to  my  mind,  any  substantial  difi^erence  in 
the  meaning  of  the  two  phrases  ;  and  I  cannot  think  that  the  Legislature 
intended  the  rights  and  liabilities  arising  upon  mercantile  instruments 
to  depend  upon  nice  distinctions  such  as  this. 

For  the  reasons  with  which  I  have  troubled  your  Lordships  at  some 
length,  I  have  arrived  at  the  conclusion  that,  whenever  the  name  in- 
serted as  that  of  the  payee  is  so  inserted  by  way  of  pretense  merely, 
without  any  intention  that  payment  shall  only  be  made  in  conformity 
therewith,  the  payee  is  a  fictitious  person  within  the  meaning  of  the 
statute,  whether  the  name  be  that  of  an  existing  person,  or  of  one  who 
has  no  existence,  and  that  the  bill  may,  in  each  case,  be  treated  by  a 
lawful  holder  as  payable  to  bearer. 

I  have  hitherto  been  considering  the  case  of  a  bill  drawn  by  the  per- 
son whose  name  is  attached  to  it  as  drawer,  whilst  the  bills  which  have 
given  rise  to  this  litigation  were  not  drawn  by  Vucina,  who  purported 
to  be  the  drawer,  his  name  being  forged  by  Glyka.  I  think  it  was 
hardly  contended  on  behalf  of  the  respondents  that  this  made  any  dif- 
ference.    The  bills  must,  under  the  circumstances,  as  against  the  ac- 


Ch.  1)  MAKER    AND    ACCEPTOR.  4c79 

ceptor,  be  taken  to  have  been  drawn  by  Vucina,  and  if  they  have  been 
made  payable  to  a  fictitious  person  within  the  meaning  of  the  statute, 
I  do  not  think  it  is  open  to  question  that  they  may,  as  against  the  ac- 
ceptor, be  treated  as  payable  to  bearer,  in  every  case  in  which  they 
could  have  been  so  treated  if  Vucina  had  drawn  them.  If,  in  the  pres- 
ent case,  Vucina  had  himself  drawn  the  bills  and  inserted  the  name  of 
C.  Petridi  &  Co.  as  payees,  as  a  mere  pretense  without  intending  any 
such  persons  to  receive  payment,  it  follows  from  what  I  have  said  that 
in  my  opinion  they  would  have  been  bills  whose  payee  was  a  fictitious 
person,  and  I  do  not  think  they  can  be  regarded  as  any  the  less  so,  in 
view  of  the  circumstances  under  which  the  name  of  C.  Petridi  &  Co. 
was  inserted. 

Assuming,  then,  that  the  bills  in  question  are  within  the  subsection 
of  the  Bills  of  Exchange  Act  which  we  are  considering,  and  may 
therefore  be  treated  as  bills  payable  to  bearer,  the  question  remains, 
By  whom  may  they  be  so  treated?  By  a  bona  fide  holder  for  value, 
certainly;  and  in  considering  the  construction  of  the  section,  I  have 
thus  far  limited  my  attention  to  the  case  of  such  a  holder.  It  is  the 
case  which  ordinarily  arises  in  the  course  of  commercial  transactions 
with  negotiable  instruments,  and  it  is  the  one,  therefore,  which  must 
be  taken  to  have  been  primarily  had  in  view  in  framing  a  law  to  de- 
termine the  rights  and  liabilities  in  respect  of  such  instruments.  But 
I  can  see  nothing  in  the  words  of  the  enactment  to  confine  their  ap- 
plication to  this  case. 

It  appears  to  me  that  the  natural  answer  to  the  question  which  I 
have  proposed  is  this :  A  bill,  within  the  subsection,  may  be  treated 
as  payable  to  bearer  by  any  person  whose  rights  or  liabilities  depend 
upon  whether  it  be  a  bill  payable  to  order  or  to  bearer.  I,  of  course, 
exclude  the  case  of  one  who  is  a  party  to,  or  who  has  notice  of,  a 
fraud.  At  all  events,  I  can  see  no  reason  why  a  banker  who  has  been 
requested  to  pay  the  bill  by  his  customer,  the  acceptor,  may  not  so 
treat  it.  Where  the  bill  is,  in  truth,  payable  to  order — that  is  to  say, 
where  the  drawer  intends  that  payment  should  be  made  only  to  the 
person  named  as  the  payee,  or  to  some  one  deriving  title  through  him — ■ 
then  the  direction  to  the  banker  must,  since  the  decision  in  Robarts  v. 
Tucker,  16  Q.  B.  560,  be  taken  to  be  a  direction  to  pay  to  such  person 
only.  But  where  the  payee  is  a  fictitious  person,  within  the  meaning 
of  the  subsection,  I  think  the  direction  to  the  banker  must  be  taken 
to  be  to  pay  the  bearer.  It  is  by  reason  of  his  filling  that  character 
that  the  holder  is  entitled  to  demand  payment  of  the  acceptor.  And 
when  a  banker  has  been  instructed  by  the  acceptor  to  pay  such  a  bill 
on  his  behalf,  it  is  to  the  person  filling  that  character  that  he  must  be 
taken  to  have  intended  the  payment  to  be  made.  If  the  holder  were  a 
bona  fide  holder  for  value  who,  if  payment  had  been  refused,  could 
hold  the  acceptor  liable,  I  do  not  think  this  could  be  doubted ;  and 
where  the  bill  is  one  which  might  be  treated  as  payable  to  bearer  by  a 
bona  fide  holder,  so  that  the  direction  to  the  banker  to  pay  the  bill  is  a 


480  LIABILITY  OF  PAUTiES.  (Part  3 

<iirection  to  pay  the  bearer,  I  do  not  think  that  the  banker  is  any  the 
less  entitled  to  charge  the  payment  of  the  bill  against  his  customer 
because  the  bearer  to  whom  payment  is  made  holds  it  under  such  cir- 
cumstances that  the  acceptor  could  successfully  resist  a  claim  for 
payment  by  him.  It  cannot  be  doubted  that  this  would  be  so  where 
a  bill  was  in  terms  payable  to  bearer,  and  I  do  not  think  there  is  any 
sound  distinction  in  the  relative  position  of  banker  and  customer  be- 
tween this  case  and  that  of  a  bill  which  may  be  treated  as  payable 
to  bearer. 

I  cannot  think  that  the  view  I  have  indicated  works  any  injustice. 
It  is  too  late  now  to  question  the  decision  in  Robarts  v.  Tucker,  16 
Q.  B.  5G0.  It  has  been  long  acted  upon  and  regarded  as  law,  though 
the  decision  certainly  seems  to  have  rested  upon  the  assumption  that 
ii  was  possible  for  a  banker  to  do  that  which  would  be.  commercially 
sspeaking,  absolutely  impracticable,  viz.  to  investigate  the  validity  of 
all  the  indorsements  before  he  complied  with  the  direction  of  his 
customers  and  paid  the  bill.  In  the  case  there  dealt  with,  however, 
the  complaint  of  the  customer  was  that  the  banker  had  paid  the  wrong 
person,  leaving  him  liable  to  pay  the  right  one.  Here  the  position  of 
the  customer  is  that  in  spite  of  his  direction  to  the  banker  to  pay  the 
bill  he  ought  not  to  have  made  payment  to  any  one.  The  conclusion 
at  which  I  have  arrived  is  exclusively  based  upon  the  construction  of 
the  terms  of  the  statute,  uninfluenced  by  these  considerations ;  but  I 
am  glad  to  think  that  it  leads  to  a  result  which  cannot,  in  my  opinion, 
be  regarded  as  either  unjust  or  commercially  inconvenient. 

The  conclusion  which  I  have  indicated  is  sufficient  to  determine  the 
case  in  favor  of  the  appellants.  I  have  not  found  it  necessary,  there- 
fore, to  form  a  decisive  opinion  upon  the  other  questions  raised ;  but 
I  do  not  desire  to  be  understood  as  dissenting  from  the  view,  enter- 
tained by  some  of  your  Lordships,  that,  apart  from  the  provisions  of 
the  statute,  the  facts  of  the  present  case  afford  sufficient  grounds  for 
arriving  at  the  same  decision. 

Judgment  reversed.^' 

13  The  opinions  of  L'Ord  TTalshury.  L.  C.  and  Lords  Watson.  Macnasrhten, 
Morris,  and  the  Earl  of  Selborne.  concurring  with  Lord  Herschell,  are  omitted. 
rx»rd  Bramwell.  with  whom  Lord  Field  concurred,  dissenting,  said: 

"The  other  ground  on  which  the  defendants  claim  to  charge  the  plain- 
tiffs with  the  amount  of  these  bills  is  that  Petridi  &  Co.,  the  payees,  were 
flctitious  persons  within  the  meaning  of  Bills  of  Exchange  Act,  §  7.  sub- 
sec.  :;.  and  that  the  defendants  therefore  might  pay  them  to  a  de  facto  hearer. 
I  differ  on  both  points.  It  must  be  borne  in  mind  that  the  Bills  of  Exchanze 
Act  is  'An  act  to  codify  the  law  relating  to  bills  of  exchange,'  not  to  alter 
or  amend  it,  and  by  section  97  the  rules  of  common  law,  including  the  law 
merchant,  'save  in  so  far  as  they  are  inconsistent  with  the  express  provisions 
of  this  act.  shall  continue  to  apply  to  bills  of  exchange.' 

"Then  were  Petridi  &  Co.  fictitious  or  nonexisting  persons?  There  was  a 
firm  of  that  name,  a  firm  as  identifiable  as  X.  M.  Rothschild  &  Co.,  as  Glyn, 
.Mills,  Currie  &  Co..  as  the  Bank  of  England  itself  would  be  identifiable  if 
their  names  appeared  as  payees  of  a  bill  of  exchange;  and  to  mv  mind  that 
shows  they  were  not  fictitious  or  nonexisting  persons.  It  is  asked,  'What 
If  the  payee  were  John  Smith?'     Well,  if  there  were  nothing  to  identify  a 


Cb.  1)  MAKER  AND  ACCEPTOR.  481 

GLUTTON  V.  GEORGE  ATTENBOROUGH  &  SON. 

(House  of  Lords,   [1897]  App.  Cas.  90.) 

The  appellants,  Messrs.  Glutton,  as  land  agents  managed  large  es- 
tates. One  of  their  clerks  named  Piper  by  an  elaborate  and  long- 
continued  system  of  fraud  and  forgery  of  vouchers  and  certificates 
(explained  in  detail  in  [1895]  2  Q.  B.  306)  caused  checks  to  be  drawn 
payable  to  the  order  of  George  Brett  and  signed  by  members  of  the 
appellants'  firm.  The  checks  then  passed  into  the  department  in  which 
Piper  was  for  postage.  He  indorsed  the  checks  in  the  name  of  George 
Brett  and  took  them  to  the  respondents,  who  gave  him  cash  or  value 
for  them  in  good  faith.  The  checks  were  afterwards  paid  by  the  ap- 
pellants' bankers  to  the  respondents'  bankers.  There  was  no  such 
person  as  George  Brett,  and  no  such  work  done  or  materials  supplied 
as  were  vouched  for  by  the  forged  vouchers  and  certificates.  The  ap- 
pellants, having  discovered  the  fraud,  brought  an  action  against  the 
respondents  to  recover  the  amounts  (between  £3,000.  and  £4,000.) 
as  money  paid  under  a  mistake  of  fact.  The  action  was  tried  before 
Wills,  J.  (without  a  jury),  who  gave  judgment  for  the  defendants 
([1895]  2  O.  B.  306),  and  this  decision  was  affirmed  by  the  Court  of 
Appeal  ([1895]  2  O.  B.  707,  Lord  Esher,  M.  R.,  and  Lopes  and  Kay, 
L.  JJ.). 

particular  John  Smith  as  payee,  when  all  'the  surrounding  circumstances' 
were  looked  at,  it  may  be  that  he  might  be  treated  as  a  nonexistent  person. 
But  what  if  it  was  shown  that  the  bill  was  delivered  to  a  particular  John 
Smith,  in  payment  of  a  debt  due  to  him  from  the  drawer,  could  any  holder 
of  it  treat  it  as  payable  to  bearer,  Smith's  name  being  forged  as  Indorser? 
Certainly  not ;  but  then  it  is  said  that  that  is  not  the  case  here ;  that  the 
bill  was  not  delivered  to  Petridi  &  Co.,  nor  intended  to  be  so ;  that,  in  the 
intention  of  the  makers  of  the  bill,  Petridi  was  a  sham,  and  so  fictitious  or 
nonexistent ;  that  Petridi  &  Co.  are  not  fictitious  nor  nonexistent ;  that  they 
exist  in  the  flesh,  yet  they  are  fictitious  qua  payees,  constructively  fictitious; 
that  if  Vucina  had  drawn  the  bill,  Petridi  was  real  and  existent,  but  inas- 
much as  Glyka  did  not  mean  Petridi  to  have  the  bill  he  was  nonexistent. 
This  beats  me.  They  are  at  the  same  time  real  and  unreal ;  they  are  that 
which  is  said  to  be  an  impossibility,  being  and  not  being  at  the  same  time. 
The  bill  means  one  thing  or  another,  according  to  the  intent  of  the  drawer ; 
that  the  drawee  has  or  has  not  a  right  to  Petridi's  indorsement,  according 
as  that  intent  is  one  thing  or  another.  Because  the  argument  would  be  the 
same  if  Vucina  had  really  drawn  the  bills,  but  not  intended  Petridi  to  have 
them  ;  a  i>ossibility,  if  Vucina  will  forgive  me.  That  if  Glyka  had  intended  to 
commit  his  fraud  through  the  innocent  agency  of  Petridi,  Petridi  would  be 
real  and  not  fictitious.  If  the  argument  is  good,  it  Avould  show  that  a  bona 
fide  holder  of  these  bills  not  claiming  through  Petridi  might  have  enforced 
payment  from  the  plaintiffs.  It  is  said  that  such  a  payment — i.  e.,  to  himself 
— is  according  to  the  intention  of  the  drawer.  So  it  is  of  the  drawer  de  facto, 
but  not  of  him  who  by  the  bill  itself  the  drawee  has  a  right  to  suppose  is  the 
drawer.  The  plaintiffs  are  estopped  to  deny  that  Vucina  is  the  drawer ;  but 
they  are  not  estopped  to  deny  that  Vucina  meant  that  Petridi  and  his  as- 
signs should  receive  the  amount  of  the  bill,  and  that  it  should  not  be  paid 
unless  indorsed  by  Petridi. 

"This  argument,  as  I  have  said,  makes  the  effect  of  a   bill   depend,   not 
on  the  meaning  of  the  writing,  but  on  the  intent  of  the  maker.     A  bill  pay- 
Sm.&  M.B.&  N.— 31 


482  LIABILITY  OF  PARTIES.  (Part  3 

The  plaintiffs  brought  this  appeal.^* 

Lord  Halsbury,  L.  C.  *  *  *  The  drawer  of  these  checks 
hands  them  to  one  of  his  own  clerks,  puts  them  in  circulation,  and  they 
get  into  the  hands  of  a  bona  fide  holder  for  value.  Now,  forsooth, 
we  were  treated  to  a  long  argument  to  show  what  was  the  intention 
of  the  drawer — to  make  that  which  is  a  bill  payable  to  bearer  a  bill 
payable  to  order  only.  I  have  nothing  to  do  with  the  intention  of  the 
drawer  beyond  this:  That  I  find  the  document  is  on  the  face  of  it 
made  payable  to  a  person  who  is  "nonexisting."  \Miatever  might 
have  been  said  in  Vagliano's  Case.  [1891]  A.  C.  107,  where  there 
were  questions  raising  a  doubt  upon  the  applicability  of  those  words, 
or  whatever  might  be  said  about  the  difference  between  the  words 
"fictitious"  and  "nonexisting,"  it  has  in  this  case  never  been  suggested 
that  on  the  face  of  these  instruments  the  name  of  George  Brett  is 
anything  other  than  the  name  of  a  nonexisting  person.  Why  am  I, 
upon  this  very  plain  and  manifest  state  of  facts  to  inquire  into  what 
would  be  the  case  if  there  was  a  person,  as  there  was  in  Vagliano's 
Case,  [1891]  A.  C.  107,  who  might  plausibly  be  represented  as  the 
person  intended  by  the  drawer  to  be  the  person  to  whom  the  payment 
was  to  be  made  ?  In  this  case  no  such  question  arises  at  all ;  and 
treating,  therefore,  these  checks  as  checks  payable  to  bearer,  the 
broad  fact  comes  that  the  genuine  drawer  attached  his  own  signature 
to  checks  perfect  in  form,  that  he  handed  them  to  his  own  clerk  for 
the  purpose  of  their  being  paid  away,  but  by  an  act  of  fraud  on  the 
part  of  a  clerk  they  get  into  the  hands  of  a  bona  fide  holder  for  value ; 
and  we  are  treated  to  this  somewhat  protracted  argument  in  order 

able  to  the  Bank  of  England  is  payable  to  a  fictitious  person  if  the  drawer 
intends  to  forge  their  name  and  give  it  to  another  person.  A  payee  is  real 
or  fictitious,  at  the  option  of  the  holder,  within  the  act.  But  it  was  shown 
that  a  bill  drawn  like  these  might  get  into  the  hands  of  Petridi  &  Co.,  though 
not  so  intended,  who  might  take  it  for  value  and  be  entitled  to  maintain  an 
action  against  the  plaintiffs.  Would  Petridi  be  fictitious  then?  It  is  ask- 
ed. 'What  difference  does  it  make  to  the  plaintiffs  that  there  is  a  C.  Petridi 
&  Co.,  when,  if  the  payee  had  been  actually  fictitious  or  unreal,  and  the 
name  was  put  on  the  back  of  the  bill,  it  might  be  treated  as  payable  to 
bearer?'  The  answer  is  obvious.  If  the  payee  is  a  known  person,  the  drawee 
can  well  believe  that  the  drawing  is  genuine;  he  knows  he  cannot  be  made 
to  pay  without  that  person's  indorsement ;  he  knows  that  before  present- 
ment for  acceptance  the  bill  has  been  in  ordinary  course,  or  at  all  events 
will  be,  in  the  hands  of  a  responsible  person  if  a  good  name  is  used.  His 
holding  and  indorsement  are  a  guarantee  that  the  bill  is  in  right  hands. 
Take  this  very  case.  Glyka  could  not  have  got  Petridi's  indorsement.  I 
do  not  mean  could  not  In  point  of  law,  but  could  not  practically.  Without 
that  the  plaintiffs  were  not  bound  to  pay  the  bill.  I  have  no  doubt  that 
Glyka  chose  Petridi's  name  to  avoid  suspicion.  If  it  had  been  a  strange  name, 
It  mfght  have  attracted  attention  and  caused  some  Inquiry. 

"An  argument  is  used  which,  with  all  submission.  I  think  very  feeble.  It 
Is  said  that  the  statute  says  'fictitious  or  nonexisting.'  and  that'  fictitious  Is 
needless  on  the  plaintiff's  construction.  I  do  not  agree.  But  what  is  the 
value  of  such  an  argument?  Nothing,  unless  there  is  no  other.  A  prudent 
draftsman  does  not  accurately  examine  whether  a  word  will  be  superfluous. 
He  makes  sure  by  using  it." 

1*  Arguments  of  counsel  and  parts  of  the  opinions  are  omitted. 


Ch.  1)  MAKER    AND    ACCEPTOR.  483 

to  decide  the  question  whether  under  these  circumstances  the  drawer 
of  these  genuine  checks  is  Hable  upon  them  to  a  person  who  has  re- 
ceived them  in  good  faith  and  paid  value  for  them. 

My  Lords,  I  do  not  profess  to  differ  in  any  one  rtspect  from  the 
judgments  which  have  been  dehvered  by  the  Court  of  Appeal ;  and 
my  own  opinion  is  that  it  would  be  treating  this  case  with  a  respect 
that  it  does  not  deserve  if  one  were  to  go  more  elaborately  into  the 
question  than  to  say  that  I  entirely  concur  with  what  was  said  by  the 
learned  judges  in  the  Court  of  Appeal,  and  that  I  hope  we  shall  not 
again  have  an  argument  of  this  sort  upon  a  matter  which,  if  it  really 
could  be  made  a  matter  of  question,  would  throw  very  considerable 
difficulty  and  doubt  upon  the  currency  of  negotiable  instruments.  I 
therefore  move  your  Lordships  that  this  appeal  be  dismissed  with 
costs. 

Lord  Shand.  My  Lords,  I  am  also  of  opinion  that  this  appeal 
should  be  disallowed. 

The  first  question  to  be  determined  in  the  case  is  whether  the  checks 
in  question  were  or  were  not,  in  the  language  of  the  statute,  to  be 
"treated  as  payable  to  bearer."  Upon  that  question  I  entertain  no 
doubt.  Apart  from  the  dicta  and  authority  of  the  Vagliano  Case, 
[1891]  A.  C.  107,  I  should  have  had  no  difficulty  on  the  statute.  The 
statute  expressly  provides  that  where  the  payee  is  a  fictitious  or  non- 
existing  person  the  bill  (and  under  the  statute  a  check  is  to  be  regarded 
as  a  bill)  may  be  "treated  as  a  bill  payable  to  bearer."  These  checks 
were  in  favor  of  a  person  of  the  name  of  Brett.  He  was  fictitious, 
because  that  name  had  been  provided  by  a  person  who  wished  to 
commit  a  fraud  and  to  appropriate  the  money  of  his  employer.  He 
knew  no  person  of  that  name,  and  the  person  who  got  the  checks 
knew  no  one  of  that  name,  and,  in  the  language  of  the  statute,  I  think 
these  were  therefore  checks  in  favor  of  a  fictitious  person  and  a  non- 
existing  person.  But  it  appears  to  me  further  that  the  decision  and 
grounds  of  judgment  in  Vagliano's  Case,  [1891]  A.  C.  107,  are  di- 
rectly applicable  to  the  present.  There  is  no  limitation  in  the  language 
of  the  statute  of  the  effect  of  the  insertion  of  the  name  of  the  ficti- 
tious or  nonexisting  person  as  payee  of  a  check  to  the  case  where  this 
is  done  in  the  knowledge  of  the  drawer,  and  nothing  to  warrant  a 
judicial  interpretation  of  the  statute  in  this  limited  way.     *     *     » 

Lords  Macnaghten  and  Davy  were  of  the  same  opinion. 

Affirmed. 


4S4  LIABILITY    OF    PARTIES.  (Part   3 

MACBETH  V.  NORTH  &  SOUTH  WALES  BANK. 
(Court  of  Appeal,  [1908]  1  K.  B.  13.) 

Appeal  by  the  defendants  from  the  judgment  of  Bray.  J.,  [IDOfi] 
2  K.  B.  71  cS' 

The  action  was  brought  to  recover  damages  for  the  conversion  of 
a  check.  Tlie  facts,  which  are  fully  stated  in  the  judgment  of  Bray. 
J.,  were  shortly  as  follows: 

Tlie  plaintiff's  claim  was  for  damages  for  the  conversion  of  a  check, 
or  alternatively  for  money  had  and  received  to  the  plaintiff's  use. 
The  facts,  which  are  stated  at  length  in  the  judgment,  may  be  sum- 
marized as  follows :  One  White,  by  falsely  representing  to  the  plain- 
tiff and  his  brother-in-law,  one  Irvine,  that  he  had  agreed  to  buy  from 
a  man  named  T.  A.  Kerr  5,000  shares  in  a  company  called  White's 
Carriage  Company  at  £2.  5s.  per  share,  and  that  he  had  arranged  to 
resell  the  shares  to  a  syndicate  for  £2.  10s.  per  share,  induced  the 
plaintiff  and  Irvine  to  agree  to  assist  him  in  financing  the  transaction. 
For  the  purpose  of  paying  Kerr  for  the  shares  the  plaintiff  drew  a 
check  on  his  bank,  the  Clydesdale  Bank,  for  £11,250.,  payable  to 
Kerr  or  order,  which  check  was  sent  by  him  to  Irvine  for  him  or 
\\'hite  to  hand  to  Kerr  in  exchange  for  the  scrip  and  transfer  of  the 
5,000  shares.  Irvine  accordingly  handed  the  check  to  White,  in  order 
that  he  might  hand  it  to  Kerr  in  exchange  for  the  scrip  and  transfer 
of  the  shares.  Instead  of  so  doing  White  forged  Kerr's  indorsement 
to  the  check  and  paid  it  into  his  own  account  with  the  defendant  bank, 
who  credited  him  with  the  amount  and  obtained  payment  of  the  check 
from  the  Clydesdale  Bank.  White  had  in  fact  never  agreed  to  buy 
any  shares  from  Kerr,  and  Kerr  did  not  hold  any  shares  in  White's 
Carriage  Company. 

Judgment  for  the  plaintiff.    The  defendant  appealed. ^^ 

Lord  Alverstone,  C.  J.  *  *  *  That  leaves  the  third  ques- 
tion, which  raises  a  very  important  point,  for  determination,  viz. 
whether  or  not  the  defendants  are  entitled  to  treat  the  check  as  a 
check  payable  to  bearer  on  the  ground  that  Kerr  is  a  fictitious  or  non- 
existing  person  within  the  meaning  of  section  7,  subsec.  3,  of  the  Bills 
of  Exchange  Act,  1882.  Whatever  view  may  be  held  as  to  the  weight 
of  judicial  opinion  in  Vagliano's  Case,  [1891]  A.  C.  107,  we  are  bound 
to  apply  the  principle  to  be  collected  from  the  judgments  of  the  House 
of  Lords  in  that  case.  I  quite  agree  with  the  observation  made  bv 
Warrington,  J.,  in  giving  judgment  in  Vinden  v.  Hughes,  [1905]  1 
K.  B.  795,  to  the  effect  that  if  certain  expressions  in  the  judgments  in 
Vagliano's  Case,  [1891]  A.  C.  107,  are  taken  alone  and  consideration 
is  not  given  to  the  subject-matter  to  which  they  were  addressed,  it 
may  be  that  the  language  used  supports  the  contention  on  behalf  of 

15  The  argumeuts,  aud  parts  of  the  opiuiuus  relatiug  to  other  points,  ar«> 
omitted. 


Ch.  1)  MAKER    AND    ACCEPTOR.  485 

the  defendant  bank  that  because  Kerr  had  no  connection  with  the 
transaction  at  all,  and  his  name  was  really  introduced  by  White  for 
the  purpose  of  White's  fraud,  he  (Kerr)  might  be  regarded  as  being 
a  nonexisting  person.  I  agree  that  the  question  as  to  a  fictitious  or 
nonexisting  person  cannot  be  answered  by  simply  asking  if  there  is 
some  one  who  corresponds  with  the  name.  The  name  of  some  dis- 
tinguished person  might  be  inserted  in  a  bill,  but  he  might  be  a  ficti- 
tious or  nonexisting  person  for  the  purpose  of  the  section  we  have  to 
consider. 

In  my  opinion  the  view  taken  by  Warrington,  ].,  in  Vinden's  Case, 
[1905]  1  K.  B.  795,  and  by  Bray,  J.,  in  the  present  case,  is  correct. 
In  giving  judgment  in  Bank  of  England  v.  Vagliano  Bros.,  [1891] 
A.  C.  107,  Lord  Herschell  said :  "In  the  ordinary  case,  where  the 
payee  designated  in  the  bill  is  a  real  person  intended  by  the  drawer 
to  receive  payment,  either  by  himself  or  by  some  transferee.   *     *     *  " 

I  call  attention  to  the  words  "intended  by  the  drawer,"  because  it 
must  be  remembered  that  the  point  in  Vagliano's  Case  was  whether 
the  acceptor  was  entitled  to  say  that  the  payee  was  not  fictitious  or 
nonexistent  for  the  purposes  of  his  (the  acceptor's)  own  protection. 
It  is  very  important  to  remember  that  in  Vagliano's  Case  the  instru- 
ment was  a  bill  of  exchange  in  the  ordinary  sense  of  the  word,  and 
the  point  raised  was  raised  by  the  acceptor.  The  acceptor  of  a  bill 
protects. the  credit  of  the  drawer  of  the  bill.  It  does  not  matter  in 
the  least  to  the  acceptor  who  the  payee  is.  When  a  bill  of  exchange 
is  presented  to  a  person  for  acceptance,  the  drawer  asks  him  to  honor 
his  signature  as  drawer  and  to  accept  the  bill,  and  the  credit  of  the 
drawer  may  be  partially  protected  even  though  the  acceptor  does  not 
choose  to  go  the  full  length  of  accepting  the  bill.  Therefore,  in  deal- 
ing with  a  payee  of  a  bill  in  the  ordinary  sense  of  the  word,  ver}^  differ- 
ent considerations  from  a  commercial  and  mercantile  standpoint  arise 
to  those  which  arise  when  the  particular  form  of  a  bill  of  exchange 
which  is  called  a  check  upon  a  bank  is  being  dealt  with.  It  is  for  that 
purpose  that  it  is  so  important  to  see  whether,  in  the  terms  formulated 
by  Lord  Herschell,  the  payee  designated  in  the  bill  is  a  real  person  in- 
tended by  the  drawer  to  receive  payment  by  himself  or  by  some  trans- 
feree. It  is  the  drawer  who  selects  and  inserts  the  name  which  is  put 
in  the  body  of  the  bill  as  being  the  payee's  name.  Therefore,  if  the 
person  who  inserted  the  name  in  the  bill  knew  that  the  person  was 
fictitious  or  nonexistent,  then  the  consequences  follow  that  the  bill 
may  be  treated  as  against  the  acceptor  (if  I  may  use  the  expression) 
as  being  a  bill  to  bearer,  with  the  consequences  pointed  out  in  Vagli- 
ano's Case. 

It  must  not  be  forgotten  that  a  check  upon  a  banker  is  treated  as  a 
bill  of  exchange  only  by  virtue  of  the  law  merchant  and  section  73 
of  the  Bills  of  Exchange  Act,  1882,  which  says  that  a  check  is  a  bill 
of  exchange  drawn  upon  a  banker  payable  upon  demand.  In  ordinary 
parlance  there  is  no  acceptor  to  a  check.     The  bank  which  pays  the 


486  LiAruLiTY  OF  TARTiKS.  (Part  3 

money  alone  stands  in  the  position  of  the  acceptor.  If  the  bank  gives 
credit  it  simply  honors  the  check  and  pays  the  money. 

Applying  Lord  Herschell's  test,  we  must  consider  whether,  in  any 
given  case,  when  the  drawer  of  a  check  inserts  a  payee's  name,  he 
intends  the  payee  to  receive  payment  by  himself  or  by  some  transferee 
from  him ;  in  other  words,  whether  he  intends  that  the  payee  who 
has  to  indorse  the  check  payable  to  order  shall  receive  payment.  In 
the  present  case  it  is  not  disputed  that  so  far  as  the  plaintiff  Macbeth 
is  concerned  there  was  a  real  transaction.  He  got  his  bank  to  ad- 
vance this  money  and  drew  his  check,  intending  that  there  should  be 
a  real  sale,  as  he  believed,  by  a  man  named  Kerr,  of  the  5,000  shares 
in  White's  Carriage  Company.  It  is  not  suggested  that  the  plaintiff 
had  the  least  idea  that  any  one  would  receive  the  proceeds  of  the  check 
except  a  person  named  Kerr — an  existing  person  bearing  that  name — 
who,  by  the  fraud  of  White,  he  had  been  induced  to  believe  did  pos- 
sess the  5,000  shares.  Although  Kerr  had  had  some  shares  in  the 
company,  at  that  moment  he  had  none  at  all.  It  seems  to  me  that  if 
I  put  to  myself  the  question,  "Is  this  an  ordinary  case  where  the  payee 
designated  in  the  check  is  a  real  person  intended  by  the  drawer  of 
the  check  to  receive  payment?"  there  can  be  but  one  answer,  viz. 
that  the  person  who  inserted  the  name  did  not  insert  the  name  of  a 
fictitious  person  in  the  sense  of  a  person  who  he  knew  had  no  con- 
nection with  the  transaction.  He  did  not  put  in  the  name  of  a  non- 
existing  person,  but  he  put  in  the  name  of  a  person  from  whom,  as  he 
believed,  the  shares  were  coming,  and  to  whom  alone  the  money  was 
to  go. 

I  am  therefore  of  opinion,  following  the  point  decided  in  Bank  of 
England  v.  Vagliano  Bros.,  and  taking  the  test  laid  down  by  Lord  Her- 
schell  in  that  case,  that  the  judgment  of  Bray,  J.,  is  correct.  I  might 
make  the  same  observations  with  regard  to  the  passages  in  the  judg- 
ments of  Lord  Halsbury.  L.  C,  and  Lord  Macnaghten,  but  no  useful 
purpose  would  be  served  by  repeating  them.  I  have  endeavored  to 
state  what  appears  to  me  to  be  the  real  decision  in  Bank  of  England 
v.  Vagliano  Bros.,  and  its  bearing  upon  the  present  case.  On  be- 
half of  the  defendants  the  decision  in  Clutton  v.  Attenborough  was 
relied  upon.  If  I  found  anything  in  Clutton  v.  Attenborough  which 
led  me  to  believe  that  the  House  of  Lords  meant  to  construe  the  judg- 
ments in  Bank  of  England  v.  Vagliano  Bros,  as  applying  to  the  case 
of  a  drawer  of  a  check  who  has  inserted  the  name  of  a  person  believing 
it  to  be  that  of  a  real  person  and  the  transaction  a  genuine  one,  and 
who  was  induced  to  do  so  by  the  fraud  of  another  person,  of  course 
the  authority,  although  we  might  not  have  been  bound  by  it,  would 
have  been  a  very  strong  justification  of  the  view  urged  on  behalf  of 
the  defendants.  It  is,  however,  impossible  to  take  that  view  in  the 
face  of  what  Lord  Halsbury  decided.  The  judgments  in  that  case 
proceeded  throughout  upon  the  basis  that  Brett,  the  payee  of  the  check. 
was  a  nonexisting  person.     The  summary   of   the   facts   states   that 


Ch.  1)  MAKER    AND    ACCEPTOR.  487 

"there  was  no  such  person  as  George  Brett."  That  statement  does 
not  mean,  of  course,  that  there  was  no  person  whose  name  was  George 
Brett.  I  myself  am  aware  of  the  fact  that  there  are  persons  bearing 
that  name,  one  of  whom  I  know.  The  statement  means  that  the  case 
was  argued  upon  the  basis  of  George  Brett  being  a  nonexisting  per- 
son, and  this  point  obviously  being  in  the  mind  of  the  members  of 
the  House  of  Lords,  Lord  Halsbury  says :  "Whatever  might  have 
been  said  in  Vagliano's  Case,  where  there  were  questions  raising  a 
doubt  upon  the  applicability  of  those  words,  or  whatever  might  be 
said  about  the  difference  between  the  words  'fictitious'  and  'nonexist- 
ing,'  it  has  in  this  case  never  been  suggested  that  on  the  face  of  these 
instruments  the  name  of  George  Brett  is  anything  other  than  the  name 
of  a  nonexisting  person.  Why  am  I,  upon  this  very  plain  and  manifest 
state  of  facts,  to  inquire  into  what  would  be  the  case  if  there  was  a 
person,  as  there  was  in  Vagliano's  Case,  who  might  plausibly  be 
represented  as  the  person  intended  by  the  drawer  to  be  the  person 
to  whom  the  payment  was  to  be  made?"  The  great  importance  of 
that  passage  is  that  Lord  Halsbury,  L.  C,  adopted  the  expres.'.ion 
used  by  Lord  Herschell  in  the  passage  in  his  judgment  in  Bank  of 
England  v.  Vagliano  Bros.,  to  which  I  have  referred,  when  he  used 
the  words  "the  person  intended  by  the  drawer  to  be  the  person  to 
whom  the  payment  was  to  be  made" — or,  in  other  words,  he  indicated 
that  the  state  of  circumstances  which  gives  rise  to  the  question  whether 
the  person  can  be  regarded  as  fictitious  or  nonexisting  depends  upon 
the  intention  of  the  person  who  inserts  the  name.  Immediately  that 
is  appreciated,  whether  the  decision  in  Vagliano's  Case  be  approved 
of  or  not,  the  broad  distinction  between  the  two  cases  becomes  ap- 
parent. Then  Lord  Halsbury,  L.  C,  followed  up  what  he  had  said 
by  adding:  "In  this  case  no  such  question  arises  at  all."  Therefore  it 
cannot  be  said  that  in  Glutton  v.  Attenborough,  [1897]  A.  C.  90,  Lord 
Halsbury  recognized  as  regards  a  check  the  argument  urged  by  the 
defendant  based  upon  Vagliano's  Case. 

With  regard  to  Vinden  v.  Hughes,  [1905]  1  K.  B.  795,  which  is 
not  binding  upon  us,  Warrington,  J.,  appears  in  that  case  to  have 
taken  the  true  view  of  Vagliano's  Case  and  of  Clutton  v.  Attenborough, 
and,  if  I  may  say  so  with  great  respect,  I  entirely  agree  with  the 
judgment  of  Warrington,  J.,  in  Vinden  v.  Hughes,  and  I  could  not 
hope  to  express  the  reasoning  better.  He,  having  taken  the  words 
of  Lord  Herschell  in  Bank  of  England  v.  Vagliano  Bros.,  says :  "He 
[the  drawer]  had  every  reason  to  believe,  and  he  did  believe,  that 
those  checks  were  being  drawn  in  the  ordinary  course  of  business  for 
the  purpose  of  the  money  being  paid  to  the  persons  whose  names  ap- 
peared on  the  face  of  those  checks."  In  the  present  case  it  is  not 
disputed  that  the  plaintiff  believed  the  check  was  being  drawn  for 
the  purpose  of  being  paid  to  an  existing  person  named  Kerr,  in  a 
transaction  which  he  believed  to  be  genuine,  and  which,  so  far  as  he 
was  concerned,  had  no  element  of  fictitiousness  about  it.     In  my  opin- 


488  LIABILITY  OF  PARTIES.  (Part  3 

ion.  therefore,  notwithstanding  the  most  interesting  and  able  argu- 
ment on  behalf  of  the  defendants,  our  judgment  ought  to  be  in  ac- 
cordance with  the  opinion  of  Bray,  J.,  and  Warrington,  J.,  and  the 
judgment  for  the  plaintiff  must  stand: 

BucKLKY,  L.  J.  The  third  question  is  that  upon  which  I  wish  to 
say  a  few  words,  because  it  is  of  importance  under  the  Bills  of  Ex- 
change Act,  1SS2.  The  language  of  section  7,  subsec.  3,  of  that  act 
is:  "Where  the  payee  is  a  fictitious  or  nonexisting  person  the  bill 
may  be  treated  as  payable  to  bearer."  Two  different  states  of  fact 
are  contemplated  by  that  subsection — the  one  is  that  the  payee  is  fic- 
titious, the  other  that  he  is  nonexistent.  Existence  or  nonexistence  of 
a  particular  person  is  a  question  of  fact,  not  relevant  to  anybody's 
mind  or  intention.  "Fictitious"  is  different.  A  thing  can  only  be  fic- 
titious relatively  to  some  one.  There  can  be  no  action  without  an 
actor,  no  pretense  without  a  pretender,  and  no  fiction  without  a  feigner. 
Fiction  is  necessarily  relative. 

What  is  meant  by  "fictitious"  in  this  connection?  I  think  it  means  fic- 
titious by  the  pretense  of  some  person  who  is  a  party  to  the  instrument. 
The  relevant  point  in  the  present  case  is  that  Kerr  was  not  fictitious 
by  any  pretense  of  the  plaintiff  The  plaintiff  made  no  pretense.  He 
feigned  nothing.  He  was  deceived.  He  thought  Kerr  had  shares, 
but  Kerr  had  no  shares.  The  plaintiff  had  a  real  intention  of  paying 
£11,250.  to  a  person  whom,  it  is  true,  he  had  never  seen,  but  who 
evisted  in  fact,  and  to  whom  he  meant  to  pay  £11,250.  as  the  price  of 
the  shares.  In  my  opinion  Kerr  was.  for  no  relevant  purpose,  ficti- 
tious. The  whole  effect  of  Bank  of  England  v.  Vagliano  Bros.,  for 
the  purposes  of  the  present  case,  seems  to  me  to  be  this — that,  as 
Lord  Macnaghten  said,  the  bills  when  they  came  before  Vagliano  for 
acceptance  were  wholly  fictitious.  The  drawer,  the  payee,  and  the 
person  indicated  as  agent  for  presentation  were  all  fictitious.  When 
Vagliano  accepted  that  instrument  he  accepted  the  responsibility  of 
becoming  liable  upon  the  document — such  as  it  was — having  regard  to, 
amongst  other  things,  section  7,  subsec.  3,  of  the  Bills  of  Exchange 
Act,  1882.  He  rendered  himself  liable  to  pay  the  bill  drawn  as  it  v^as 
by  a  person  who  forged  the  name  of  the  drawer,  and  inserted  a  fic- 
titious payee.  When  Vagliano  accepted  that,  he  made  himself  respon- 
sible upon  an  instrument  which,  by  the  operation  of  the  act  of  1882, 
was  necessarily  to  be  treated  as  being  payable  to  bearer.  If  that  is 
the  true  meaning  of  Vagliano's  Case,  I  need  not  add  anything  to 
.show  it  has  nothing  to  do  with  the  present  case. 

On  behalf  of  the  defendants  w^e  have  been  pressed  with  the  deci- 
sion of  the  House  of  Lords  in  Glutton  v.  Attenborough.  Having 
regard  to  the  expressions  of  Lord  Halsbury,  it  is  clear  that  he  was 
not  deciding  the  point  which  we  have  now  to  decide.  It  appears  to 
•  me  there  is  a  difference  in  substance  between  the  two  cases.  If  the 
drawer  of  a  check  chooses  to  take  the  responsibility  of  drawing  it  to 
a  nonexistent  person,  no  doubt  the  result  of  the  statute  is  that  he  can- 


Cb.  1)  MAKER    AND    ACCEPTOR.  489 

not  complain  because  the  check  is  not  indorsed.  That  is  the  whole 
of  the  decision  in  Glutton  v.  Attenborough.  In  my  opinion  that  has  no 
relevance  to  the  meaning-  of  the  word  "fictitious,"  which  I  have  en- 
deavored to  show  involves  an  investigation  into  the  mind  of  the  drawer 
of  the  bill.  I  find  in  the  judgments  in  Vagliano's  Case — I  refer  in 
particular  to  Lord  Herschell's  judgment  on  pages  151  to  153,  inclu- 
sive— that  again  and  again  the  intention  of  the  drawer  is  pointed  to  as 
being  relevant.  It  seems  to  me  that  it  is  a  cardinal  fact.  Was  the 
drawee  a  fiction  to  the  drawer?  If  he  was,  then  he  is  a  fictitious 
person.  It  seems  to  me  that  the  present  case  is  not  governed  by  Bank 
of  England  v.  Vagliano  Bros.  On  the  contrary,  I  think  it  is  governed 
by  the  decision  of  Warrington,  J.,  in  Vinden  v.  Hughes,  [1905]  1  K. 
B.  795,  which  in  my  judgment  was  rightly  decided,  and  that  Bray,  J., 
was  right  in  the  view  he  took.  For  these  reasons  I  think  that  this  ap- 
peal fails  and  must  be  dismissed. 

Kennedy,  L,.  J.  I  am  of  the  same  opinion.  My  Lord  and  Buck- 
EEY,  L.  J.,  have  so  fully  dealt  with  all  the  points  that  there  would  be 
no  use  in  my  adding  anything. 

Appeal  dismissed.^® 


CANAL  BANK  v.  BANK  OF  ALBANY. 

(Supreme   Court  of  New   York,   1841.     1   Hill,   287.) 

Assumpsit,  to  recover  money  paid  on  a  draft,  tried  at  the  Albany 
Circuit,  in  1840,  before  Cushman,  C.  J.  The  dracft  was  drawn  on  the 
plaintiffs  by  the  Montgomery  County  Bank,  payable  to  the  order  of 
E.  Bentley,  Jr.  It  purported  to  have  been  indorsed  successively  by 
Bentley,  then  by  one  Budd,  afterward  by  the  Bank  of  New  York, 
and  lastly  by  the  defendants,  to  whom  the  plaintiffs  paid  it.  The 
payment  of  it  was  made  on  the  28th  of  March,  1839.  The  ground  on 
which  the  plaintiffs  sought  to  recover  back  the  money  was  that  the 
indorsemiCnt  purporting  to  be  that  of  Bentley  was  a  forgery,  which 
fact  was  proved  by  Bentley  and  others  on  the  trial. 

On  the  7th  of  June,  1839,  the  plaintiffs'  attorney  called  on  the  de- 
fendants, and  asked  to  have  the  money  refunded,  notifying  them  at 
the  same  time  of  the  forgery. 

When  the  plaintiffs  offered  Bentley  as  a  witness,  the  defendants 
objected,  insisting  that  he  was  incompetent,  as  being  interested.  The 
objection  was  overruled,  and  Bentley  permitted  to  testify;  whereupon 
the  defendants  excepted. 

The  defendants  offered  to  prove,  and  the  plaintiffs  admitted,  that 
they  (defendants)  received  the  draft  from  the  Bank  of  New  York 
to  collect,  as  agents  for  the  latter,  and  that  as  such  they  received  the 
money  and  paid  it  over  to  their  principals,  before  notice  of  the  for- 

16  Affirmed,  [1908]  App.  Cas.  137.  Accord:  Viuden  v.  Hughes,  [1905J  1  K. 
B.  795. 


490  LIABILITY  OF  PAUTiLs.  (Part  3 

gery.  The  defendants,  however,  never  disclosed  their  agency  to  the 
plaintiffs  till  called  on  by  the  plaintiffs'  attorney,  as  above  mentioned, 
and  notified  of  the  forgery. 

The  defendants  further  offered  to  show  a  uniform  custom  of  the 
banks  of  this  state  to  receive  and  collect  drafts  in  the  manner  this 
was  done,  without  disclosing  their  agency.  Tlie  plaintiffs  objected, 
on  the  ground  of  irrelevancy,  and  the  judge  overruled  the  offer,  to 
which  the  defendants  again  excepted. 

A  verdict  having  been  rendered  for  the  plaintiffs,  the  defendants  now 
moved  for  a  new  trial  on  a  bill  of  exceptions,  presenting  the  above 
and  some  other  points. 

CowiiN,  J,  It  is  not  perceived  what  advantage,  direct  or  remote, 
Bentley  can  derive  from  the  plaintiffs'  recovery,  nor  what  he  can  lose 
by  their  failure.  It  is  said,  the  plaintiffs  will  hold  the  money  to  be 
recovered  in  trust  for  the  witness.  This  is  not  so.  Their  recovery 
or  failure  will  neither  add  to  nor  take  from  their  liability  to  him. 
Their  recovery  will  not,  as  the  defendants'  counsel  supposes,  estop 
them  to  deny  that  Bentley's  name  was  forged.  The  record  and  pro- 
ceedings here  would  not,  as  such,  be  any  evidence  whatever  between 
him  and  the  plaintiffs.  The  whole  is  but  a  more  solemn  admission  of 
the  forgery;  and  his  being  sworn  as  a  witness  adds  nothing  to  its 
strength  in  his  favor.  Shoidd  he  sue  the  Montgomery  County  Bank, 
and  should  they  plead  payment,  they  would  have  the  same  right  to 
contest  the  forgery  as  if  this  suit  had  never  been ;  nor  could  any  of 
the  proceedings  here  be  used  as  evidence  against  the  witness,  even 
though  the  plaintiffs  should  fail  to  establish  the  forgery  against  these 
defendants. 

On  the  merits,  there  was  nothing  in  the  nature  of  the  transaction 
to  conclude  the  plaintiffs  against  showing  the  forgery.  They  had 
done  no  act  giving  currency  to  the  bill  on  the  strength  of  Bentley's 
name.  Even  had  they  accepted  it  on  the  day  when  it  was  drawn,  the 
defendants  could  have  holden  them  concluded  only  in  respect  to  the 
genuineness  of  the  drawer's  name,  he  being  their  immediate  corre- 
spondent. Chit,  on  Bills  (7th  Am.  Ed.  of  1839)  336.  And  the  act 
of  payment  could  amount  to  no  more.  Id.  Neither  acceptance  nor 
payment,  at  any  time,  nor  under  any  circumstances,  is  an  admission 
that  the  first,  or  any  other  indorser's  name  is  genuine.  Id.  628.  In 
point  of  title,  then,  the  case  of  the  defendants  was  the  same  as  if  the 
name  of  Bentley  had  not  appeared  on  the  bill.  They  have  obtained 
money  of  the  plaintiffs  without  right,  and  on  the  exhibition  of  a  forged 
title  as  a  genuine  one.  The  plaintiffs  paid  their  money  under  the  mis- 
taken belief  thus  induced,  that  the  name  was  genuine.  To  a  note  or 
bill  payable  to  order,  none  but  the  payee  can  assert  any  title  without 
the  indorsement  of  such  payee;  not  even  a  bona  fide  holder.  Id. 
286,  a,  430. 

But  it  is  said  the  equities  of  the  parties  are  equal,  and  the  defend- 
ants, having  possession,   must  prevail.      No   doubt  the  parties   were 


CIl.  1)  MAKER    AND    ACCEPTOR.  491 

equally  innocent  in  a  moral  point  of  view.  The  conduct  of  both  was 
bona  fide,  and  the  negligence  or  rather  misfortune  of  both  the  same. 
It  was  the  duty,  or,  more  properly,  a  measure  of  prudence,  in  each 
to  have  inquired  into  the  forgery,  which  both  omitted.  But  this  raises 
no  preference  at  law  or  equity  in  favor  of  the  defendants,  but  against 
them.  They  have  obtained  the  plaintiffs'  money  without  consideration ; 
not  as  a  gift,  but  under  a  mistake.  For  the  very  reason  that  the  par- 
ties were  equally  innocent,  the  plaintiffs  have  the  right  to  recover; 
and  that  was  conceded  throughout,  in  the  authority  cited  on  another 
point  by  the  defendants'  counsel.  United  States  Bank  v.  Bank  of 
Georgia,  10  Wheat.  333,  354,  6  L.  Ed.  331.  The  whole  course  of 
argument  and  authority  in  that  case  went  on  the  fault  of  the  party 
who  paid  the  money.  It  was  likened  to  the  case  of  a  bank  paying  a 
check,  on  which  the  name  of  the  drawer  was  forged,  which  was  again 
assimilated  to  the  acceptance  of  a  bill  of  exchange,  where  the  drawer's 
name  is  forged.  It  was  said  that,  in  such  cases,  the  payor  or  acceptor 
takes  upon  himself  the  knowledge  of  his  correspondent's  handwriting, 
and  shall  be  concluded.  Even  that  is  going  a  great  way,  unless  some 
bona  fide  holder  has  purchased  the  paper  on  the  faith  of  such  an  act. 
But  it  is  sufficient  to  distinguish  the  case,  that  it  goes  on  the  superior 
negligence  of  the  party  paying  or  accepting.  At  page  355  of  10 
Wheat.  (6  L.  Ed.  334)  the  court  draw  an  express  distinction  between 
the  effect  of  acceptance  or  payment  as  a  recognition  of  the  drawer's 
and  the  indorser's  handwriting.  It  is  said  the  forgery  of  an  indorse- 
ment is  not  a  fact  w^hich  the  acceptor  is  presumed  to  know.  And 
perhaps  the  decision  in  the  case  cited  should  be  rested  entirely  on  neg- 
ligence in  the  Bank  of  Georgia.  Vide  10  Wheat.  344  (6  L.  Ed.  334) ; 
also  the  case  of  the  Gloucester  Bank  v.  Salem  Bank,  17  Mass.  33,  cited 
10  Wheat.  350  (6  L.  Ed.  334). 

But,  it  is  said,  the  plaintiffs  here  delayed  giving  notice  of  the  forgery 
from  the  28th  of  March  till  the  7th  of  June.  Under  what  circum- 
stances is  not  disclosed,  for  the  point  of  delay  was  not  made  at  the 
trial.  That  is  a  sufficient  reason  why  it  should  not  be  listened  to  here. 
But  I  am  not  willing  to  concede  that  delay  in  the  abstract,  as  seems 
to  be  supposed,  can  deprive  the  party  of  his  remedy  to  recover  back 
money  paid  under  the  circumstances  before  us.^^ 

17  Accord:  Bank  of  Commerce  v.  Bank,  3  N.  Y.  230  (ISoO) ;  Third  National 
Bank  v.  Allen,  59  Mo.  310  (1875).  Contra:  London  &  River  Plate  Bank  v 
Bank,  11S96]  1  Q.  B.  7.     In  the  latter  case  the  court  said: 

"In  Cocks  V.  Masterman.  9  B.  &  C.  902.  the  simple  rule  was  laid  down  in 
clear  language  for  the  first  time  that  when  a  bill  becomes  due  and  is  pre- 
sented ifor  payment  the  holder  ought  to  know  at  once  whether  the  bill  is 
going  to  be  paid  or  not.  If  the  mistake  is  discovered  at  once,  it  maj-  be  the 
money  can  be  recovered  back  ;  but  if  it  be  not,  and  the  money  is  paid  in  good 
faith,  and  is  received  in  good  faith,  and  there  is  an  interval  of  time  in  which 
the  position  of  the  holder  may  be  altered,  the  principle  seems  to  apply  that 
money  once  paid  cannot  be  recovered  back.  That  rule  is  obviously,  as  it 
seems  to  me,  indispensable  for  the  conduct  of  business.  A  holder  of  a  bill 
v^annot  possibly  fail  to  have  his  position  affected  if  there  be  any  interval 
of  time  during  which  he  holds  the  money  as  his  own,  or  spends  it  as  his  own. 


492  LIABILITY  OF  PARTIES.  (Part  3 

It  is  said  the  defendants  had  indorsers  behind  them;  and  by  delay 
they  were  prevented  from  charging  them,  by  giving  seasonable  no- 
tice. Admit  this  to  be  so;  the  plaintiffs  did  not  stand  in  the  relation 
of  a  holder.  They  were  the  drawees,  and  advanced  the  money  by  way 
of  payment.  They  would  never,  therefore,  think  of  notice  to  the  de- 
fen<Iants,  till  they  accidentally  discovered  the  forgery.  If  there  had 
been  any  unreasonable  delay  after  such  discovery,  another  question 
would  be  presented.  I  infer  from  the  rigor  of  the  case  cited  by  the 
defendants'  counsel  (Cocks  v.  Masterman,  9  Barn.  &  Cress.  902)  that 
he  would  exact  as  great,  indeed  greater,  diligence  in  giving  notice 
than  is  necessary  to  fix  an  indorser.  There  the  plaintiffs  had  paid 
to  the  defendants,  the  holders,  an  acceptance,  purporting  to  be  in  the 
name  of  the  plaintiffs'  customers.  The  bill  was  drawn  payable  at  the 
plaintiffs'  bank.  The  next  day,  discovering  the  forgery,  they,  on  the 
same  day,  gave  notice  to  the  defendants  and  the  indorsers.  This  was 
held  too  late.  The  court  even  declined  to  give  an  opinion  whether 
notice  on  the  very  day  of  payment  would  have  entitled  the  plaintiffs 
to  recover,  but  held  that  notice  on  the  very  day  was  at  all  events  nec- 
essary, and  that,  short  of  this,  the  plaintiffs  were  not  entitled  to  re- 
cover. They  said  the  holder  must  not,  by  want  of  notice,  be  deprived 
of  the  right  to  take  steps  against  the  parties  to  the  bill,  on  the  very 
(lay  when  it  was  paid ;  and  they  admitted  that  this  was  requiring  one 
day  increased  diligence  beyond  what  would  have  been  required  in 
the  ordinary  case  of  dishonor.  In  the  latter  case,  they  allowed  that 
notice  on  the  next  day  would  have  been  in  season.  In  a  previous  case 
of  payment  under  the  like  circumstances,  notice  having  been  given 
on  the  very  day.  the  bankers,  who  paid  for  their  customers,  were  al- 
lowed to  recover.  Wilkinson  v.  Johnson,  3  Barn.  &  Cress.  428.  In 
this  earlier  case,  the  payment  was  made  for  the  honor  of  indorsers. 
whose  bankers  the  plaintiffs  were.  Both  cases  were  treated  by  the 
court  as  standing  on  the  same  principles,  though,  in  the  latter  case, 
they  do  not  put  it  distinctly  on  any  principle.  In  the  earlier  case, 
they  said  the  plaintiffs  were  not  the  drawees,  or  acceptors,  nor  the 
agents  of  any  supposed  acceptors.  The  same  thing  may,  I  take  it, 
be  said  of  the  latter  case,  though  the  plaintiffs  assumed  to  pay  for 
the  acceptors.  They  could  scarcely  have  intended  to  pay  as  mere 
agents  for  the  acceptors,  an  act  which  would  have  extinguished  the 
bill,  and  cut  them  off  from  a  remedy  against  the  drawers  and  indorsers. 
Where  a  bill  or  note  is  payable  at  a  bank,  and  no  express  direction 

and  if  he  is  subsonuently  sousht  to  be  made  responsible  to  hand  it  back.  It 
may  be  that  no  legal  right  may  be  conipronn.^ed  by  reason  of  the  payment. 
For  instance,  the  acceptor  may  pay  the  bill  and  discover  on  the  same  day 
that  the  bill  is  a  forgory,  and  so  inform  the  lioldor  of  it,  so  that  the  holder 
would  have  time  to  give  notice  of  dishonor  to  the  other  parties  to  the  bill ; 
but  even  in  such  a  case  it  is  manifest  that  the  position  of  a  man  of  business 
may  be  most  seriously  compromised,  even  by  the  delay  of  a  day.  Now  that 
clear  rule  is  one  that  ought  not  to  be  tampered  with."^  It  is  one  of  the  feu- 
rules  of  business  which  is  perfectly  clear  and  distinct  at  present,  and,  as  it 
seems  to  me,  it  is  unimpeachable." 


Ch,  1)  MAKER    AND    ACCEPTOR.  493 

given  by  the  principal  to  the  bank,  on  its  coming  in  with  indorsers, 
tlie  bank,  of  course,  takes  the  paper  as  a  purchaser,  or  holder,  and  for 
its  own  indemnity  presents  it  to  the  principal  for  payment  on  the  very 
day,  or  as  soon  as  may  be.  Thus  there  is  a  good  chance  to  detect  the 
forgery  of  his  name,  and  hurry  the  notices  to  the  other  parties.  What- 
ever forgeries  there  may  be  are  soon  brought  to  light.  In  the  earlier 
of  the  two  cases  cited  the  court  said :  "The  general  rule  of  law  is 
clear  and  not  disputed,  viz.  that  money  paid  under  a  mistake  of  facts 
may  be  recovered  back,  as  being  paid  without  consideration."  In 
the  latter  case  the  court  do  not  deny  the  rule,  nor  that  it  would  apply 
to  the  case  before  them.  But  to  enforce  it  they  require  an  almost  im- 
practicable diligence.  I  doubt  whether  this  case  can  be  sustained, 
except  upon  its  own  peculiar  circumstances,  if  it  can  be  sustained  at 
all.  In  all  the  previous  cases,  where  a  recovery  had  been  denied,  there 
was  carelessness,  or  delay,  or  both.  Smith  v.  Mercer,  6  Taunt.  76, 
was  much  like  Cocks  v.  Masterman,  and  there  had  been  a  neglect 
to  discover  the  forgery  and  give  notice  for  a  week's  time.  The  case 
of  Price  v.  Neale,  3  Burr.  1354,  was  one  of  palpable  neglect,  in  both 
payment  and  delay.  Some  other  cases  turn  on  similar  principles. 
Barber  v.  Gingell,  3  Esp.  Rep.  60 ;  United  States  Bank  v.  Bank  of 
Georgia  and  Gloucester  Bank  v.  Salem  Bank,  before  cited ;  Levy  v. 
Bank  of  United  States,  1  Bin.  (Pa.)  27,  4  Dall.  234,  1  L.  Ed.  814.  If 
Cocks  V.  Masterman  is  to  be  followed,  it  must,  I  think,  be  on  the  same 
principle.  The  plaintiffs  paid  on  the  faith  of  their  correspondents' 
name.  The  former  were  not  named  as  drawees ;  but  they  had  a  su- 
perior knowledge  of  their  correspondents'  handwriting,  which  they 
neglected  to  exert.  It  might,  therefore,  have  been  reasonable  to  re- 
quire that  they  should  overcome  the  objection  of  neglect,  by  such  a 
speedy  movement  as  to  save  all  possible  advantage  to  the  holder, 
against  the  prior  parties.  But,  where  each  party  enjoys  only  the 
same  chance  of  knowledge,  no  case  demands  anything  more  than 
reasonable  diligence  in  giving  notice,  after  a  discovery  of  the  forgery. 
The  common  case  of  paying  forged  bank  notes  is  one  instance.  And 
navy  and  victualing  bills  have  been  treated  as  standing  on  the  same 
footing.  Jones  v.  Ryde,  5  Taunt.  488.  Bruce  v.  Bruce,  Id.  495,  note. 
These  are  cases  of  transferring  notes  from  one  to  another,  which 
turn  out  to  be  unavailable  by  reason  of  a  forgery,  in  respect  to  which 
both  parties  are  equally  ignorant,  the  one  being  no  more  guilty  of  neg- 
lect than  the  other;  indeed,  neither  being  negligent,  but  both  being 
imposed  upon  under  the  exercise  of  ordinary  diligence.  At  all  events, 
it  does  not  lie  with  the  payor  to  complain  of  the  very  neglect  impu- 
table to  himself.  Neglect  to  give  notice,  after  discovering  the  forgery, 
is  another  matter.  Vid.  Chit,  on  Bills  (Am.  Ed.  of  1839)  p.  463.  If  the 
indorsers  are  to  be  charged,  as  such,  why  should  not  the  accidental 
delay  in  discovering  the  forgery,  on  a  paid  bill  especially,  operate  as 
an  excuse  for  not  giving  them  immediate  notice? 

The  defendants  did  not  disclose  their  agency,  and  must,  therefore, 


404  LIABILITY    OF    PARTIES.  (Part    3 

as  between  them  and  plaintiffs,  be  taken  to  have  acted  as  principals. 
They  obtained  the  money  of  the  plaintiffs  on  a  bill  of  exchange,  pay- 
able to  the  order  of  Bcntley,  under  a  forged  indorsement  of  his  name. 
Money  has  been  successively  paid  by  mistake  of  the  several  indorsees, 
the  plaintiffs,  the  defendants,  the  Bank  of  New  York,  etc.,  and  the 
remedy  by  each  is  plain.  It  is  by  action  over,  each  against  his  respec- 
tive indorser.  The  bill  has  never  been  put  in  a  regular  course  of  ne- 
gotiation, for  want  of  Bentley's  name.  No  one  who  has  advanced 
money  on  it,  therefore,  obtained  what  he  supposed  he  had  got ;  and 
the  indorsers,  beside  being  liable  as  such,  may  each  be  sued,  as  hav- 
ing received  money  without  consideration. 

The  proof  offered,  relative  to  the  custom  of  banks  to  collect  paper 
received  by  them  as  agents,  without  communicating  the  name  of  their 
principal,  would  have  disclosed  a  case  in  which  it  would  be  apparent 
that  the  defendants  might  or  might  not  have  been  agents.  The  object 
of  the  proposed  proof  was  to  supply  the  want  of  direct  evidence  that 
notice  of  the  agency  had  been  given  by  them  at  the  time.  Till  they 
had  superadded  proof  of  another  custom  for  banks  never  so  to  re- 
ceive paper  and  collect  as  principals,  the  proposed  evidence  could  have 
had  no  tendency  to  affect  the  plaintiffs  with  such  notice.  Knowledge 
that  the  defendants  might  be  acting  as  agents  was  not  enough.  This 
is  so  of  every  man  ostensibly  transacting  business  as  a  principal.  Vide 
Mills  V.  Hunt,  20  Wend.  433.  The  proof  offered  and  rejected  was, 
therefore,  irrelevant. 

New  trial  denied.^' 


COGGILL  V.  AMERICAN  EXCHANGE  BANK. 

(Court  of  Appeals  of  New  York,  1S47.    1  N.  Y.  113.  49  Am.  Dee.  .310.) 

Error  to  the  Supreme  Court,  where  Coggill  sued  the  American 
Exchange  Bank  in  assumpsit,  to  recover  back  the  money  which  he, 
as  the  drawee  and  acceptor,  had  paid  to  the  bank  as  the  holders  of 
a  bill  of  exchange,  upon  which  the  name  of  the  payee  had  been  forged. 
The  case  was  this:  Shapley  and  Billings  were  partners  in  business 
at  Earlville,  Madison  county,  and  the  plaintiff  resided  and  did  busi- 
ness in  the  city  of  New  York.  On  the  28th  of  July,  1843,  Charles 
S.  Billings,  one  of  the  partners,  drew  a  bill  in  the  name  of  the  firm, 
on  the  plaintiff,  for  $1,500.  payable  to  the  order  of  Truman  Billings. 
10  days  after  sight.  Charles  S.  Billings  forged  the  name  of  Truman 
Billings  as  indorser  on  the  draft,  and  also  the  name  of  Truman  Bill- 
ings, Jr.,  and  with  those  names  upon  the  bill  presented  it  to  the  Bank 
of  Central  New  York,  at  Utica,  for  discount,  on  the  29th  of  July; 
and  the  bank  discounted  the  bill  and  paid  the  money  to  Charles  S. 

IS  Ac-cord:  Jordan  Marsh  Co.  v.  Bank,  201  Mass.  397,  87  N.  E.  740,  22 
L.  R.  A.  (N.  S.)  2,")0  (1009).  action  by  drawer  ajjuiust  bauk.  See  Aiidrews  "v! 
Bauk.  107  Miuu.  190,  117  N.   W.  021,  7S0  (19US). 


Ch.  1)  MAKER    AND    ACCEPTOR.  495 

Billings.  The  discount  was  made  in  the  usual  course  of  business ; 
the  bank  having-  no  knowledge  of  the  forgery,  nor  any  reason  to  sup- 
pose that  Billings  was  not  acting,  as  he  professed  to  do,  for  his  firm, 
though  in  point  of  fact  he  applied  the  money  to  his  own  private  use. 
The  bank  indorsed  the  draft,  and  sent  it  to  the  defendants  for  collec- 
tion. The  plaintiff  accepted  the  bill,  and  paid  the  same  at  maturity,  on 
the  12th  of  August,  to  the  defendants.  The  plaintiff  had  no  funds 
of  the  drawers  in  his  hands,  but  accepted  and  paid  the  bill  for  their 
accommodation,  in  pursuance  of  an  agreement  made  with  Charles  S. 
Billings  to  do  so.  Charles  S.  Billings  absconded,  about  the  7th  of 
August,  on  account  of  this  and  other  forgeries.  On  learning  that  the 
names  of  the  indorsers  had  been  forged,  the  plaintiff,  on  the  18th  of 
August,  called  on  the  defendants  to  refund  the  money,  and  then 
brought  this  action  to  recover  it  back.  On  the  trial,  the  circuit  judge 
charged  the  jury  that  the  plaintiff  was  not  entitled  to  recover,  and  the 
plaintiff  excepted  to  his  opinion.  The  jury  found  a  verdict  for  the 
defendants,  which  the  Supreme  Court  refused  to  set  aside,  and  ren- 
dered judgment  for  the  defendants.    The  plaintiff  brings  error.^® 

Bronson,  J.  In  an  action  against  the  drawee  of  a  bill,  it  is  not 
enough  for  the  holder  to  prove  that  it  has  been  accepted,  without 
also  establishing  his  title  to  the  bill.  And  if  the  acceptor,  under  a 
mistake  as  to  the  fact  of  ownership,  has  paid  the  bill  to  one  who  had 
no  title,  the  money  may  be  recovered  back,  although  it  was  paid  to 
a  bona  fide  holder.  Canal  Bank  v.  Bank  of  Albany,  1  Hill,  287.  The 
plaintiff  relies  upon  this  case  as  not  being  distinguishable  from  his 
own ;  but  he  is  under  a  great  mistake.  It  is  not  expressly  stated  in 
the  report  of  that  case  that  Bentley,  the  payee  named  in  the  draft,  was 
the  owner  of  it;  nor  was  it  necessary  that  the  fact  should  be  stated, 
for  where  nothing  appears  to  the  contrary  the  payee  must  be  taken 
to  be  the  owner.  It  may,  however,  be  proper  to  mention  that  it  did 
expressly  appear  that  Bentley  was  the  owner  of  the  draft.  My 
recollection  on  the  subject  has  been  confirmed  by  inquiries  made  since 
the  argument.  In  the  case  now  before  us,  the  fact  is  fully  established 
that  Billings,  the  payee  named  in  the  bill,  never  was  the  owner  of  it; 
nor  was  it  drawn  with  the  intent  that  he  should  either  indorse  it  or 
have  any  interest  in  or  concern  with  it.  In  the  one  case,  the  payee 
owned  the  bill,  and  could  have  maintained  actions  upon  it,  both  against 
the  acceptors  and  drawers ;  while  in  the  other  the  payee  has  no  in- 
terest in  the  bill,  and  cannot  maintain  an  action  upon  it,  for  his  own 
benefit,  against  any  one.  In  the  one  case,  payment  to  the  holder  of  the 
bill  would  be  no  protection  against  an  action  by  the  payee,  because 
he  was  the  true  owner ;  while  in  the  other  the  payee,  having  no  title, 
could  in  no  event  have  a  legal  claim  to  the  money.  The  distinction 
between  the  two  cases  is  very  material  and  is  quite  too  obvious  to 
be  mistaken  by  any  one. 

19  Arguiueuts  of  counsel  are  omitted. 


496  LIABILITY  OF  PARTIES.  (Part  3 

Although  the  payee.  BilHngs,  had  no  interest  in  the  bill,  the  question 
still  remains  whether  the  Bank  of  Central  New  York,  in  whose  place 
the  defendants  stand,  acquired  a  good  title  to  it.  We  think  they  did. 
Shapley  and  Billings  drew  the  bill,  and  passed  it  to  the  bank,  with 
the  name  of  the  payee  indorsed  upon  it.  By  that  act  they  plainly  af- 
firmed that  the  indorsement  was  genuine,  so  that  the  bill  might  be 
negotiated  by  delivery.  By  means  of  this  representation  they  induced 
the  bank  to  discount  the  bill ;  and  if  the  bank  had  brought  an  action 
upon  it  against  them,  counting  in  the  usual  form,  as  upon  a  bill  pay- 
able to  Truman  Billings,  and  indorsed  by  him,  the  drawers  would, 
upon  the  plainest  principles  for  maintaining  honesty  and  fair  dealing, 
nave  been  estopped  from  controverting  the  genuineness  of  the  in- 
dorsement. If  an  authority  is  needed  in  support  of  this  doctrine, 
Meacher  v.  Fort,  3  Hill,  Law  (S.  C.)  227,  30  Am.  Dec.  364,  and 
Id.,  Riley  (S.  C.)  248,  is  a  case  directly  in  point. 

There  is  another  form  of  declaring  in  which  the  bank  might  have 
recovered  on  the  bill.  As  the  payee  had  no  interest,  and  it  was  not 
intended  that  he  should  ever  become  a  party  to  the  transaction,  he 
may  be  regarded,  in  relation  to  this  matter,  as  a  nonentity;  and  it  is 
fully  settled  that  when  a  man  draws  and  puts  into  circulation  a  bill 
which  is  payable  to  a  fictitious  person,  the  holder  may  declare  and  re- 
cover upon  it  as  a  bill  payable  to  bearer.  Vere  v.  Lewis,  3  Term  R. 
182 ;  Minet  v.  Gibson,  3  Term  R.  481 ;  Id.,  1  H.  Black,  569,  in  the 
House  of  Lords;  Collins  v.  Emett,  1  H.  Black.  313;  Plets  v.  Johnson, 
3  Hill,  112.  In  legal  eflfect,  though  not  in  form,  the  bill  is  payable  to 
bearer ;  and  it  is  always  good  pleading  to  state  the  legal  effect  of  the 
contract.  It  is  said  in  some  of  the  cases  (and  see  Bennett  v.  Farnell, 
1  Camp.  130,  180,  b,  note)  that  when  the  action  is  against  the  acceptor 
of  such  a  bill  it  must  appear  that  he  knew  the  payee  was  a  fictitious 
person.  But  I  can  see  no  sufficient  reason  for  laying  down  such  a 
rule.  It  is  enough  that  the  holder  has  a  good  title  to  the  bill,  so  that 
the  acceptor,  on  paying  it,  can  properly  charge  the  amount  against 
the  funds  of  the  drawer  in  his  hands,  if  there  be  any,  and,  if  there 
be  none,  that  he  may  have  an  action  against  the  drawer  for  monev 
paid  to  his  use.  As  the  acceptor  can  never  resort  to  the  payee  or  in- 
dorser,  he  has  no  interest  in  knowing  through  whose  hands  the  bill 
has  passed,  except  for  the  purpose  of  ascertaining  that  the  holder  has 
a  good  title. 

It  may  be  well  enough,  by  way  of  discouraging  such  transactions, 
to  hold  that  one  who  discounts  a  bill  for  the  benefit  of  the  drawer, 
with  knowledge  of  the  fact  that  the  payee  is  a  fictitious  person,  cannot 
recover  against  the  acceptor.  Hunter  v.  Jefferey,  Peake  Add.  Cas. 
146.  But  that  doctrine  has  nothing  to  do  with  this  case ;  for  the  bank 
had  no  knowledge  or  suspicion,  at  the  time  the  bill  was  discounted, 
that  the  name  of  the  payee  had  been  forged. 

The  point  has  been  adjudged  that  when  the  maker  of  a  promissory 
note  puts  it  into  circulation,  with  a  forged  indorsement  of  the  name 


Ch.  1)  MAKER    AND    ACCEPTOR.  497 

of  the  payee  upon  it,  a  bona  fide  holder  may  sue  and  recover  against 
the  maker  as  upon  a  note  payable  to  bearer  (Meacher  v.  Fort,  supra) ; 
and  the  same  rule  has  been  applied  where  the  payee  had  no  interest 
in  the  note,  and  it  was  not  intended  that  he  should  become  a  party  to 
the  transaction  (Foster  v.  Shattuck,  2  N.  H.  446).  Notwithstanding 
what  was  said  in  Dana  v.  Underwood,  19  Pick.  (Mass.)  99,  I  think 
this  sound  doctrine ;  and  it  is  applicable  to  the  case  of  a  bill  put  into 
circulation  by  the  drawer  with  a  forged  indorsement  upon  it.  A  bona 
fide  holder  may  treat  it  as  a  bill  payable  to  bearer. 

The  bank  had  a  good  title  to  the  bill  as  against  the  drawers  and 
the  payee,  and  that  was  a  good  title  against  all  the  world.  No  one 
is  injured  by  this  doctrine.  The  bill  has  answered  the  end  for  which 
it  was  drawn.  The  plaintiff  has  paid  money  for  the  drawers  in  pur- 
suance of  their  request ;  and  he  has  the  same  remedy  against  them 
that  he  would  have  had  if  the  indorsement  had  been  genuine. 

I  have  spoken  of  the  drav/ing  and  negotiating  the  bill  as  the  act  of 
both  of  the  partners,  although  only  one  of  them  was  present,  because 
such  was  the  legal  effect  of  the  transaction.  It  is  said  that  Charles  S. 
Billings  was  not  the  agent  of  his  partner,  Shapley,  for  the  purpose  of 
committing  a  forgery ;  and  that  is  very  true ;  but  his  right  to  draw 
and  negotiate  bills  in  the  name  of  the  firm  has  not  been  questioned, 
and  that  is  all  that  is  material  to  the  present  inquiry.  It  is  not  im- 
portant to  know  who  put  the  name  of  Truman  Billings  as  indorser 
upon  the  bill.  It  is  enough  that  Truman  Billings  was  not  the  owner  of 
the  bill,  and  that  it  was  passed  to  the  bank  with  his  name  upon  it. 

As  the  bank  discounted  the  bill  for  the  firm  of  Shapley  &  Billings, 
it  is  of  no  importance  that  Billings  applied  the  money  to  his  own 
private  use,  instead  of  carrying  it  into  the  affairs  of  the  partnership. 
And  in  relation  to  the  estoppel,  it  is  quite  clear  that  the  declarations 
and  acts  of  one  of  the  partners,  made  and  done  while  transacting  the 
partnership  business,  and  relating  to  it,  are  equally  conclusive  upon 
both  of  them.  We  have  not  been  referred  to  any  book  which  holds 
a  different  doctrine. 

The  plaintiff  probably  accepted  and  paid  the  bill  under  the  mistaken 
assumption  that  the  indorsement  v/as  genuine.  But  he  was  not  mis- 
taken about  the  main  fact  which  he  was  concerned  to  know,  which 
was  that  the  holder  was  the  owner  of  the  bill.  Having  paid  the  mone}- 
to  the  proper  person,  the  plaintiff  has  all  the  rights  against  the  drawers 
which  he  would  have  had  if  the  indorsement  had  been  made  by  Tru- 
man Billings ;  and  there  is  no  principle  upon  which  this  action  can 
be  maintained. 

Judgment  affirmed. 
Sm.&  M.B.&  N.— 32 


493  LIABILITY  or  PAKTiKS.  (Part  3 

WHITE  et  al.  v.  CONTINENTAL  NAT.  BANK. 
(Court  of  Appeals  of  New  York,  1876.    &i  N.  Y.  316,  21  Am.  Rep.  612.) 

Appeal  from  judgment  of  the  General  Term  of  the  Court  of  Com- 
mon Pleas  in  and  for  the  city  and  county  of  New  York,  affirming  a 
jutig-ment  in  favor  of  defendant  entered  upon  a  verdict,  and  affirming 
an  order  denying  a  motion  for  a  new  trial. 

This  action  was  brought  to  recover  back  money  paid  by  plaintiffs  to 
defendant,  upon  an  altered  sight  draft  drawn  upon  plaintiffs  by  their 
correspondent,  in  Buffalo. 

The  draft  was  drawn  for  the  sum  of  $27.  After  its  delivery  to  the 
payee,  and  before  presentation  and  acceptance,  it  was  altered  so  as  to 
change  the  amount  to  $2,750.  It  was  sent  by  one  Horton,  of  Balti- 
more, to  Austin  Baldwin  &  Co.,  New  York,  and  received  by  them  Au- 
gust 16,  18G9.  That  firm  deposited  it  on  the  same  day  with  defendant, 
and  for  its  avails  sent  to  Horton  a  sterling  bill  of  exchange  on  London 
at  60  days.  Defendant  credited  said  firm  the  amount  of  the  draft. 
The  draft  was  presented,  August  17th,  to  and  accepted  by  plaintiffs, 
payable  at  the  Leather  Manufacturers'  Bank,  by  whom  it  was  paid  to 
defendant.  In  the  regular  course  of  business  between  plaintiffs  and 
the  drawer  of  the  draft,  monthly  statements  of  accounts  were  render- 
ed. The  August  account  was  rendered  the  forepart  of  September.  It 
was  not  examined  by  the  drawer  until  October  5th,  when  the  altera- 
tion was  first  discovered.  Plaintiffs  were  advised  on  the  6th,  and  im- 
mediately notified  defendant. 

The  court  charged  among  other  things:  "If  the  jury  beheve  from 
ihe  evidence,  that  if  Austin  Baldwin  &  Co.  had  been,  either  directly 
by  the  plaintiffs  or  by  them  through  the  defendants,  informed  with- 
in a  reasonable  time  after  the  acceptance  of  the  draft  by  the  plaintiffs, 
that  the  same  was  forged  for  an  amount  exceeding  the  sum  of  $27, 
they,  Austin  Baldwin  &  Co.,  or  the  defendants,  could  have  taken  steps 
to  trace  and  arrest  the  crime  in  its  consummation,  and  have  prevented 
the  acceptance  of  their  bill  of  exchange  on  the  City  Bank  of  London, 
and  that  they  failed  to  take  either  of  such  steps  by  reason  of  the  ac- 
ceptance and  payment  of  the  draft  in  question  by  the  plaintiffs,  and 
the  failure  of  the  plaintiffs  to  advise  them  of  such  forgery  until  on  or 
about  October  6,  1869,  then  the  plaintiffs  are  estopped  from  denying 
the  genuineness  of  the  draft  in  question,  and  that  the  defendants  are 
entitled  to  a  verdict."    To  which  the  plaintiffs'  counsel  excepted. 

Plaintiffs'  counsel  requested  the  court  to  charge  that  plaintiffs  were 
not  bound  to  know  that  this  draft  had  been  altered  in  the  way  it  was 
altered,  and  that  all  they  were  bound  to  know  when  they  accepted  it 
was  that  the  signature  to  the  draft  was  genuine ;  also,  that  if  the  plain- 
tiffs were  not  legally  chargeable  with  knowledge  of  the  fact  that  the 
draft  had  been  altered,  no  duty  devolved  upon  them  to  give  any  earli- 


Ch.  1)  MAKER    AND    ACCEPTOR.  499 

er  notice  than  was  given,  either  to  Austin  Baldwin  &  Co.  or  anybody 
else,  of  the  fact  of  the  alteration. 

The  court  dechned  so  to  charge,  and  the  plaintiffs'  counsel  excepted. 

Allen,  J.  The  right  of  a  party,  paying  money  to  another  under  a 
bona  fide  forgetfulness  or  ignorance  of  facts,  to  recover  it  back  from 
one  who  is  not  entitled  to  receive  it,  is  well  established.  The  equita- 
ble actron  for  money  had  and  received  will  lie  against  one  who  has  re- 
ceived money  which  in  conscience  does  not  belong  to  him.  Kelly  v. 
Solari,  9  M.  &  W.  54;  Bank  of  Orleans  v.  Smith,  3  Hill,  560. 

The  doctrine  has  been  applied,  repeatedly,  in  cases  analogous  to  the 
present.  Bank  of  Commerce  v.  Union  Bank,  3  N.  Y.  230  ;  Continental 
National  Bank  v.  National  Bank  of  the  Commonwealth,  50  N.  Y.  575 ; 
National  Bank  of  Commerce  v.  National  Mechanics'  Banking  Associa- 
tion, 55  N.  Y.  211,  14  Am.  Rep.  232;  Marine  National  Bank  v.  Na- 
tional City  Bank,  59  N.  Y.  67,  17  Am.  Rep.  305. 

That  the  plaintiffs  in  this  action  paid  to  the  defendant,  professing 
to  be  the  holder  of  the  bill,  the  face  of  it,  in  ignorance  of  the  facts  dis- 
entitling the  defendant  to  receive  the  same,  is  not  disputed.  Their 
right  to  recover  the  money  thus  paid  must  be  unquestioned,  unless 
their  right  is  barred  by  some  circumstance  which  takes  the  case  out  of 
the  general  rule,  or  by  some  act  of  their  own,  they  have  lost  the  right. 

Certain  general  principles,  applicable  to  commercial  paper  and  regu- 
lating the  rights  and  obligations  of  the  several  parties  thereto,  are  very 
familiar  and  of  every-day  application. 

First.  The  plaintiffs,  as  drawees  of  the  bill,  were  only  held  to  a 
knowledge  of  the  signature  of  their  correspondents,  the  drawers ;  by 
accepting  and  paying  the  bill  they  only  vouched  for  the  genuineness 
of  such  signatures,  and  were  not  held  to  a  knowledge  of  the  want  of 
genuineness  of  any  other  part  of  the  instrument,  or  of  any  other  names 
appearing  thereon,  or  of  the  title  of  the  holder.  Kelly  v.  Solari,  su- 
pra; Broom's  Legal  Maxims,  257;  National  Park  Bank  v.  Ninth  Na- 
tional Bank,  46  N.  Y.  77,  7  Am.  Rep.  310 ;  Merchants'  Bank  v.  State 
Bank,  10  Wall.  604,  19  L.  Ed.  1008 ;  Espy  v.  Bank  of  Cincinnati,  18 
Wall.  604,  21  L.  Ed.  947 ;   Goddard  v.  Merchants'  Bank,  4  N.  Y.  147. 

Second.  The  defendant,  as  holder  of  the  bill  and  claiming  to  be  en- 
titled to  receive  the  amount  thereof  from  the  drawees,  was  held  to  a 
knowledge  of  its  own  title  and  the  genuineness  of  the  indorsements, 
and  of  every  part  of  the  bill  other  than  the  signature  of  the  drawers, 
within  the  general  principle  which  makes  every  party  to  a  promissory 
note  or  bill  of  exchange  a  guarantor  of  the  genuineness  of  every  pre- 
ceding indorsement,  and  of  the  genuineness  of  the  instrument.  Erwin 
V.  Downs,  15  N.  Y.  575 ;  Turnbull  v.  Bowyer,  40  N.  Y.  456,  100  Am. 
Dec.  523  ;  Story  on  Promissory  Notes,  §§  135,  379,  380,  381.  The 
presentation  of  the  bill,  and  the  demand  and  receipt  of  the  money 
thereon,  was  equivalent  to  an  indorsement.  The  drawees  had  a  right 
to  act  upon  the  presumptive  ownership  of  the  defendant  as  the  appar- 
ent holder. 


500  LIABILITY    OF    PARTIES.  (Part    3 

The  facts  which  disentitled  the  defendant  to  receive  the  money,  and 
in  ignorance  of  which  it  was  paid,  were  those  presumed  to  be  within 
the  knowledge  of  the  defendant  and  not  of  the  plaintiffs.  The  defend- 
ant, in  receiving  the  money  and  in  disposing  of  it,  did  not  act  upon  the 
faith  of  any  admission  by  the  plaintiffs,  express  or  implied,  of  any  fact 
which  they  now  controvert  in  prosecuting  this  action.  There  was, 
therefore,  no  want  of  good  faith,  no  negligence,  or  even  want  of  ordi- 
nary care  on  the  part  of  the  plaintiffs  in  the  payment  of  the  money. 
The  defendant,  in  the  entire  transaction,  acted  upon  other  evidence  of 
its  right  to  the  money  than  the  statement  or  actions  of  the  plaintiffs, 
and  in  dealing  with  the  bill  and  with  the  money,  its  avails,  acted  upon 
the  apparent  title  and  genuineness  of  the  instrument,  and  the  responsi- 
bility of  those  from  and  through  whom  it  received  the  bill.  The  plain- 
tiffs, therefore,  owed  no  duty  to  the  defendant  in  respect  to  the  for- 
gery, which  invalidated  the  bill  and  its  title  to  the  moneys  represented 
by  it. 

It  follows  that  there  could  be  no  negligence  on  the  part  of  the  plain- 
tiffs which  could  defeat  their  right  to  reclaim  the  money  paid  when- 
ever the  forgery  and  the  consequent  mistake  in  the  payment  were  dis- 
covered. Owing  no  duty  and  making  no  misrepresentation,  there  was 
no  estoppel  to  bar  the  action.  The  case  is  distinguishable  from  Con- 
tinental National  Bank  v.  National  Bank  of  the  Commonwealth,  supra, 
in  this :  That  in  the  case  cited  the  officer  of  the  bank  pronounced  a 
forged  certification  of  a  check  to  be  genuine,  upon  which  the  payee  of 
the  check  relied,  as  he  had  a  right  to  do,  and  thus  relying  neglected  to 
take  the  means  then  in  his  power  to  retrieve  his  position  and  save  him- 
self from  loss.  The  court  held  that  the  circumstances  created  an  equi- 
table estoppel,  and  that  the  bank  could  not  thereafter  gainsay  the  gen- 
uineness of  the  certification  which  it  had  adopted  and  upon  which  the 
other  parties  had  acted.  It  will  be  seen  that  this  estoppel  was  based 
upon  the  admission  of  a  fact  peculiarly  within  the  knowledge  of  the 
bank  upon  which  the  check  was  drawn,  and  which  it  was  bound  to 
know,  and  upon  a  positive  assertion  upon  which  the  other  party  had  a 
right  to  and  did  rely.  In  this  case,  as  we  have  seen,  the  plaintiffs  made 
no  assertion  of  any  fact  within  their  knowledge,  and  the  defendant  did 
not  act  or  forbear  to  act  upon  the  faith  of  anything  which  the  plain- 
tiffs said  or  did  or  omitted  to  say  or  do. 

Again,  in  the  case  cited,  had  the  teller  of  the  certifying  bank  dis- 
claimed the  forged  certification  and  pronounced  it  a  forgery  when  pre- 
sented, the  holder  of  the  check  would  have  had  ample  time  to  arrest 
the  swindler  at  the  Bank  of  the  State  of  New  York  before,  as  the  evi- 
dence showed,  he  had  received  the  money  on  the  gold  checks,  and  be- 
fore he  went  to  the  subtreasury  with  his  gold  certificates. 

In  the  case  at  bar,  it  is  the  merest  conjecture,  with  scarcely  a  possi- 
bility to  support  it,  that  the  defendant,  or  those  from  whom  it  received 
the  bill,  could  at  any  time  after  the  transmission  of  the  foreign  bill  of 
exchange  to  Baltimore,  have  taken  any  effectual  measures  either  for 


Ch.  1)  MAKER    AND    ACCEPTOR,  501 

arresting  the  swindler  or  reclaiming  the  bill  bought  and  paid  for  up- 
on the  credit  of  the  bill.  Estoppels  cannot  be  based  upon  mere  con- 
jectures even  if  a  proper  foundation  is  laid  for  them  in  other  respects. 
There  is  nothing  really  in  the  case  to  distinguish  it  from  National 
Bank  of  Commerce  v.  National  Banking  Association,  supra,  in  which 
the  plaintiff  recovered. 

Should  this  action  be  retried  other  questions  may  arise  not  present- 
ed by  this  record,  growing  out  of  the  relations  between  the  defendant 
and  other  parties,  and  the  character  in  which  the  defendant  acted, 
whether  as  agent  or  principal.  Upon  the  present  record  the  equities 
are  with  the  plaintiffs.  If  they  fail  to  recover,  they  lose  the  money  ab- 
solutely and  without  legal  fault  on  their  part.  If  the  defendant  is  com- 
pelled to  reimburse  the  plaintiffs,  it  has  its  remedy  over  against  the 
prior  indorsers ;  and  if  they  in  turn  have  no  remedy  against  the  prior 
indorsers,  it  is  because  they  have  chosen  to  deal  with  irresponsible  per- 
sons, or  those  of  whose  character  and  responsibility  they  were  igno- 
rant. It  would  be  unjust  to  father  the  consequences  of  their  method  of 
dealing  upon  innocent  third  persons.  But  waiving  the  question  as  to 
the  responsibility  of  the  defendant  for  the  genuineness  of  the  instru- 
ment, and  taking  the  most  favorable  view  for  the  defendant,  which  is 
to  regard  it  as  the  case  of  a  mutual  mistake,  in  respect  to  which  neither 
was  in  fault,  and  in  that  view  and  upon  that  theory,  the  case  is  within 
the  principles  decided  in  Bank  of  Commerce  v.  Union  Bank,  3  N.  Y. 
2.30,  and  Blingston  Bank  v.  Eltinge,  40  N.  Y.  391,  100  Am.  Dec.  516, 
and  the  plaintiffs  are  entitled  to  a  new  trial. 

Upon  the  case  as  made  and  upon  the  exceptions  taken  at  the  trial, 
I  am  of  the  opinion  that  the  judgment  should  be  reversed,  and  a  new 
trial  granted. 

Judgment  reversed.^" 


SEABOARD  NAT.  BANK  v.  BANK  OF  AMERICA. 

(Supreme  Court  of  New  York,  1906.     51  Misc.  Rep.  103,  100  N.  Y.  Supp.  740.) 

Action  by  the  Seaboard  Bank,  the  drawee  of  a  draft,  against  the 
Bank  of  America  to  whom  as  indorsee  the  plaintiff  had  paid  it. 

E.  V.  Babcock  &  Co.,  engaged  in  the  lumber  business  in  the  city  of 
Pittsburg,  Pa.,  kept  an  account  in  the  Federal  National  Bank  there  lo- 
cated. One  H.  R.  Pennock,  to  the  knowledge  of  the  bank,  was  the  au- 
ditor and  chief  bookkeeper  of  that  firm,  and  had  access  to  its  check- 
books and  its  books  generally,  and,  on  occasions,  he  called  at  the  bank 
with  reference  to  certain  financial  matters  of  the  firm.  On  September 
17,  1904,  Pennock  went  to  the  bank,  and,  claiming  to  represent  E.  V. 
Babcock  &  Co.,  presented  a  check  purporting  to  be  a  check  of  that  firm 

20  The  dissentiug  opinion  of  Miller.  J.,  is  omitted.  Compare  Ward  v.  Al- 
len, 2  Jkletc.  (Mass.)  53,  35  Am.  Dec.  3S7  (1840). 


502  LIABILITY    OF    PARTIES.  (Part    3 

drawn  on  the  Federal  National  Bank  to  the  order  of  "N.  Y.  Draft'" 
for  $2,0U0,  and  requested  a  New  York  draft  in  that  sum,  payable  to 
the  order  of  Carroll  Bros.  This  firm,  composed  of  David  N.  Carroll 
and  W.  T.  Carroll,  was  likewise  engaged  in  the  lumber  business  in 
Pittsburg,  but  the  bank  was  not  aware  of  its  existence,  or  who  were  its 
individual  members.  The  bank  complied  with  Pennock's  request,  drew 
on  the  Seaboard  National  Bank,  the  plaintiff,  a  draft  in  the  sum  of 
$2,000  in  favor  of  "Carroll  Bros.,"  and  handed  it  to  Pennock.  There- 
upon he  left,  and,  without  the  knowledge  of  the  Federal  National 
Bank  or  of  E.  V.  Babcock  &  Co.  or  of  Carroll  Bros.,  indorsed  "Car- 
roll Bros."  on  the  draft  and  collected  the  proceeds  through  the  de- 
fendant bank  which  acted  in  good  faith.  The  $2,000  check  which  Pen- 
nock delivered  to  the  Federal  Bank  was  forged,  presumably  by  him. 
Babcock  &  Co.  were  at  no  time  indebted  to  Carroll  Bros.-^ 

LiiVEXTRiTT,  J.  The  defendant  resists  the  claim  principally  on  the 
ground  that  the  draft  was  in  effect  payable  to  bearer.  What  was  the 
nature  of  the  draft?  If  in  law  it  was  equivalent  to  a  draft  payable  to 
bearer,  then  through  Pennock's  indorsement  of  "Carroll  Bros."  the 
payee,  the  Mellon  National  Bank,  and,  through  it,  the  defendant,  ac- 
quired a  good  title  to  the  draft.  An  instrument  is  payable  to  bearer 
not  only  when  it  is  so  expressed  on  its  face,  but  also  "when  it  is  pay- 
able to  the  order  of  a  fictitious  or  nonexisting  person,  and  such  fact 
was  known  to  the  person  making  it  so  payable."  Neg.  Inst.  Law 
(Laws  1897,  p.  724,  c.  612)  §  28,  subd.  3.  To  bring  the  draft  within 
the  provisions  of  the  statute  the  defendant  maintains  that  in  so  far  as 
the  Federal  National  Bank  was  concerned  Carroll  Bros.,  unknown  to  it 
as  a  firm  or  as  individuals,  was  "nonexisting" ;  and,  in  so  far  as  Pen- 
nock was  concerned,  Carroll  Bros,  was  "fictitious,"  because  it  was  a 
mere  name  arbitrarily  selected  by  him  to  promote  the  fraudulent 
scheme  which  he  had  concocted,  a  firm  that  was  a  nonentity  in  the 
transaction,  a  stranger  to  it,  and  neither  interested  in,  nor  entitled  to 
any  of  the  proceeds  of  the  draft.  Thus  the  defendant  deduces  as  a 
conclusion  that  Carroll  Bros,  was  either  "fictitious  or  nonexisting"  to 
the  only  parties  who  participated  in,  or  were  aware  of,  the  issuance  of 
the  draft.  But  the  mere  adoption  of  a  random  name  for  a  payee  would 
not,  under  the  statute,  make  the  instrument  payable  to  bearer,  and  such 
result  would  follow  only  provided  the  "person  making  it  so  payable" 
knew  the  payee  named  to  be  "fictitious  or  nonexisting."  The  defend- 
ant argues  that,  in  the  contemplation  of  the  statute,  Pennock,  and  not 
the  Federal  National  Bank,  made  the  draft  payable  to  Carroll  Bros. ; 
that  in  its  preparation  the  bank  acted  simply  as  a  scribe,  obedient  to 
Pennock's  dictation  and  direction ;  that  his  mind  guided  the  bank's 
hand  to  record  intention.    Let  us  consider  these  propositions. 

It  is  uniformly  recognized  law  that  negotiable  paper,  the  payee  of 

21  The  statement  of  the  case  is  taken  trum  the  uy iuiou,  part  of  which  is 
omitted. 


^h.  1)  MAKEK    AND    ACCEPTOE.  503 

which  does  not  represent  a  real  person,  cannot  be  deemed  payable  to 
bearer  unless  the  paper  was  put  into  circulation  by  the  maker  with 
the  knowledge  that  the  name  of  the  payee  does  not  represent  a  real  per- 
son. The  fictitiousness  of  the  payee  and  the  knowledge  of  the  maker 
must  concur.  Then  the  maker's  intention  as  disclosed  by  his  adoption 
of  a  fictitious  payee  fixes  the  character  of  the  paper.  Shipman  v.  Bank 
of  the  State  of  N.  Y.,  126  N.  Y.  318,  27  N.  E.  371,  12  L.  R.  A.  791, 
22  Am.  St.  Rep.  821 ;  Turnbull  v.  Bowyer,  40  N.  Y.  456,  100  Am. 
Dec.  523 ;  Irving  Nat.  Bank  v.  Alley,  79  N.  Y.  536;  Vagliano  v.  Bank 
of  England,  L.  R.  22  Q.  B.  D.  103  ;  Armstrong  v.  Pomeroy,  46  Ohio 
St.  512,  22  N.  E.  866,  6  L.  R.  A.  625,  15  Am.  St.  Rep.  655 ;  Gibson  v. 
Minet,  1  H.  Black.  569.  But  can  it  be  said  that  Carroll  Bros,  was  non- 
existent merely  because  the  Federal  National  Bank  was  ignorant  of 
the  existence  of  that  concern?  Ignorance  of  existence  is  not  the  equiv- 
alent of  knowledge  of  nonexistence.  Carroll  Bros,  was  a  real  concern, 
though  the  bank  did  not  know  it.  Conceding  that  conclusion,  the  de- 
fendant argues,  in  efifect,  that  ignorance  of  the  existence  of  Carroll 
Bros,  precludes  the  possibility  of  any  intention  on  the  part  of  the  bank 
that  that  firm  should  enjoy  the  proceeds  of  the  draft;  that  if  any  in- 
tention so  utterly  colorless  and  purposeless  could  be  conceived  it  is  of 
no  consequence ;  that  Pennock  was,  in  effect,  the  maker  as  he  was  the 
author  of  the  draft ;  that  it  was  his  intention  that  the  name  Carroll 
Bros,  should  represent  a  fictitious  payee,  and  that  that  intention  is  con- 
trolling and  should  prevail.  That  argument  ignores  the  statute,  which 
constitutes  the  intention  of  the  maker  the  test,  and  not  that  of  any  per- 
son to  whose  dictation  the  maker  submits.  It  also  ignores  the  essential 
fact  that  the  draft  is  the  obligation  of  the  bank,  and  that  to  allow  the 
argument  would  enable  any  person  to  change  the  legal  effect  of  the  act 
of  the  obligor. 

There  are..many  precedents  for  the  conclusion  that  the  drawer  of  a 
negotiable  instrument  is  liable  to  the  drawee  if  payment  be  made  to  a 
person  not  named  as  payee.  Where  the  drawer  of  a  check,  draft,  or 
bill  of  exchange  delivers  it  to  an  imposter,  supposing  him  to  be  the  per- 
son whose  name  he  has  assumed,  the  drawer  must,  as  against  the  draw- 
ee or  a  bona  fide  holder  for  value,  bear  the  loss  where  the  imposter  ob- 
tains payment  of  or  negotiates  the  draft.  The  underlying  reason  is 
that  it  was  the  drawer's  intention  that  the  person  to  whom  the  instru- 
ment was  delivered  should  be  the  payee,  even  though  through  fraud 
and  imposition  that  intention  was  created.  Though  the  victim  of  de- 
ception practiced  by  the  person  who  adopted  the  name  of  the  payee, 
the  maker  must  honor  the  paper.  Land  Title  &  Trust  Co.  v.  North- 
western National  Bank,  196  Pa.  230,  46  Atl.  420,  50  L.  R.  A.  75,  79 
Am.  St.  Rep.  717;  United  States  v.  National  Exchange  Bank  (C.  C.) 
45  Fed.  163  ;  Levy  v.  Bank  of  America,  24  La.  Ann.  220,  13  Am.  Rep. 
124 ;  Electrical  Const.  Co.  v.  Globe  Sav.  Bank,  64  111.  App.  225.  Un- 
der such  circumstances  the  intention  of  the  maker  of  the  instrument 
controls,  and  casts  upon  him  the  consequences  of  the  imposition.    It  is 


504  LIABILITY  OF  rAKTiLs.  (Part  3 

because  the  drawee  has  acted  in  accordance  with  the  drawer's  indicat- 
ed intention  that  the  latter  must  make  reimbursement.  It  is  scarcely 
conceivable  that  if,  under  such  conditions,  the  maker's  intention  is  vi- 
tal to  involve  him  in  liability,  that  under  other  conditions,  where  lia- 
bility would  not  follow,  such  intention  is  immaterial,  and  must  give 
place  to  the  intention  of  a  third  person,  here  the  impostor. 

Let  us  assume  that  Pennock,  as  a  stranger,  had  called  at  the  Fed- 
eral National  Bank,  had  represented  himself  to  be  a  member  of  the 
firm  of  Carroll  Bros.,  and  as  such  had  requested  the  draft  in  suit,  and 
the  bank,  believing  the  representation  of  Pennock  to  be  true,  had 
drawn  the  draft  in  the  form  in  which  it  appears  and  delivered  it  to 
Pennock,  then  Pennock's  indorsement  of  Carroll  Bros,  would  have 
made  the  Federal  National  Bank  answerable  because  its  intention  had 
been  eflfectuated.  But  the  facts  are  otherwise.  Pennock  was  known 
to  the  bank ;  he  claimed  to  represent  his  employers,  E.  V.  Babcock  & 
Co.,  and  in  their  behalf  applied  for  a  draft  in  favor  of  Carroll  Bros,  as 
payee.  He  made  no  pretense  whatever  to  be  a  member  of  that  firm,  or 
in  anywise  to  be  entitled  as  payee  to  the  proceeds  of  the  draft.  The 
imposition  which  he  practiced  did  not  relate  to  his  own  identity.  Noth- 
ing transpired  which  could  have  given  rise  to  an  intention  on  the 
part  of  the  bank  that  Pennock  should  become  the  payee.  The  delivery 
to  him  of  the  draft  did  not  import  any  intention  on  the  part  of  the 
bank  that  he  should  reap  the  proceeds.  If,  under  the  assumed  condi- 
tions, the  bank  is  to  be  mulcted  as  a  result  of  its  intention,  is  it  also  to 
be  mulcted  under  the  actual  conditions  where  a  contrary  intention  ex- 
isted? If  so,  the  intention  of  the  maker,  which  the  courts  have  uni- 
formly accepted  as  the  controlling  element,  could  be  eliminated,  as  his 
liability  would  attach  whatever  his  intention.  In  my  opinion,  the  in- 
tention of  the  Federal  National  Bank,  to  the  exclusion  of  any  design 
of  Pennock,  is  the  controlling  consideration.  The  bank  intended  to  is- 
sue, as  in  form  it  did,  a  draft  to  order,  and  not  to  bearer,  and  handed 
it  to  Pennock,  not  as  owner,  but  for  delivery  to  E.  V.  Babcock  &  Co. 
or  to  Carroll  Bros.  His  indorsement  of  Carroll  Bros,  was  a  forgery. 
He  had  no  title  to  the  draft ;  he  could  convey  none.  The  Mellon  Na- 
tional Bank  cashed  the  draft  in  reliance  on  his  implied  warranty  of  ti- 
tle ;  having  taken  that  risk,  it  cannot  complain  if  it  must  bear  the  con- 
sequences of  its  misplaced  reliance  and  restore  to  the  defendant  the 
remitted  proceeds  of  a  draft  to  which  it  did  not  give  the  defendant 
good  title.     *     *     * 

Plaintiff's  motion  for  a  verdict  granted. ^^ 

22  Affirmed  in  Aiipellate  Divisiou  on  the  opinion  of  T^ventritt.  J.,  118  App. 
DIv.  iM>7.  Ki.S  X.  Y.  Sup]).  1141  (1907).  Accord:  .Jordan  Marsli  Co.  v.  Bank. 
201  Mass.  397,  87  N.  E.  740,  22  L.  R.  A.  (N.  S.)  250  (WOO),  acUon  by  drawer 
against  bank. 


Cb.  1)  MAKER    AND    ACCEPTOR.  505 

TRUST  CO.  OF  AMERICA  v.  HAMILTON  BANK  OF  NEW 

YORK  CITY. 

(Supreme  Court,  Appellate  Division,  First  Department,  190S.     127  App.  Div. 
515,  112  N.  y.  Supp.  M.) 

Submission  of  controversy  under  Code  Civ.  Proc.  §  1279,  by  the 
Trust  Company  of  America  and  the  Hamilton  Bank  of  New  York  City. 
Judgment  for  defendant. 

McLaughlin,  J.  This  is  a  controversy  submitted  to  the  court  up- 
on an  agreed  statement  of  facts  under  section  1279  of  the  Code  of 
Civil  Procedure.  The  controversy  relates  to  four  checks  for  $500 
each,  drawn  upon  the  plaintifif,  a  trust  company  doing  a  banking  busi- 
ness, and  signed,  "Estate  of  Kate  M.  Wallace,  Arthur  B.  Wallace, 
Adm'r."  At  the  time  the  checks  were  presented  to  the  plaintiff  for 
payment,  the  estate  of  Kate  M.  Wallace  was  one  of  its  depositors,  hav- 
ing to  its  credit  an  amount  in  excess  of  all  the  checks,  which  could  be 
drawn  out  on  checks  signed  by  Arthur  B.  Wallace,  administrator, 
when  countersigned  by  the  United  States  Fidelity  &  Guaranty  Com- 
pany. The  Wallace  estate  had  then  been  practically  settled,  and  the 
amount  on  deposit  was  ready  for  distribution  among  the  next  of  kin 
of  the  decedent. 

The  four  checks  in  question  were  drawn  without  the  knowledge  or 
authority  of  the  administrator,  his  signature  being  forged,  and  in  each 
there  was  inserted  as  payee  the  name  of  some  one  of  the  next  of  kin 
whose  distributable  share  of  the  amount  on  deposit  with  the  plaintiff 
was  greater  than  the  amount  of  the  check  or  checks  thus  apparently 
payable  to  such  person.  The  first  check  was  dated  September  25, 
1905,  and  was  presented  on  that  day  to  the  United  States  Fidelity  & 
Guaranty  Company  by  a  person  unnamed,  without  the  knowledge  of 
plaintiff  or  defendant.  The  United  States  Fidelity  &  Guaranty  Com- 
pany, relying  upon  the  apparent  genuineness  of  the  check,  counter- 
signed the  same,  and  it  was  then,  by  some  person  unknown,  presented 
to  the  plaintiff  for  acceptance  and  by  it  accepted,  in  writing.  The 
name  of  the  payee  was  then  forged  upon  the  back  of  the  check  as  first 
indorser,  and  it  was  subsequently  deposited  with  the  defendant,  by  one 
M.  F.  Kerby,  one  of  its  depositors,  who  was  given  credit  for  the  same. 
It  then  bore  the  following  additional  indorsements :  "Harvey  J.  Con- 
key.  M.  F.  Kerby.  A,  Edward  Fisher."  Thereafter,  the  defendant, 
through  the  New  York  Clearing  House,  presented  the  check  to  the 
plaintiff  for  payment,  guaranteeing  the  indorsements,  and  it,  relying 
upon  the  genuineness  of  the  check,  with  the  guarantee  of  the  defend- 
ant thereon,  not  knowing  that  the  indorsement  of  the  payee  was  forg- 
ed, paid  the  same  in  good  faith.  Substantially  the  same  facts  are  true 
in  regard  to  the  second  check,  which  was  dated  in  November,  1905. 

The  other  two  checks,  dated  in  December,  1905,  and  January,  1906, 
were  not  presented  to  plaintiff   for  acceptance  before  payment  and 


50G  LiAuiLiTY  OF  I'AUTiES.  (Part  3^ 

were  deposited  with  defendant  by  Harvey  J.  Conkey,  one  of  its  de- 
positors, to  the  cretht  of  his  account ;  otherwise,  the  same  course  was 
pursued  with  regard  to  them.  They  were  indorsed  "Harvey  J.  Con- 
key"  below  the  forged  indorsement  of  the  payee. 

Upon  discovering  the  forgeries,  the  plaintiff  at  once  notified  the  de- 
fendant, tendered  back  the  checks,  and  demanded  repayment.  In  the 
meantime  both  Kerby  and  Conkey  had  withdrawn  the  proceeds  of  the 
checks,  and  the  defendant,  relying  on  plaintiff's  acceptance  and  pay- 
ment of  them,  had  paid  out  the  same  in  good  faith.  The  defendant 
has  refused  to  rcpciy  plaintiff'  the  amount  of  the  checks,  or  any  of 
them,  and  the  question  presented  is  whether  plaintiff  is  entitled  thereto. 

The  general  rule  is  that  payments  made  under  a  mistake  of  fact 
may  be  recovered,  although  negligently  made ;  but  it  is  also  settled 
that,  if  the  drawee  of  a  bill  of  exchange  to  which  the  drawer's  name 
has  been  forged  accepts  or  pays  the  same,  he  can  neither  repudiate  the 
acceptance  nor  recover  the  money  paid,  since  he  is  bound  to  know  the 
drawer's  signature.  Price  v.  Neal,  3  Burrows,  1354 ;  Bank  of  United 
States  v.  Bank  of  Georgia,  10  Wheat.  333,  6  L.  Ed.  33-i;  National 
Park  Bank  v.  Ninth  National  Bank,  46  N.  Y,  77,  7  Am.  Rep.  310; 
Goddard  v.  Merchants'  Bank,  4  N.  Y.  147.  It  is  also  settled  that, 
where  the  indorsement  of  the  payee  of  a  bill  of  exchange  has  been 
forged,  subsequent  holders  obtain  no  title  to  it,  and  payments  made  to 
one  who  holds  under  such  forged  indorsements  may  be  recovered. 
Corn  Exchange  Bank  v.  Nassau  Bank,  91  N.  Y.  74,  43  Am.  Rep.  655 ; 
Holt  v.  Ross,  54  N.  Y.  472,  13  Am.  Rep.  615 ;  Canal  Bank  v.  Bank  of 
Albany,  1  Hill,  287. 

Therefore,  if  all  the  indorsements  on  the  checks  in  question  had 
been  genuine,  the  plaintiff  could  not  recover;  but  if  the  maker's  sig- 
natures had  been  genuine,  and  only  the  indorsements  or  any  of  them 
forged,  it  could  recover.  Having  paid  the  checks,  the  plaintiff  cannot 
now  be  heard  to  say  that  the  maker's  signatures  are  not  genuine,  or 
recover  on  the  ground  that  the  same  were  forged,  and  bv  reason  of 
that  fact  it  is  suggested  that  the  rights  of  the  parties  are  precisely  the 
same  as  though  the  drawer's  signatures  were  genuine,  and  since  the 
defendant  never  obtained  good  title  to  them,  on  account  of  the  forged 
indorsements  of  the  payees,  the  plaintiff  is  entitled  to  recover.  There 
are  authorities  to  support  this  contention.  First  Nat.  Bank  v.  North- 
western Bank.  152  III.  296,  38  N.  E.  739,  2G  L.  R.  A.  289,  43  Am.  St. 
Rep.  247 ;  McCall  v.  Croning,  3  La.  Ann.  409,  48  Am.  Dec.  454.  But 
it  does  not  necessarily  follow,  because  the  checks  were  not  indorsed 
by  the  persons  whose  names  appeared  on  them  as  payees,  that  the 
defendant,  which  received  them  in  good  faith  and  paid  value  therefor, 
can  be  compelled  to  repay  their  amounts  to  the  plaintiff. 

A  leading  authority  on  the  subject  is  Bank  of  England  v.  Vagliano 
Bros.,  L.  R.  1891  App.  Cas.  107,  which  reversed  Vagliano  v.  Bank 
of  England.  23  Q.  B.  D.  243,  and  22  Q.  B.  D.  103.  ^This  authority 
has  been   frequently  cited  and  is  directly  in  point.     There,  Va^Hano- 


•Ch.  1)  MAKER    AND    ACCEPTOR.  507 

Bros,  were  foreign  bankers  doing  a  large  business  in  various  parts  of 
the  world.  One  of  their  clerks,  Glyka,  forged  a  large  number  of  bills 
of  exchange  purporting  to  be  drawn  on  the  firm  by  one  of  its  foreign 
correspondents,  payable  to  another  well-known  firm.  He  also  forged 
letters  of  advice  to  accompany  them  and  caused  them  to  be  presented, 
the  same  as  genuine  bills,  to  Vagliano  Bros,  in  the  regular  course  of 
business.  Vagliano  Bros.,  deceived  by  the  cleverness  of  the  forgeries, 
accepted  from  time  to  time  bills  aggregating  over  $350,000,  which 
they  directed  the  Bank  of  England,  their  general  banker,  to  pay  when 
presented.  After  bills  had  been  accepted,  Glyka  would  obtain  pos- 
session of  them,  indorse  thereon  the  name  of  the  payee,  and  collect 
the  money  from  the  bank,  which  charged  the  amounts  so  paid  to  the 
account  of  Vagliano  Bros.  The  latter,  on  discovering  the  forgeries, 
sued  the  bank  to  recover  the  amounts  so  paid  out  on  the  forged  bills. 
The  House  of  Lords  held,  reversing  the  decisions  of  the  lower  courts, 
that  this  amount  could  not  be  recovered.  The  decision  is  placed  upon 
the  ground  that  "since  Glyka,  although  he  inserted  in  the  forged  bills 
as  payee  the  name  of  a  well-known  firm,  knew  that  such  firm  had  no 
interest  in  the  bills  and  never  intended  that  it  should,  the  payee  was 
fictitious,"  and  under  the  statute  providing  that  "where  the  payee  is  a 
fictitious  or  non-existing  person  the  bill  may  be  treated  as  payable  to 
bearer"  (Bills  of  Exchange  Act  1882,  §  7,  subsec.  3),  the  bills  of  ex- 
change were,  in  legal  effect,  payable  to  bearer,  and  the  bank  obtained 
good  title,  regardless  of  the  indorsements. 

Some  doubt  was  expressed  in  the  Bank  of  England  Case  as  to  wheth- 
er the  statute  warranted  such  construction,  since  the  effect  was  to 
make  the  fictitiousness  of  the  payee  depend  upon  the  maker's  inten- 
tion ;  but  under  our  own  statute  no  such  question  can  be  raised.  The 
negotiable  instruments  law  provides  (Laws  1897,  p.  724,  c.  612,  §  28) : 
"The  instrument  is  payable  to  bearer:  *  *  *  (3)  When  it  is  pay- 
able to  the  order  of  a  fictitious  or  nonexisting  person,  and  such  fact 
was  known  to  the  person  making  it  so  payable." 

The  correctness  of  the  decision  in  First  National  Bank  v.  North- 
western Bank,  supra,  may  well  be  questioned,  since  the  decision  of  the 
lower  court,  which  was  reversed  by  the  House  of  Lords,  in  the  Bank 
of  England  Case,  was  cited  at  length  and  relied  upon.  Whether  this 
be  so  or  not,  the  decisions  in  our  own  state  are  entirely  in  harmony 
with  the  views  expressed  by  the  House  of  Lords.  Thus,  in  Coggill 
V.  American  Exchange  Bank,  1  N.  Y.  113,  49  Am.  Dec.  310,  a  partner 
drew  a  bill  of  exchange  in  the  name  of  the  partnership,  payable  to 
one  Truman  Billings  and  forged  thereon  the  indorsement  of  the  lat- 
ter. The  bill  subsequently  came  into  the  hands  of  the  defendant  bank, 
and  the  plaintiff,  upon  whom  it  was  drawn,  accepted  and  paid  it.  It 
was  held  that  the  plaintiff,  on  discovering  the  forgery,  could  not  re- 
cover the  amount  paid  from  the  defendant,  since  the  bill  was  in  effect 
payable  to  bearer,  and  defendant  had  good  title.  Mr.  Justice  Bronson, 
who  delivered  the  opinion  of  the  court,  distinguished  the  case  of  Canal 


508  LIABILITY  OF  rAUTiKS.  (Part  3 

Bank  v.  Bank  of  Albany,  supra,  and  said :  "As  the  payee  had  no  in- 
terest, and  it  was  not  mtended  that  he  should  ever  become  a  party  to 
the  transaction,  he  may  be  regarded,  in  relation  to  this  matter,  as  a 
nonentity ;  and  it  is  fully  settled  that  when  a  man  draws  and  puts  in- 
to circulation  a  bill  which  is  payable  to  a  fictitious  person,  the  holder 
may  declare  and  recover  upon  it  as  a  bill  payable  to  bearer,  *  *  * 
In  legal  effect,  though  not  in  form,  the  bill  is  payable  to  bearer. 
*  *  *  The  plaintiff  probably  accepted  and  paid  the  bill  under  the 
mistaken  assumption  that  the  indorsement  was  genuine;  but  he  was 
not  mistaken  about  the  main  fact  which  he  was  concerned  to  know, 
which  was  that  the  holder  was  the  owner  of  the  bill." 

And  in  Phillips  v.  Mercantile  National  Bank,  140  N.  Y.  556,  35  N. 
E.  9S2,  23  L.  R.  A.  584,  37  Am.  St.  Rep.  596,  the  cashier  of  the  Na- 
tional Bank  of  Sumter,  S.  C,  drew  checks  in  the  name  of  the  bank, 
inserting  as  payees  the  names  of  customers  of  the  bank,  whose  indorse- 
ments he  forged.  The  checks  thus  drawn  were  sent  to  various  firms 
in  New  York  and  subsequently  came  into  the  hands  of  the  defendant, 
which  received  them  in  good  faith  and  charged  them  to  the  account 
of  the  Sumter  Bank.  The  receiver  of  the  Sumter  Bank  thereafter 
brought  an  action  to  recover  the  amount  of  these  checks,  and  it  was 
held  that  the  same  could  not  be  maintained,  since  in  legal  effect  the 
payees  were  fictitious  and  the  checks  payable  to  bearer,  and  for  that 
reason  the  defendant  obtained  good  title.  The  court,  Mr.  Justice  Gray 
delivering  the  opinion,  said:  "The  names  he  used  were,  for  his  pur- 
poses, fictitious,  because  he  never  intended  that  the  paper  should  reach 
the  persons  whose  names  were  upon  them.  The  transaction  was  one 
solely  for  the  fraudulent  purpose  of  appropriating  his  bank's  moneys, 
by  a  trick  which  his  position  enabled  him  to  perform.  Concededly,  if 
the  names  of  the  payees  were  of  fictitious  persons,  the  Sumter  Bank 
would  have  had  no  claim  upon  the  defendant.  How,  then,  can  the 
transaction  be  said  to  assume  a  dift'erent  aspect  because  the  names 
adopted  were  of  known  persons?  That  the  intention  was  to  treat  them 
as  being  of  fictitious  persons  is  manifest.  *  *  *  'phe  fictitiousness 
of  the  maker's  direction  to  pay  does  not  depend  upon  the  identification 
of  the  name  of  the  payee  with  some  existent  person,  but  upon  the  in- 
tention underlying  the  act  of  the  maker  in  inserting  the  name." 

Under  the  negotiable  instruments  law  and  the  cases  cited,  I  am  of 
the  opinion  the  checks  in  question,  as  between  plaintiff"  and  defendant, 
were  payable  to  bearer.  It  does  not  appear  who  forged  the  maker's 
signatures,  but  the  subsequent  history  of  the  checks  does  not  leave  it 
open  to  doubt  that  the  person  who  did  so  knew  that  the  parties  whose 
names  were  used  as  payees  would  never  have  anv  interest  in  the  in- 
struments. Just  as  in  the  Bank  of  England  and  the  Phillips  Cases,. 
in  order  to  accomplish  the  fraud  more  easily,  the  names  inserted  as 
payees  were  those  of  persons  to  whom  checks  might  naturally  be  made. 
Whether  indorsing  the  names  of  the  payees  upon  the  checks  was  tech- 
nically forgery  or  not  it  is  unnecessary  to  consider.     It  has  been  con- 


Ch.  1)  MAKER    AND    ACCEPTOR.  509 

venient  to  thus  describe  them.  Despite  these  forged  indorsements, 
then,  the  defendant  acquired  good  title,  since  in  legal  effect  the  checks 
were  payable  to  bearer.  Plaintiff,  having  paid  them  to  a  holder  in 
due  course,  cannot  recover  upon  the  ground  that  the  payees'  signatures 
were  forged. 

Nor  is  this  view  at  all  in  conflict  with  Shipman  v.  Bank  of  State  of 
New  York,  126  N.  Y.  318,  27  N.  E.  371,  12  L.  R.  A.  791,  22  Am.  St. 
Rep.  821.  There,  the  plaintiffs'  firm  signed  a  large  number  of  checks 
relying  on  the  false  statements  of  an  employe ;  the  names  of  the  payees 
being  in  some  instances  fictitious  and  in  others  the  names  of  existing 
persons.  The  employe  upon  whose  false  statements  the  checks  were 
made  then  indorsed  upon  them  the  names  of  the  respective  payees,  and 
the  checks  were  thereafter  paid  in  good  faith  by  the  bank  upon  which 
they  were  drawn.  The  court  held  that  the  plaintiffs  could  recover 
from  the  bank  the  amount  paid,  distinguishing  the  Bank  of  England 
Case,  and  the  distinction  is  obvious.  In  the  former  case,  the  member 
of  the  firm  who  signed  the  checks  in  the  firm  name  believed  that  in 
every  instance  the  payee  was  a  real  person  to  whom  alone  the  check 
was  payable,  while,  in  the  latter  case,  the  person  who  wrote  the  mak- 
er's signature  was  a  forger  who  knew  that,  so  far  as  the  bills  of  ex- 
change were  concerned,  the  payee  was  fictitious.  The  court  expressly 
recognized  the  rule  that  the  maker's  intention  was  controlling,  saying : 
"The  maker's  intention  is  the  controlling  consideration  which  deter- 
mines the  character  of  such  paper." 

It  is  true  that  in  many  of  the  authorities  cited  the  person  guilty  of 
the  fraud  was  connected  in  some  way  with  one  of  the  parties,  which 
may  have  affected  the  equities  of  the  case,  as  was  suggested  in  Ship- 
man  V.  Bank  of  State  of  New  York,  supra,  concerning  the  decision  in 
the  Bank  of  England  Case,  while  here,  so  far  as  appears,  the  guilty 
party  was  a  stranger  to  both  plaintiff  and  defendant,  and  they  are 
equally  innocent.  But  that  cannot  change  the  law  as  to  the  fictitious- 
ness  of  the  payees,  and,  if  it  did,  I  am  of  the  opinion  that  any  equities 
in  the  present  case  are  with  the  defendant.  The  risk  of  paying  out 
money  upon  a  forged  signature  of  a  depositor  is  one  which  a  banker 
must  assume,  and,  if  the  plaintiff  had  detected  the  forgeries  when  the 
checks  were  presented  for  payment,  it  would  not  have  suffered  any 
loss,  and  it  is  possible  that  the  defendant  would  not. 

I  am  of  the  opinion  that  the  plaintiff  has  no  legal  claim  against  the 
defendant,  and  for  that  reason  the  latter  is  entitled  to  judgment  upon 
the  merits,  with  costs. 


510  LIABILITY    OF    I'AKTIES.  (Part    3 

CHAPTER  II 
DRAWER  AND  INDORSER 


SECTION  1.— IN  GENERAL 


BISHOP  V.  HAYWARD. 
(Court  of  King's  Bench,  1791.     4  Term  R.  470.) 

Tlie  plaintiff  declared  on  a  promissory  note  made  by  one  Collins, 
payable  to  the  plaintiff  or  order,  and  afterwards  indorsed  by  him  to  the 
defendant,  who  afterwards  reindorsed  it  to  the  plaintiff  again.  After 
verdict  for  the  plaintiff  on  the  general  issue,  a  motion  was  made  by 
Bower,  in  arrest  of  judgment,  upon  the  ground  that  nothing  appeared 
to  be  due  to  the  plaintiff  on  his  own  showing;  for  the  defendant  would 
be  entitled  to  recover  back  again  the  identical  sum  from  the  plaintiff' 
for  which  he  had  now  obtained  a  verdict  against  the  defendant,  and 
therefore,  as  this  would  introduce  a  circuity  of  action,  which  the  law 
does  not  permit,  the  declaration  was  bad  upon  the  face  of  it.^ 

Lord  Kenyon,  C.  J.  It  is  an  invariable  rule  that  every  plaintiff 
must,  on  his  own  stating  of  the  case,  show  sufficient  to  entitle  him  to 
recover  judgment  against  the  defendant.  And  it  is  a  rule  equally  clear 
that  every  instrument  ought  to  be  declared  on  according  to  its  legal 
import.  I  do  not  say  but  that  there  may  be  circumstances,  which,  if 
disclosed  on  the  record,  might  entitle  the  plaintiff  to  recover  against 
the  defendant  on  this  note ;  but  we  are  now  called  upon  to  form  a 
judgment  on  the  title  which  he  has  disclosed.  And  on  the  face  of  the 
declaration  he  has  stated  the  note  as  a  legal  existing  note,  and  the  in- 
dorsements as  legal  existing  indorsements ;  we  are  therefore  bound  to 
consider  them  to  be  so.  Then  the  case  stands  thus :  That  he,  the  plain- 
tiff, being  the  original  indorser  of  the  note,  calls  on  the  defendant  who 
appears  on  the  record  to  be  a  subsequent  indorsee.  And  nothing  can 
be  clearer  in  law  than  that  an  indorsee  may  resort  to  either  of  the  pre- 
ceding indorsers  for  payment ;  whereas  the  present  action  is  an  at- 
tempt to  reverse  this.  I  admit  that  a  case  might  happen  in  which  the 
plaintiff  might  have  stated  that  he  was  substantially  entitled  to  re- 
cover on  this  note,  e.  g.  that  his  own  name  was  originally  used  for  form 
only,  and  that  it  was  understood  by  all  the  parties  to  the  instrument 
that  the  note  though  nominally  made  payable  to  the  plaintiff,  was  sub- 

1  The  argument  of  plaiutift's  counsel  and  the  opinion  of  Buller,  J.,  are 
omitted. 


Ch.  2)  DRAWER   AND    INDORSEE.  511 

stantially  to  be  paid  to  the  defendant;  but  if  such  were  the  case,  the 
note  should  have  been  declared  on  according  to  its  legal  import,  as  was 
held  in  Minet  v.  Gibson,  3  Term  R.  481,  1  H.  Bl.  569.  A  name  may  be 
omitted  in  the  declaration,  if  the  legal  operation  of  the  instrument  re- 
quires it.  But  in  this  case  the  plaintiff  has  stated  facts  subversive  of 
his  title. 

Per  Curiam.    Judgment  arrested. 


SHAW  V.  KNOX. 
(Supreme  Judicial  Court  of  Massachusetts.  Suffolk.  1867.    98  Mass.  214.) 

Contract  on  a  draft  by  Nathaniel  Heath  on  John  W.  West  for  pay- 
ment of  $450  three  months  after  date  to  the  order  of  the  defendant, 
indorsed  by  the  latter  and  bearing  also,  below  the  defendant's  indorse- 
ment, the  indorsement  of  E.  Longfellow  &  Son. 

Trial  in  the  superior  court,  before  Morton,  J.,  without  a  jury,  when 
it  appeared  that  the  draft  was  drawn  on  the  day  of  its  date,  and  indors- 
ed by  the  defendant,  and  then  at  his  request  by  E.  Longfellow  &  Son, 
"so  that  it  could  be  discounted"  (neither  of  the  indorsers  receiving  any 
consideration  therefor),  and  then  was  negotiated,  and  discounted  by  a 
bank,  and  presented  for  acceptance,  that  it  was  accepted  by  West, 
but  on  maturity  was  protested  for  nonpayment ;  and  that  E.  Long- 
fellow &  Son  some  months  later  paid  it  to  the  bank  and  took  it  up, 
and  afterwards  sold  it  to  the  plaintiff. 

The  defendant  asked  the  judge  to  rule  "that  E.  Longfellow  &  Son 
and  the  defendant  were  joint  accommodation  indorsers,  and,  when  the 
former  paid  the  draft,  its  negotiability  was  destroyed,  and  they  could 
not  pass  it  to  the  plaintiff  so  that  he  could  maintain  an  action  thereon." 
But  he  declined  so  to  rule,  and  ruled  that  the  plaintiff  could  maintain 
his  action,  and  found  for  the  plaintiff ;  and  the  defendant  alleged  ex- 
ceptions. 

BiGELOW,  C.  J.  There  was  no  joint  liability  on  the  part  of  the  de- 
fendant with  the  subsequent  indorsers.  The  indorsers  on  the  draft 
were  all  liable  to  the  holders  of  the  draft  for  value  on  their  several 
contracts  of  indorsement.  There  was  no  agreement  between  the  par- 
ties, when  the  draft  was  made  and  indorsed,  that  they  should  hold  any 
other  relation  towards  each  other  than  that  which  would  result  from 
their  being  successive  indorsers  on  the  draft  for  the  accommodation 
of  the  drawer.  If  the  last  indorser  paid  the  draft  to  the  holder  for 
value,  he  would  succeed  to  the  right  of  such  holder,  and  could  look  to 
his  prior  indorser  for  payment  of  the  amount  paid  by  him.  Guild  v. 
Eager,  17  Mass.  615.  Such  payment  was  in  fact  made  by  the  second 
mdorsers,  from  whom  the  plaintiff  derives  his  title  to  the  draft.  The 
relations  of  the  parties  to  the  draft  can  in  no  sense  be  regarded  as 
creating  a  contract  of  joint  guaranty  and  suretyship.     The  rights  and 


512  LIABILITY  OF  PAKTiEs.  (Part  3 

duties  of  the  several  parties  to  an  accommodation  note  or  bill  of  ex- 
change arc  the  same  in  all  respects  as  upon  notes  given  for  value.  The 
legal  effect  of  the  contract  into  which  they  respectively  enter  by  be- 
coming parties  to  negotiable  paper  is  that  which  appears  on  the  face 
of  the  bill  or  note.  It  follows  that,  if  an  accommodation  indorser  is 
obliged  to  take  up  the  draft  in  the  hands  of  a  holder  for  value,  he  can 
look  to  his  prior  indorser  for  payment.  Church  v.  Barlow,  9  Pick. 
547;  Clapp  v.  Rice,  13  Gray,  403,  74  Am.  Dec.  639;  Howe  v.  Merrill, 
5Cush.  80.2 

Exceptions  overruled. 


EASTERLY  v.  BARBER. 

(Court  of  Appeals  of  New  York.  1S7G.    6B  N.  Y.  433.) 

There  were  two  appeals  in  this  case — the  one  by  plaintiff  from  an 
order  of  the  General  Term  of  the  Supreme  Court  in  the  Fourth  Ju- 
dicial Department  denying  motion  for  a  new  trial  and  directing  judg- 
ment on  a  verdict;  the  other  by  defendant  from  the  judgment  entered 
upon  such  order. 

The  action  was  brought  by  plaintiff  as  third  indorser  of  a  promis- 
sory note  to  recover  the  amount  thereof  of  the  second  indorser. 

The  note  in  question  was  made  by  the  Stevenson  Manufacturing 
Company,  payable  to  the  order  of  one  Knight,  who  indorsed  it.  De- 
fendant was  second  indorser,  plaintiff'  third,  and  one  MacDougall  the 
fourth.  Defendant  alleged  in  his  answer  that  the  note  was  given  and 
discounted  for  the  benefit  of  the  maker,  in  which  company  all  the  four 
indorsers  were  stockholders;  that  they  indorsed  for  the  accommoda- 
tion of  the  company  under  an  agreement  that  as  between  themselves 
rhey  should  be  cosureties,  and  share  and  contribute  equally  to  the 
amount  all  or  either  should  be  obliged  to  pay  thereon. 

Upon  a  former  trial  plaintiff  recovered  a  judgment  for  one- fourth 
the  amount  of  the  note.  It  appeared  on  such  trial  that  the  two  other 
indorsers  were  insolvent.  The  General  Term  reversed  the  judgment 
and  ordered  a  new  trial  on  the  ground  that  plaintiff  was  entitled  to 
judgment  for  one-half  the  amount.     3  Th.  &  C.  421. 

Upon  the  second,  parol  evidence  was  received  to  prove  the  allega- 
tions of  the  answer,  which  was  received  under  objection  and  exception. 
The  evidence  tended  to  show  that  the  note  in  suit  was  a  renewal  of  a 
former  note ;  that  the  agreement  was  made  in  reference  to  the  orig- 
inal note,  which  was  renewed  from  time  to  time.  The  testimony  was 
conflicting  as  to  whether  any  thing  was  said  in  reference  to  the  lia- 
bility as  co-sureties  at  the  time  of  the  indorsements  of  the  note  in  suit. 

Plaintiff  was  allowed  to  prove,  under  objection  and  exception,  the 
insolvency  of  the  other  two  indorsers.  Knight  and  MacDougall.     Evi- 

»  Accord:   State  Bauk  v.  Kahn,  49  .Misc.  Rep.  500,  98  N.  Y.  Supp.  858  (190G). 


Cll.  2)  DRAWER    AND    INDORSER.  513 

vience  was  given  on  the  part  of  defendant  tending  to  show  that  the 
bank  which  discounted  the  note  brought  suit  thereon  against  plaintiff 
alone  at  defendant's  request  upon  his  giving  security  to  indemnify  the 
bank. 

As  to  the  agreement,  the  court  charged,  in  substance,  that  if  the 
jury  found  that  the  agreement  was  made  as  claimed  by  defendant, 
plaintiff  was  entitled  to  judgment  for  one-half  the  amount  of  the  note, 
to  which  defendant's  counsel  duly  excepted. 

The  court  also  charged  as  follows:  "If  former  notes  have  been 
given  under  this  agreement,  with  the  understanding  that  they  were  to 
stand  with  a  joint  instead  of  a  separate  liability,  and  that  note  was 
carried  along  until  it  came  to  this  one,  and  they  signed  this  note  with 
the  arrangement  and  understanding  resting  upon  their  minds,  you  will 
have  no  doubt  in  coming  to  the  conclusion  that  this  agreement  attaches 
to  this  last  note ;"  to  which  plaintiff's  counsel  duly  excepted.  Excep- 
tions were  ordered  to  be  heard  at  first  instance  at  General  Term.* 

MiivivER,  J.  The  first  question  presented  upon  these  appeals  is 
whether  it  is  competent  in  an  action  by  one  indorser  against  a  prior 
indorser  for  the  defendant  to  prove  by  parol  an  agreement  between  all 
the  indorsers  that  they  were  as  between  themselves  cosureties,  where 
they  are  accommodation  indorsers.  In  Barry  v.  Ransom,  12  N.  Y.  462, 
it  was  held  that  an  agreement  made  between  parties  prior  to  or  co- 
temporaneously  with  their  executing  a  written  obligation  as  sureties, 
by  which  one  promises  to  indemnify  the  other  from  loss,  does  not  con- 
tradict or  vary  the  terms  or  legal  effect  of  the  written  obligation,  and 
it  may  be  proved  by  parol  evidence.  It  was  said  by  Denio,  J.,  in  the 
opinion,  that  an  agreement  among  the  sureties,  arranging  their  event- 
ual liabilities  among  themselves  in  a  manner  different  from  what  the 
law  would  prescribe,  in  the  absence  of  an  express  agreement,  would 
not  contradict  any  of  the  terms  of  the  bond.  It  was  also  held  that 
the  engagement  among  themselves  had  no  necessary  place  in  the  in- 
strument between  them  and  the  other  contracting  parties.  The  case  cit- 
ed referred  to  a  joint  and  several  bond,  where  the  obligors  were  equal- 
ly liable  upon  its  face.  No  reason  exists,  however,  why  the  same  prin- 
ciple is  not  applicable  to  notes  and  bills  of  exchange.  The  terms  of  the 
contract  contained  in  instruments  of  this  character,  which  are  within 
its  scope  to  define  and  regulate,  cannot  be  changed  by  parol ;  but  th«» 
understanding  between  the  indorsers  is  a  distinct  and  separate  subject- 
an  outside  matter,  which  may  be  properly  proved  independent  of  and 
without  any  regard  to  the  instrument  itself.  This  rule  is  distinctly  es- 
tablished in  reference  to  joint  makers  of  promissory  notes;  and  al- 
though the  previous  decisions  had  been  somewhat  uncertain  it  has  been 
recently  determined  by  the  decision  of  this  court  that  where  a  person 
signed,  as  surety,  a  joint  and  several  promissory  note,  and  it  did  not 

8  The  arguments  of  counsel  are  omitted. 
Sm.&  M.B.&  N.— 33 


514  LIABILITY  OF  rAUTiEs.  (Part  3 

appear  by  the  instrument  itself  that  such  relation  existed,  he  might 
prove  such  fact  by  parol,  and  that  such  proof  did  not  tend  to  alter  the 
terms  of  the  contract.  Hubbard  v.  Gurney,  64  N.  Y.  457.  It  is  not 
apparent  that  any  such  difference  exists  between  the  two  classes  of 
cases  which  prevents  the  application  of  the  same  principle  to  both  of 
them. 

An  attempted  distinction  is  sought  to  be  maintained  because  the  re- 
lation of  indorsers  to  each  other  is  fixed  by  law,  while  the  relations 
and  obligations  of  sureties  and  obligors  are  not  fixed.  As  between  the 
principal  and  the  sureties  they  are  fixed  quite  as  much  as  between  in- 
dorsers, and  can  only  be  settled  as  between  sureties  where  the  contract 
does  not  show  the  fact  by  parol  proof  of  the  same.  In  support  of  the 
same  views  is  the  case  of  Phillips  v.  Preston,  5  How.  278,  292,  12 
L.  Ed.  152,  where  the  doctrine  is  laid  down  that  proof  of  a  collateral 
contract,  by  parol,  may  be  given  to  show  the  liability  of  indorsers  as 
between  themselves.  See,  also,  McDonald  v.  Magruder,  3  Pet.  470,  7 
L.  Ed.  744 ;  Aiken  v.  Barkley,  2  Speers  (S.  C.)  747,  42  Am.  Dec.  397  ; 
Edelen  v.  White,  6  Bush  (Ky.)  408;  Davis  v.  Morgan,  64  N.  C.  570. 
The  indorsements  upon  bills  of  exchange  or  promissory  notes  rest  up- 
on the  theory  that  the  liability  of  indorsers  to  each  other  is  regulated 
by  the  position  of  their  names,  and  that  the  paper  is  transferred  from 
the  one  to  the  others  by  indorsement.  But  this  rule  has  no  practical 
application  to  accommodation  indorsers,  where  neither  of  them  has 
owned  the  paper  and  no  such  transfer  has  been  made.  It  is  easy  to  see 
that  the  application  of  the  rule  contended  for,  in  many  cases,  would 
work  the  most  serious  injustice.  Suppose  a  person  sign  as  accommo- 
dation maker  of  a  promissory  note,  and  the  payee  for  whose  benefit  it 
is  made  indorses  it  and  pays  the  note,  and  afterwards  sues  the  maker 
to  recover  back  the  money ;  would  it  be  seriously  contended  that  proof 
could  not  be  given  to  show  that  he  was  merely  an  accommodation  mak- 
er? Clearly  not;  and  yet  such  evidence  would  contradict  the  written 
instrument  quite  as  much  as  it  would  to  prove  an  agreement  between 
indorsers  in  regard  to  their  liability  as  betvi^een  each  other.  Cases 
frequently  arise  where  it  is  competent  to  prove  that  the  indorsement  is 
made  for  the  accommodation  of  the  maker ;  and  a  drawee  may  show, 
after  acceptance,  that  he  has  no  funds  (Reubens  v.  Joel,  13  N.  Y.  493) 
in  his  hands,  and  that  he  was  merely  an  accommodation  acceptor  (Grif- 
fith V.  Reed,  21  Wend.  502,  34  Am.  Dec.  267).  The  cases  to  which 
we  have  been  referred  by  the  plaintiff's  counsel  do  not,  we  think,  sus- 
tain the  position  contended  for;  that  parol  proof  cannot  be  given  to 
show  an  arrangement  between  accommodation  indorsers  different  from 
that  which  appears  by  the  legal  effect  of  the  instrument,  and  a  par- 
ticular examination  of  them  is  not  required.  The  uniform  practice  in 
this  state  has  been  in  conformity  to  the  views  expressed  in  reference 
to  proof  of  this  character,  and  it  would  be  establishing  a  new  rule  at 
this  time  to  hold  that  such  testimony  was  incompetent.     There  was, 


Ch.  2)  DRAWER    AND    INDORSER,  515 

therefore,  no  error  committed  by  the  judge  in  the  admission  of  the  evi- 
dence to  which  objection  was  taken. 

There  is  no  force  in  the  objection  made  by  the  plaintiff's  counsel  that 
the  evidence  failed  to  establish  the  agreement  alleged  in  the  answer 
to  have  been  made  in  reference  to  the  note  in  suit.  It  was  purely  a 
question  of  fact  what  the  agreement  actually  made  was.  No  request 
was  made  to  take  the  case  from  the  jury,  and  sufficient  was  shown  to 
submit  the  question  raised  to  their  consideration.  There  is  no  ground 
for  claiming  that  the  defendant  was  estopped  from  setting  up  the 
verbal  agreement  alleged  to  have  been  made  as  a  defense.  The  ar- 
rangement of  the  defendant  with  the  bank  for  the  prosecution  of  the 
note  and  the  collection  of  the  same  of  the  plaintiff,  and  the  security 
given  thereupon  do  not  contain  the  elements  of  an  estoppel.  The  de- 
fendant was  not  the  actual  party  in  the  suit,  and  the  most  which  can 
be  said  in  regard  to  it  is,  that  the  defendant  preferred  to  have  it  col- 
lected of  Easterly  instead  of  himself,  and  to  compel  Easterly  to  sue 
him  for  the  proportion  which  he  was  lawfully  liable  to  pay.  There 
was  no  assumption  in  this,  we  think,  that  estops  the  defendant. 

We  are  also  of  the  opinion  that  there  was  no  error  in  that  portion 
of  the  charge  wherein  the  court  instructed  the  jury  that  if  former  notes 
had  been  given  under  the  agreement,  with  the  understanding  that  they 
were  to  stand  with  a  joint  instead  of  a  separate  liability,  and  they  were 
carried  along  until  they  came  to  this  one,  which,  if  it  was  signed  with 
the  arrangement  and  understanding  resting  upon  their  minds,  they 
would  have  no  doubt  in  coming  to  the  conclusion  that  this  agreement 
attaches  to  the  last  note.  This  was  a  necessary  result  of  the  facts 
proved  and  clearly  right.  The  requests  to  charge  upon  this  branch  of 
the  case  in  this  connection  were  properly  refused,  as  the  propositions 
presented  were  sufficiently  covered  in  the  charge  which  had  already 
been  made.  The  discussion  had  leads  to  the  conclusion  that  sufficient 
grounds  are  presented  on  the  plaintiff's  appeal  for  a  reversal  or  mod- 
ification of  the  judgment. 

Other  questions  arise  upon  the  defendant's  appeal,  which  should  be 
considered.  It  is  claimed  that  an  action  at  law  by  a  surety  for  con- 
tribution must  be  against  each  of  the  sureties  separately  for  his  pro- 
portion, and  that  no  more  can  be  recovered,  even  where  one  or  more 
are  insolvent.  In  the  latter  case,  the  action  must  be  in  equity  against 
all  the  cosureties  for  contributions,  and,  upon  proof  of  the  insolvency 
of  one  or  more  of  the  sureties,  the  payment  of  the  amount  will  be  ad- 
judged among  the  solvent  parties  in  due  proportion.  The  principle 
stated  is  fully  sustained  by  the  authorities.  It  is  thus  stated,  in  Par- 
sons on  Contracts  (volume  1,  p.  34):  "At  law,  a  surety  can  recover 
from  his  cosurety  an  aliquot  part,  calculated  upon  the  whole  number, 
without  reference  to  the  insolvency  of  others  of  the  cosureties ;  but  in 
equity  it  is  otherwise."  See,  also,  Browne  v.  Lee,  6  Barn.  &  Cress. 
689,  13  Eng.  C.  L.  394 ;  Cowell  v.  Edwards,  2  B.  &  Pull.  268 ;  Bea- 
man  v.  Blanchard,  4  Wend.  432,  435;    Story's  Eq.  Juris.  §  496;    1 


51G  LIABILITY  OF  TAUTiEs.  (Part  3 

Chitty  on  Cont.  (5th  Am.  Ed.)  597,  598;  Willard's  Eq.  Juris.  108. 
There  seems  to  be  a  propriety  in  the  rule  that  where  sureties  are  called 
upon  to  contribute,  and  some  of  them  are  insolvent,  that  all  the  parties 
should  be  brought  into  court  and  a  decree  made  upon  equitable  prin- 
ciples in  reference  to  the  alleged  insolvency.  There  should  be  a  rem- 
edy decreed  against  the  insolvent  parties,  which  may  be  enforced  if 
they  become  afterwards  able  to  pay,  and  this  can  only  be  done  in  a 
court  of  equity  and  when  they  are  parties  to  the  action.  The  action 
here  was  not  of  this  character ;  nor  were  all  the  proper  parties  before 
the  court.  It  was  clearly  an  action  at  law,  and  in  that  point  of  view, 
as  we  have  seen,  the  plaintiff  could  only  recover  for  one-fourth  of  the 
debt  for  which  all  the  sureties  were  liable.  The  distinction  between 
the  two  classes  of  actions  is  recognized  by  the  decisions. 

The  remedies,  the  parties,  and  course  of  procedure  are  each  differ- 
ent. In  the  one  a  jury  trial  is  a  matter  of  right ;  while  in  the  other  the 
trial  is  by  the  court.  The  costs  are  also  in  the  discretion  of  the  court. 
Code,  §§  253,  306  ;  13  N.  Y.  498,  supra.  As  the  judgment  could  not 
require  each  of  the  parties  to  pay  his  aliquot  share  and  furnish  a  rem- 
edy over  against  those  who  were  insolvent  and  the  rights  of  the  par- 
ties be  finally  determined  and  fixed,  it  was  under  the  facts  proven 
clearly  erroneous.  Although  in  many  cases  under  the  Code  the  plead- 
ings, if  necessary,  may  be  made  to  conform  to  the  facts,  and  the  case 
disposed  of  upon  the  merits,  the  defects  here  are  so  radical  as  to  strike 
at  the  very  foundation  of  the  action,  and  cannot  thus  be  remedied.  Be- 
sides, the  proper  parties  are  not  before  us,  and  cannot  be  brought  in, 
except  on  motion  in  the  court  below.  As  the  claim  was  alleged  in  the 
complaint,  there  was  no  such  defect  of  parties  apparent  as  required 
the  defendant  to  take  the  objection  by  demurrer  or  answer. 

It  follows  that  the  judgment  must  be  affirmed  upon  the  plaintiff's 
appeal,  with  costs  of  appeal  to  be  paid  by  the  plaintiff  upon  the  final 
termination  of  the  action,  if  the  defendant  succeeds ;  and  if  the  plain- 
tiff succeeds,  to  be  set  off  against  the  plaintiff's  costs.  And  the  judg- 
ment must  be  reversed  upon  the  defendant's  appeal,  with  costs  of  the 
appeal  in  this  court,  and  costs  in  the  Supreme  Court  to  abide  the  event.* 


WILKINSON  &  CO.  v    UNWIN. 
(Court  of  Appeal,  1881.     7  Q.  B.  Div.  636.) 

Action  upon  two  bills  of  exchange  drawn  by  the  plaintiffs  on  and 
accepted  by  Edwin  Unwin.  the  one  for  £51.  13s.  4d.  at  three  months, 
and  the  other  for  £60.  at  four  months. 

At  the  trial  it  appeared  that  Edwin  Unwin  had  requested  the  plain 
tiffs  to  supply  him  with  goods,  and  to  give  him  some  credit  for  the 

«  Accord:    Wilson  v.  Hendee,  74  N.  J.  Law,  640,  66  Atl.  413  (1907.) 


Ch.  2)  DRAWER    AND    INDORkSER.  517 

price  of  them  by  taking  bills  of  exchange,  and  it  was  agreed  between 
the  plaintiffs  and  Edwin  Unwin  that  he  should  procure  his  mother, 
the  defendant,  to  indorse  the  bills  as  surety  for  the  price  of  the  goods. 
The  plaintiffs  accordingly  supplied  the  goods  and  drew  and  indorsed 
the  bills  sued  upon,  and  the  defendant  indorsed  them  to  the  plaintiffs. 
It  was  alleged  for  the  plaintiffs  that  the  defendant  indorsed  the  bills 
with  the  intent  of  thereby  becoming  surety  for  the  due  payment  of 
the  bills ;  for  the  defendant  it  was  alleged  that  she  indorsed  the  bills 
in  the  ordinary  way  and  to  the  ordinary  extent  incident  to  an  indorse- 
ment, and  without  any  intention  to  forego  any  rights  or  remedies  or- 
dinarily incident  to  an  indorsement.  The  bills  of  exchange  were  dis- 
honored at  maturity,  and  the  plaintiffs  were  unable  for  some  time  to 
find  the  defendant's  address,  but  on  finding  it  they  gave  her  notice  of 
dishonor. 

The  jury  found  that  the  plaintiffs  had  shown  due  diligence  in 
trying  to  find  out  the  defendant's  address,  and  to  give  her  notice  of 
dishonor;  that  the  defendant  did  not  put  her  name  on  the  bill  with 
the  ordinary  intention,  but  that  she  had  agreed  with  the  plaintiffs  to 
become  surety  to  them  for  the  price  of  the  goods  supplied  to  Edwin 
Unwin,  and  put  her  name  on  the  bill  to  become  surety  to  the  plain- 
tiffs; and  that  no  payment  on  account  of  the  bills  had  been  made  by 
the  defendant. 

Bowen,  J.,  gave  judgment  for  the  plaintiffs. 

The  defendant  appealed. 

Bramwell,  L.  J.  I  think  that  this  judgment  must  be  af^rmed.  It 
has  been  established  that  if  the  indorser  of  a  bill  of  exchange  subse- 
quently becomes  the  indorsee,  he  can  maintain  no  action  against  the 
intermediate  indorsers,  because  he  would  himself  be  liable  to  them 
by  reason  of  his  antecedent  indorsement.  But  there  are  several  other 
cases  which  have  decided  that,  if  the  holder  of  the  bill  would  not  be 
liable  to  the  indorser  whom  he  is  suing  by  reason  of  any  previous 
indorsement  of  his  own,  he  may  enforce  his  claim  because  no  cir- 
cuity of  action  arises ;  the  holder  of  the  bill  may  always  show  such 
circumstances  as  do  away  with  any  liability  by  reason  of  his  previous 
indorsement.  That  has  been  established  by  numerous  decisions.  Not- 
withstanding Mr.  Fullarton's  argument,  I  have  no  doubt  that  this  ac- 
tion is  maintainable.  It  is  alleged  by  the  plaintiffs  that  the  bills  of 
exchange  sued  on  were  indorsed  by  the  defendant  with  the  intention 
of  becoming  surety  for  the  price  of  goods  supplied  to  Edwin  Unwin. 
The  defendant  has  alleged  that  she  indorsed  the  bills  in  the  ordinary 
way  and  without  any  intention  to  forego  her  remedies  against  the 
plaintiffs  as  indorsers.  The  jury  have  found  that  the  defence  to  the 
action  is  untrue,  and  they  have  said  that  she  intended  to  make  her- 
self liable  It  is  clear  that  upon  this  finding  she  could  not  have  main- 
tained any  action  against  the  plaintiffs,  if  they  had  indorsed  away  the 
bills  of  exchange  sued  upon,  and  if  the  indorsees  had  compelled  the 
defendant  to  pay  the  amount.     It  has  been  argued  by  Mr.  Fullarton, 


51 S  LIABILITY  OF  PAUTiES.  (Part  3 

that  the  agreement  reHed  upon  by  the  plaintiffs  must  be  proved  by  a 
memorandum  in  writing  because  the  contract  is  one  of  suretyship. 
The  contract,  however,  is  not  within  the  words  or  the  reason  of  the 
statute  of  frauds.  If  the  buyer  of  goods  accepts  a  bill  drawn  upon 
him  for  the  price  by  a  surety  who  afterwards  indorses  it  to  the  seller, 
the  surety  cannot  refuse  to  pay  the  amount  upon  default  of  the  prin- 
cipal debtor,  because  the  agreement  under  which  the  bill  was  signed 
was  not  in  writing  The  liability  of  the  defendant  cannot  be  explained 
away  in  the  manner  suggested.  The  only  difficulty,  which  I  have  felt, 
is  that  some  expressions  in  the  opinions  of  the  Lords  in  Steele  v.  Mc- 
Kinlay.  5  App.  Cas.  754,  may  be  inconsistent  with  the  reasoning  of  my 
judgment  in  this  case;  but  I  am  satisfied  that  it  was  not  the  intention 
of  the  House  of  Lords  to  overrule  either  the  three  English  cases  which 
have  been  mentioned,  namely,  Wilders  v.  Stevens,  15  M.  &  W.  208, 
Smith  v.  Marsack,  6  C.  B.  486.  and  Morris  v.  Walker,  15  O.  B.  589, 
or  the  two  cases  decided  in  the  Supreme  Court  of  New  York,  Seabury 
V.  Hungerford,  3  Hill  (N.  Y.)  80,  and  Hall  v.  Newcomb,  3  Hill  (N. 
Y.)  233. 

Baggallay,  L.  J.  In  this  case  the  question  arises  upon  the  judg- 
ment entered  upon  the  findings,  and  it  is  not  now  disputed  that  the 
findings  are  correct.  The  defendant  is  an  mtermediate  indorser,  and 
the  position  of  the  parties  when  there  has  been  a  reindorsement  is 
thus  described  in  Byles  on  Bills  (12th  Ed.)  p.  155,  c.  11:  "If  a  bill 
be  reindorsed  to  a  previous  indorser,  he  has,  in  general,  no  remedy 
against  the  intermediate  parties  for  they  would  have  their  remedy  over 
against  him,  and  the  result  of  the  actions  would  be,  to  place  the  par- 
ties in  precisely  the  same  situation  as  before  any  action  at  all.  But 
where  a  holder  has  previously  indorsed,  and  the  subsequent  interme- 
diate indorser  has  no  right  of  action  or  remedy  on  that  previous  in- 
dorsement against  the  holder,  there  are  cases  in  which  the  holder 
may  sue  the  intermediate  indorser."  The  object  of  the  rule  of  law  is 
to  prevent  a  circuity  of  action.  Prima  facie,  when  the  holder  of  the 
bill  is  likewise  a  previous  indorser,  no  action  can  be  maintained ;  but 
then,  as  has  been  pointed  out  in  the  work  which  I  have  cited,  certain 
exceptions  exist  to  the  general  rule.  Wilders  v.  Stevens.  15  M.  &  W. 
208,  Smith  v.  Marsack,  6  C.  B.  486.  and  Morris  v.  Walker,  15  Q.  B. 
589,  are  instances  of  these  exceptions.  I  think  that  what  Mr.  Fullar- 
ton  has  pointed  out  with  respect  to  them  is  very  important.  They  were 
all  cases  decided  upon  the  pleadings,  and  this  creates  a  difference  be- 
tween them  and  Steele  v.  McKinlay,  5  App.  Cas.  754.  In  that  case 
all  the  facts  were  before  the  House  of  Lords,  and  it  was  held  that  a 
written  contract  was  necessary.  I  was  much  impressed  by  the  argu- 
ment which  has  been  addressed  to  us,  and  under  other  circumstances 
there  might  be  great  force  in  the  contention  that  the  agreement  put 
forward  by  the  plaintiffs  is  not  in  writing;  but  I  think  that  the  de- 
fendant is  precluded  by  the  findings  of  the  jury  from  raising  the  de- 
fence upon  which  she  wishes  to  rely.     They  have  found  that  she  in- 


Ch.  2)  DRAWER    AND    INDORSER.  539 

dorsed  the  bills  of  exchange  in  order  to  make  herself  liable  as  surety 
for  the  debt  due  from  her  son. 

Upon  this  ground,  I  think  that  the  appeal  must  be  dismissed. 

Brett,  L.  J.  The  verdict  and  the  judgment  have  proceeded  upon 
the  ground  that  the  defendant  was  an  indorser,  and  if  this  were  an 
ordinary  case  of  indorser  and  indorsee,  no  doubt  the  verdict  and  the 
judgment  would  be  right,  for  prima  facie  no  consideration  is  needed 
to  support  an  indorsement.  However  a  difficulty  was  raised  as  to 
the  plaintiffs'  right  to  recover,  and  the  objection  was  based  on  the 
ground  that  before  the  indorsement  to  the  plaintiffs  by  the  defendant 
the  plaintiffs  themselves  had  been  parties  to  the  bill.  At  first  sight 
this  seems  a  fatal  objection ;  but  the  effect  of  the  previous  indorsement 
by  the  plaintiffs  may  be  destroyed.  In  certain  cases  relating  to  mer- 
cantile law  the  objection  to  the  right  to  recover  was  raised  upon  the 
pleadings ;  but  circuity  of  action  was  negatived,  and  the  moment  that 
that  is  negatived  the  objection  is  destroyed.  If  it  is  shown  that  no 
consideration  existed  for  handing  the  bill  to  the  defendant,  the  cir- 
cuity of  action  is  taken  away.  In  Morris  v.  Walker,  15  Q.  B.  589. 
the  objection  was  taken  away  by  showing  that  the  note  was  indorsed 
by  the  plaintiff  without  any  consideration,  and  the  indorsement  was  in 
fact  for  the  accommodation  of  the  defendant;  therefore  all  objection 
on  the  ground  of  circuity  of  action  was  destroyed.  It  has  been  con- 
tended that  the  only  evidence  of  a  consideration  was  the  defendant's 
promise  to  become  a  surety  for  her  son,  and  that  as  this  promise  was 
not  in  writing  the  indorsement  was  not  binding  upon  the  defendant. 
But  the  plaintiffs  are  not  suing  upon  a  guarantee ;  the  case  is  not 
within  either  the  words  or  the  spirit  of  Statute  of  Frauds,  §  4.  More- 
over, verbal  evidence  of  the  consideration  was  admitted,  and  the  com- 
plaint ought  to  have  been  made  to  the  High  Court;  but  the  objection 
was  not  sustainable,  and  the  defendant  has  in  truth  lost  nothing  by  the 
omission  to  apply  to  that  tribunal.  It  has  been  contended  that  the 
cases  which  support  the  contention  for  the  plaintiffs  were  wrongly 
decided,  and  that  the  law  as  laid  down  in  Britten  v.  Webb,  2  B.  &  C. 
483,  must  in  all  cases  be  applied.  But  it  seems  to  me  that  Britten  v. 
Webb  is  quite  distinguishable  from  the  decisions  which  support  the 
contention  for  the  plaintiffs.  It  has  been  argued  that  Steele  v.  Mc- 
Kinlay,  5  App.  Cas.  754,  shows  that  when  all  the  facts  are  proved  at  the 
trial  it  becomes  necessary  to  give  evidence  of  an  agreement  in  writing; 
it  seems  to  me  that  that  case  has  nothing  to  do  with  the  present.  It 
was  there  held  that  the  mere  fact  of  a  person  writing  his  name  on 
the  back  of  a  bill  does  not  make  him  acceptor,  when  the  names  of 
other  parties  appear  as  acceptors.  This  point  does  not  affect  the  ques- 
tion before  us.  When  this  case  was  tried  before  Bowen,  J.,  he  acted 
upon  the  principles  of  the  law  merchant,  and  I  am  of  opinion  that  his 
judgment  was  quite  right. 

Judgment  affirmed. 


Dl!U  LiABiLiTi-  OF  PAUTiEs.  (Part  3 

PIERCE  V.  MANN. 
(Supreme  Judicial  Court  of  Massachusetts.  Middlesex,   1835.     17   Pick.  244.) 

Assumpsit  on  the  common  money  counts,  and  on  a  special  count 
against  the  defendant  as  a  promisor,  on  a  note  as  follows :  "East  Sud- 
bury, June  37,  1832.  For  value  received  of  Horace  Heard  I  promise 
to  pay  him  or  his  order  $i46.65  in  ninety  days  from  date.  Peter  Rice." 
On  the  back  of  the  note  were  the  names  of  Horace  Heard  and  Samuel 
H.  Mann ;  the  name  of  Mann  being  below  that  of  Heard.  The  plain- 
tiflf  called  Heard  as  a  witness,  who  testified  that  before  and  at  the 
date  of  the  note  he  held  a  note  against  Rice  and  Mann,  made  by  them 
as  joint  and  several  promisors ;  that  there  was  due  thereon  the  sum 
for  which  the  note  declared  on  was  given ;  that  he  called  on  Rice  for 
payment,  and  Rice,  at  Wayland,  wrote  and  signed  the  note  now  in  suit 
and  delivered  it  to  the  witness ;  that  the  old  note  was  then  given  up 
to  Rice;  that  Mann,  on  the  next  day,  at  Boston,  put  his  name  on  the 
back  of  the  new  note,  and  it  was  in  this  state  delivered  torthe  witness 
for  the  purpose  of  procuring  the  money  on  it  at  the  Brighton  Bank ; 
that  the  witness  offered  the  new  note  at  the  bank,  but  trie  bank  de- 
clined discounting  it ;  that  the  witness,  being  indebted  to  the  plaintiffs, 
offered  this  note  to  them  in  payment,  and  they  agreed  to  take  it  if  the 
witness  would  indorse  it ;  that  he  accordingly  put  his  name  upon  it ; 
that  nothing  was  then  said  about  the  place  where  his  name  should  be 
written  on  the  back  of  the  note,  and  he  did  not  know  that  it  made  any 
difference  where  he  should  put  his  name. 

On  this  evidence  a  nonsuit  was  ordered,  and  if  the  court  should 
be  of  opinion  that  the  defendant  was  not  liable  either  as  original  prom- 
isor or  as  guarantor  of  the  note,  the  nonsuit  was  to  be  confirmed ; 
otherwise  a  new  trial  was  to  be  granted.^ 

Per  Curiam.  It  is  not  necessary  to  consider  the  question,  whether 
the  parol  evidence  introduced  by  the  plaintiff  was  admissible,  for  the 
facts  te.'^tified  do  not  show  (and  perhaps  have  no  tendency  to  show) 
that  the  defendant  was  an  original  promisor  or  a  guarantor.  There 
was  no  request  to  him  to  sign  as  one  or  the  other,  but  he  put  his  name 
on  the  back  of  the  note  to  enable  the  payee  to  get  it  discounted  at  the 
bank.  It  is  not  unusual  in  business  for  a  third  person  to  indorse  a 
note  before  it  is  indorsed  by  the  payee,  who  is  to  put  his  name  upon  it 
at  the  time  when  it  is  discounted.  Here  the  plaintiffs  agreed  to  take 
the  note  if  Heard  would  put  his  name  upon  it,  which  he  did,  above  the 
name  of  the  defendant ;  and  the  plaintiffs  must  be  understood  to  have 
taken  it  as  a  common  indorsed  note.  The  facts  do  not  imply  an  au- 
thority to  write  a  guaranty  over  the  defendant's  name. 

Nonsuit  made  absolute. 

6  The  arguments  of  counsel  are  omitted. 


Ch.  2)  DRAWER    AND    INDORSER.  521 

MECORNEY  v.  STANLEY. 
(Supreme  Judicial  Court  of  Massachusetts,  Worcester.  1851.    8  Cush.  85.) 

This  was  an  action  of  assumpsit  on  a  promissory  note,  bearing  dat* 
the  20th  of  December,  1848,  payable  to  the  plaintiff  or  order  on  de- 
mand, subscribed  by  John  E.  Stanley,  and  on  which  the  defendant's 
name  was  indorsed  in  blank.  The  trial  was  before  Hoar,  J.,  in  the 
court  of  common  pleas. 

The  declaration  contained  four  special  counts,  in  the  first  of  which 
the  defendant  was  sought  to  be  charged  as  an  original  promisor,  and 
in  the  others  as  a  guarantor.  The  consideration  alleged  in  the  three 
last  counts  was  a  forbearance  to  sue  John  E.  Stanley. 

It  was  in  evidence  for  the  plaintiff  that  the  defendant,  on  the  19th 
of  February,  1849,  paid  a  part  of  the  note ;  that  at  the  time  of  making 
the  payment  he  said  that  he  had  signed  a  note  for  his  brother,  John 
E.  Stanley ;  that  he  had  become  surety  for  his  brother  to  the  plaintiff, 
who  furnished  him  with  goods  and  thereby  helped  him;  that  he,  the 
defendant,  was  secured,  and  held  a  bill  of  sale  or  a  mortgage  of  the 
goods  and  effects  of  John  E.  Stanley  to  secure  him ;  and  that  the  plain- 
tiff was  pressing  him  for  payment. 

The  defendant  then  introduced  evidence  tending  to  show  that  he  did 
not  put  his  name  on  the  note  until  the  14th  of  February,  1849.  The 
defendant  also  put  in  evidence  the  deposition  of  Horace  Mecorney, 
who  testified  that,  in  the  latter  part  of  February,  or  the  early  part  of 
March,  1849,  the  plaintiff  called  on  John  E.  Stanley  to  pay  or  secure 
a  note  which  the  plaintiff  held  against  him ;  that  John  replied  that  he 
would  try  to  get  his  brother  Douglas,  who  was  in  the  next  room,  to 
sign  with  him,  and  asked  the  plaintiff  if  he  would  accept  of  that,  to 
which  the  plaintiff  answered  that  he  would ;  that  John  then  went  into 
the  room  where  his  brother  was,  and  both  came  together,  immediately, 
into  the  room  where  the  witness  and  the  plaintiff  were ;  that  the  de- 
fendant then  said  to  the  plaintiff  that  if  he  would  not  ask  him  for  pay- 
ment, nor  call  on  him  for  it  in  less  than  six  months,  he  would  sign  with 
his  brother ;  that  the  plaintiff  then  said  he  would  not.  and  they  made  a 
writing  to  that  effect,  which  the  plaintiff  signed ;  and  that  thereupon  the 
defendant  indorsed  his  name  on  the  note. 

The  plaintiff,  upon  these  facts,  insisted  that  the  defendant  was  liable 
on  the  first  count  in  the  declaration,  if  not  on  the  others.  But  the 
judge  ruled,  and  instructed  the  jury,  that  if  the  defendant  did  not  put 
his  name  on  the  note  at  the  time  it  was  given,  but  at  the  time  and  in  the 
manner  stated  in  the  deposition  of  Horace  Mecorney,  he  was  not  liable 
on  the  first  count,  and  that  to  sustain  the  three  last  counts  it  was  not 
sufficient  for  the  plaintiff  to  prove  a  forbearance  to  sue  John  E.  Stan- 
ley, but  that  he  must  prove  an  agreement,  binding  upon  the  plaintiff,  to 
forbear  to  sue  John  E.  Stanley ;  that  an  agreement  not  to  sue  the  de- 
fendant would  not  be  sufficient ;  and  that  there  seemed  to  be  no  suffi- 


522  LIABILITY  OF  PAUTiKS.  (Part  3 

cient  evidence  in  the  case  from  which  the  jury  could  infer  an  agree- 
ment to  forbear  to  sue  John  E.  Stanley,  leaving  that  question,  however, 
to  the  decision  of  the  jury. 

The  jury  returned  a  verdict  for  the  defendant,  whereupon  the  plain- 
tiff alleged  exceptions, 

BiGi-LOW,  J.  It  is  very  clear  that  the  plaintiff  could  not  recover 
against  the  defendant  on  the  first  count  charging  him  as  an  original 
promisor,  because  the  evidence  proved  that  the  defendant's  name  was 
not  put  on  the  back  of  the  note  until  several  weeks  after  the  note  was 
given.  Union  Bank  of  Weymouth  and  Braintree  v.  Willis,  8  Mete. 
504,  41  Am.  Dec.  541 ;   Benthall  v.  Judkins,  13  Mete.  265. 

As  the  defendant  did  not  partake  in  the  original  consideration  of 
the  note  by  becoming  a  party  to  it,  at  its  inception,  the  plaintiff  was 
bound  to  show  a  valid  consideration  for  the  undertaking  of  the  de- 
fendant. For  this  purpose  he  relied  on  his  three  last  counts,  and  of- 
fered evidence  tending  to  show  a  forbearance  to  sue  John  E.  Stanley, 
the  original  promisor.  But  it  did  not  appear  that  there  was  any  agree- 
ment to  give  time  to  the  original  promisor.  On  the  contrary,  his  lia- 
bility to  pay  the  note  on  demand  remained  unchanged.  The  only  con- 
sideration therefore  for  the  defendant's  promise  was  the  pre-existing 
debt  of  John  E.  Stanley,  with  which  the  defendant  had  no  concern. 
But  a  mere  forbearance  to  sue,  without  any  promise  or  agreement  to 
that  effect,  by  the  holder  of  a  note,  forms  no  sufficient  consideration 
for  a  guaranty.  It  is  a  mere  omission  on  the  part  of  the  creditor  to 
exercise  his  legal  right,  to  which  he  is  not  bound  by  any  promise,  and 
which  right  he  may  at  any  moment  and  at  his  own  pleasure  enforce. 
There  being  in  this  case  no  agreement  to  forbear  to  sue,  the  creditor 
was  not  hindered  or  delayed.  He  could  have  brought  his  suit  against 
the  promisor  at  any  time,  so  that  he  sustained  no  injury  or  inconven- 
ience sufficient  to  constitute  a  consideration  for  the  promise ;  and,  on 
the  other  hand,  the  original  debtor  received  no  benefit  or  advantage 
whatever,  because  he  was  liable  to  be  sued  at  any  moment,  and  so  the 
consideration  fails  as  to  him.  There  was  no  damage  to  the  creditor 
or  benefit  to  the  debtor  upon  which  the  consideration  of  a  promise  can 
rest.  It  is  not  therefore  true,  as  a  proposition  of  law,  that  forbearance 
to  sue  a  third  person  is,  of  itself,  a  sufficient  consideration  for  a  prom- 
ise; and  the  court  would  have  erred,  if  they  had  complied  with  the 
plaintiff's  request,  and  given  any  such  instruction  to  the  jury.  To  con- 
stitute a  forbearance  to  sue  a  third  person  a  good  consideration  for 
a  promise  by  a  stranger  to  the  original  consideration,  it  must  have 
been  in  pursuance  of  an  agreement  to  forbear.  In  such  a  case,  the 
injury  to  the  promisee  and  the  benefit  to  the  debtor  both  concur  in 
making  the  consideration  valid.  It  is  undoubtedly  true,  that  an  actual 
forbearance  to  sue  may  often,  in  connection  with  other  facts,  be  evi- 
dence of  an  agreement  to  forbear,  and,  as  such,  form  a  good  consider- 
ation for  a  promise.  Walker  v.  Sherman,  11  Mete.  170 ;  Breed  v.  Hill- 
house,  7  Conn.  523.     But  this  is  a  very  different  proposition  from  that 


Ch.  2)  DRAWER    AND    INDORSER.  523 

contended  for  by  the  plaintiff,  that  forbearance  of  itself,  without  any 
promise,  is  a  good  consideration.  Byles  on  Bills,  90,  note ;  Crofts  v. 
Beale,  11  C.  B.  172. 

The  exception,  founded  on  the  remark  of  the  judge,  as  to  the  in- 
sufficiency of  the  evidence  to  prove  an  agreement  on  the  part  of  the 
plaintiff  to  forbear  to  sue  the  original  promisor,  cannot  be  sustained. 
The  question,  whether  there  was  such  an  agreement,  was  left  by  the 
court  to  the  jury,  who  returned  a  verdict  for  the  defendant ;  and  al- 
though there  may  have  been,  upon  the  facts  reported,  sufficient  evi- 
dence from  which  the  jury  might  well  have  inferred  such  agreement 
to  forbear,  still  the  remark  of  the  judge,  being  only  a  comment  on  evi- 
dence, forms  no  valid  ground  of  exception.  Davis  v.  Jenney,  1  Mete. 
221 ;  Mansfield  v.  Corbin,  4  Cush.  213.  The  remedy  of  the  plaintiff, 
for  any  error  in  this  respect,  was  by  a  motion  for  a  new  trial. 

Exceptions  overruled. 


ESSEX  CO.  V.  EDMANDS  et  al. 

(Supreme  Judicial  Court  of  Massachusetts,   Suffolli,  1S58.     12  Gray,  273,  71 

Am.  Dec.  75S.) 

Action  of  contract  against  the  Lawrence  Carpet  Company,  the  exec- 
utors of  the  will  of  John  Raynor,  and  Samuel  G.  Wheeler,  as  joint 
promisors  of  three  promissory  notes  payable  to  the  plaintiffs,  signed  on 
their  face  by  the  company,  and  on  the  back,  before  delivery,  the  first 
"John  Raynor,  Samuel  G.  Wheeler,"  and  the  other  two  "Samuel  G. 
Wheeler,  John  Raynor."  The  corporation  was  defaulted.  The  other 
defendants  answered  that  they  were  liable  as  indorsers  only. 

At  the  trial  the  defendants  offered  to  prove  that  the  real  agreements 
between  the  plaintiffs  and  Raynor  and  Wheeler,  under  which  they 
wrote  their  names  upon  the  back  of  the  notes,  was  that  the  plaintiffs 
should  receive  the  notes  from  the  Lawrence  Carpet  Company,  indorsed 
by  Raynor  and  Wheeler,  and  that  Raynor  should  be  first  and  Wheeler 
second  indorser  on  the  first  note,  and  Wheeler  first  and  Raynor  second 
indorser  on  the  other  two ;  that  they  were  not  joint  promisors  on  either 
note ;  and  that  the  notes  had  not  been  so  protested  for  nonpayment  as 
to  charge  indorsers.  They  also  offered  to  prove  these  facts  by  the 
mortgage  given  at  the  same  time  with  the  notes,  as  a  part  of  the  same 
contract,  and  to  secure  their  payment.  But  Thomas,  ].,  ruled  that 
Raynor  and  Wheeler,  having  signed  said  notes  at  their  inception  and 
before  their  delivery,  were  joint  promisors  thereon,  and  that  the  evi- 
dence offered  could  not  vary  that  liability,  and  directed  a  verdict  for 
the  plaintiffs.     The  defendants  alleged  exceptions.® 

Shaw,  C.  J.  There  is  nothing  to  take  this  case  out  of  the  usual  and 
long-established  rule,  though  perhaps,  if  a  new  question,  it  would  be 
fairly  open  to  argument. 

9  The  argrumeuts  of  counsel  are  omitted. 


524  LIABILITY  OF  PARTIES.  (Part  3 

The  position  which  we  think  is  settled  in  Massachusetts  is  that,  if 
one  not  the  promisee  indorses  his  name  in  blank  on  the  note,  before 
it  is  delivered  to  take  effect  as  a  promissory  note,  the  law  presumes 
that  he  intends  to  give  it  credit  by  becoming-  liable  to  pay  it  in  some 
capacity  and  on  some  terms.  One  natural  legal  result  might  have  been 
presumed  to  be  that  he  intended  to  be  liable  as  second  indorser;  but 
this  has  long  been  held  otherwise,  and  is  now  settled  otherwise  by  au- 
thority. He  cannot  be  held  in  the  capacity  of  first  indorser ;  for  he  is 
not  payee,  and  no  one  but  the  promisee  can  be  first  indorser  and  put 
the  note  in  circulation.  If  it  be  said  he  may,  if  he  chooses,  take  upon 
himself  the  limited  obligation  of  an  indorser,  the  answer  is,  so  he  may, 
if  he  so  expresses  it  before  signing  it,  but  not  otherwise.  If  it  be  said 
that  signing  in  blank  leaves  it  equivocal  whether  he  means  to  assume 
the  obligation  of  promisor  or  indorser,  and  that  the  law  makes  no  pre- 
sumption on  the  subject,  then  the  contract  would  be  a  contract  be- 
tween the  holder  and  such  indorser  requiring  evidence  aliunde  to  show 
which  was  intended,  and  that  would  make  it  in  effect  a  parol  contract 
to  pay  the  debt  of  another  and  void  by  the  statute  of  frauds. 

But  it  is  intended  when  the  blank  is  filled  to  have  the  character  of  a 
written  instrument,  and  not  to  depend  on  parol  proof  to  give  it  effect, 
and  not  to  be  altered  or  contradicted  by  parol  evidence.  The  law  does 
presume,  and  it  is.  a  strict  legal  presumption,  that  such  indorser  did 
intend  to  be  liable  in  some  form  and  to  some  extent.  It  does  not 
charge  him  as  indorser,  though  his  name  is  on  the  back,  unless  by  ex- 
press terms.  The  case  of  an  indorsement  in  blank  supposes  that  there 
are  no  such  express  terms;  therefore  it  must  be  either  as  promisor  or 
guarantor.  To  that  extent  it  is  equivocal.  But  this  does  not  leave  it 
open  to  the  holder  to  insert  the  one  or  the  other  contract  over  the  name 
as  he  pleases.     There  are  other  considerations  applicable  to  the  subject. 

The  peculiar  character  of  a  contract  of  guaranty  is  that  it  is  an  in- 
dependent contract  between  the  holder  of  the  note  and  the  guarantor ; 
it  must  be  upon  separate  consideration.  He  is  not  a  party  to  the  note. 
Such  guaranty  may  be  on  the  note,  or  made  by  a  separate  instrument ; 
but  in  either  case  it  is  upon  a  distinct  consideration.  Therefore,  if  the 
note  was  thus  indorsed  in  blank,  after  it  was  delivered  by  the  promisor 
to  the  promisee,  it  could  not  be  a  contract  made  upon  the  original  con- 
sideration of  advancing  the  money  on  the  note,  and  participating  in  the 
same  consideration  with  the  promisor.  He  cannot  therefore  be  held 
as  promisor ;  he  cannot  be  held  except  as  guarantor.  To  hold  him  in 
the  latter  capacity  a  distinct  consideration  must  appear. 

Being  a  blank  indorsement,  of  course  no  consideration  appears  on 
the  face  of  it ;  but  if  it  was  put  on  after  delivery,  an  instrument  so 
indorsed  in  blank  authorized  the  holder  to  go  into  proof  of  the  fact 
which  such  blank  shows  was  intended  to  be  supplied.  It  may  be 
proved  by  parol  testimony  that  there  was  a  consideration  as  between 
the  holder  and  guarantor,  and  what  that  consideration  was,  and  the 
blank  filled  accordingly. 


Ch.  2)  DRAWER   AND    INDORSER.  525 

It  follows  therefore  that  in  determining  whether  such  blank  indorse- 
ment constitutes  an  original  promise  in  which  the  person  giving  it  is 
held  as  one  participating  in  the  original  consideration  of  the  loan,  or 
whatever  it  was,  on  which  the  promisor  was  bound,  it  is  important 
that  it  should  appear  whether  the  name  of  such  blank  indorser  was  on 
the  note  when  it  was  delivered  by  the  promisor  to  the  promisee.  If  it 
was  not,  the  conclusion  of  law  is  that  he  was  not  a  joint  or  original 
promisor.  If  it  was,  then  the  conclusion  of  law  equally  attaches  that 
he  was  an  original  promisor. 

The  question  of  the  delivery  of  a  note  must  necessarily  be  a  question 
of  fact.  It  is  something  which  occurs  after  the  contract  has  been  com- 
pletely written,  and  it  cannot  appear  on  the  note  itself.  A  note,  like 
a  deed  or  other  written  instrument  of  contract,  takes  effect  from  its 
delivery.     Fay  v.  Richardson,  7  Pick.  91. 

It  is  said  in  some  of  the  cases  that  if  a  note  is  produced  by  a  holder, 
having  the  blank  indorsement  of  one  not  the  payee,  the  presumption  is 
that  it  was  on  when  he  took  it.  And  perhaps  it  may  be  so,  as  the  pre- 
sumption is  that  a  note  was  made  and  delivered  at  its  date.  But  this 
is  a  presumption  of  fact,  and  may  be  rebutted  by  proof  that  it  was  not 
so  on  the  note  when  delivered,  on  which  question  of  fact  the  case  is 
for  the  jury  and  open  to  proof  on  both  sides. 

This  view  in  some  measure  indicates  the  nature  and  the  extent  of  the 
parol  evidence  which  may  be  given  in  such  case.  It  is  always  com- 
petent to  give  parol  evidence  of  the  fact  whether  the  blank  indorsement 
was  made  before  or  after  the  delivery  of  the  note.  If  it  is  proved  as 
a  fact  that  the  name  was  on  before  it  was  delivered  to  the  promisee,  it 
is  conclusive  of  the  legal  character  and  effect  of  the  contract,  and  parol 
evidence  is  not  admissible  to  control  such  legal  effect.  But  if  the  fact 
is  proved  that  it  was  made  after  delivery  to  the  promisee,  parol  evi- 
dence is  admissible  to  prove  a  separate  consideration  to  give  it  effect 
as  a  guaranty.  Perhaps  it  is  impossible  to  prescribe  any  exact  rule  as 
to  the  extent  of  such  parol  evidence.  Some  things,  we  think,  are  clear. 
Some  parol  evidence  may  be  admitted  to  show  the  time  and  circum- 
stances under  which  it  was  made  and  delivered.  Samson  v.  Thornton, 
3  Mete.  275,  37  Am.  Dec.  135.  On  the  contrary,  it  would  not  be  com- 
petent to  show  that  the  agreement  was  that  the  words  "without  re- 
course" should  be  written  over  the  party's  name.  That  would  con- 
tradict the  legal  presumption  that  he  intended  to  give  credit  to  the  note 
by  binding  himself  in  some  form — which  cannot  be  done.  Precisely 
what  are  the  limits  it  may  be  difficult  to  say  before  the  cases  arise. 

It  seems  to  be  agreed  on  all  hands  that  the  matter  to  be  filled  up  by 
parol  evidence  must  be  consistent  with  the  writing  as  far  as  it  has  gone. 
The  ground  on  which  any  power  of  filling  up  a  blank  is  warranted  is 
that  the  party,  by  delivering  an  instrument  in  blank,  consented  to  such 
filling  up.  Smith  v.  Crooker,  5  Mass.  538.  Of  course  it  must  be  some- 
thing consistent  with  the  contract  when  delivered,  and  does  not  extend 


526  LIABILITY  OF  PARTIES.  (Part  3 

to  the  insertion  of  matter  inconsistent.  For  instance,  it  has  been  said 
that  the  deHvery  of  a  blank  note,  with  a  name  written  across  in  the  usual 
place  of  indorsement,  would  warrant  the  holder  to  fill  it  up  on  the  other 
side  with  a  note  for  any  amount,  payable  to  him  who  had  thus  left 
his  name  in  blank.  So  suppose  this  written  on  a  stamp,  where  stamps 
are  required,  it  would  not  warrant  an  amount  larger  than  the  stamp 
would  cover.  So  if  a  note  be  filled  and  signed,  leaving  a  blank  for 
the  number  of  dollars,  it  would  be  a  letter  of  credit  for  any  amount 
covered  by  the  stamp. 

The  question  whether  the  promisee  was  surety  or  principal  is  a  ques- 
tion between  themselves  only,  and  does  not  affect  the  rights  of  the 
holder. 

It  has  been  argued  that  the  case  of  Riley  v.  Gerrish,  9  Cush.  104,  ex- 
pressed a  different  view  of  the  law  as  to  the  admission  of  parol  evi- 
dence from  that  which  had  been  laid  down  in  Chaffee  v.  Jones,  19 
Pick.  2G3,  Union  Bank  v.  Willis,  8  Mete.  509,  41  Am.  Dec.  541,  Howe 
V.  Merrill,  5  Cush.  80,  and  other  previous  cases.  That  case  was  left  to 
the  court  on  certain  testimony  of  Mr.  Hancock,  so  far  as  it  was  admis- 
sible. The  decision  was  certainly  right.  There  were  words  erased, 
and  it  was  held  that  parol  evidence  was  competent  to  prove  that  they 
were  stricken  out  before  the  note  was  delivered,  with  a  full  under- 
standing of  the  effect  of  thus  erasing  the  words  "as  indorser."  It  is 
there  stated  that  "this  power  of  filling  up  the  blank  is  not  arbitrary,  but 
depends  upon  proof  of  the  real  negotiation."  It  would  have  been  more 
accurate  to  say:  "Proof  of  the  fact  that  it  was  signed  before  or  after 
delivery ;  and,  if  after,  then  it  would  be  competent  to  prove  the  consid- 
eration and  an  authority  to  fill  the  blank  with  words  constituting  a  con- 
tract of  guaranty."  Another  material  consideration  in  that  case  was 
that  the  proof  tended  to  show  that  it  was  an  original  contract  between 
the  promisee  and  such  special  indorser,  and  so  was  open  to  any  and  all 
questions  respecting  want  and  legality  of  consideration,  which  it  would 
not  have  been  if  sued  by  an  indorsee  having  taken  it  in  the  due  course 
of  business  and  not  dishonored.  It  had  been  recently  held  in  the  case 
of  Howe  v.  Merrill  that,  when  a  party  had  signed  in  due  order  as 
indorser,  parol  evidence  was  not  admissible  to  show  that  he  was  bound 
as  promisor.  In  the  more  recent  case  of  Wright  v.  Morse,  9  Gray,  337, 
69  Am.  Dec.  291,  in  the  opinion  given  by  Mr.  Justice  Dewey,  some 
expressions  in  Riley  v.  Gerrish  were  set  right. 

Describing  the  notes  in  the  mortgage  as  "indorsed"  is  a  description 
of  the  notes  simply  to  identify  them;  it  was  literally  true,  they  were 
notes  with  the  names  of  the  defendant  written  on  the  back. 

Exceptions  overruled. 


Gh.  2)  DRAWER   AND    INDORSER.  527 

MOORE  V.  CROSS. 
(Court  of  Appeals  of  New  York,  1859.     19  N.  T.  227,  75  Am.  Dec.  826.) 

Appeal  from  the  Supreme  Court.  The  complaint  averred  the  mak- 
ing of  a  promissory  note  by  the  defendant  McGervey,  payable  to  the 
order  of  the  plaintiff,  and  that  it  was  indorsed  by  the  defendant  Cross 
for  the  purpose  of  paying  for  coal  sold  and  delivered  by  the  plaintiff 
to  McGervey  on  the  credit  of  such  indorsement,  and  was  delivered, 
thus  indorsed,  to  the  plaintiff,  with  the  privity  of  Cross,  in  payment  for 
coal  then  sold  and  delivered.  Upon  the  trial  before  a  referee  the  com- 
plaint was  proved  in  substance,  and  he  reported  in  favor  of  the  plain- 
tiff. The  judgment  thereupon  entered  was  affirmed  on  appeal  at  Gen- 
eral Term  in  the  First  District,  and  the  defendant  Cross  appealed  to 
this  court. 

Johnson,  C.  J.  This  action  is  upon  a  promissory  note  made  by  one 
McGervey,  payable  to  the  order  of  James  Moore,  and  indorsed  in  blank 
by  John  A.  Cross,  James  Moore,  and  John  McNamee,  The  plaintiff 
is  the  James  Moore  to  whose  order  the  note  is  payable.  It  was  proved 
that,  upon  a  negotiation  for  a  sale  of  coal  by  Moore  to  McGervey, 
Moore  agreed  to  sell  him  the  coal  for  his  note,  indorsed  by  Cross,  and 
that  for  this  purpose  Cross  indorsed  the  note.  The  sale  accordingly 
took  place,  and  the  coal  and  the  note  indorsed  by  Cross  were  respec- 
tively delivered.  The  note  was  discounted  for  Moore  at  the  Atlantic 
Bank,  and  being  unpaid  at  maturity  was  duly  demanded  and  notice 
duly  given  to  Cross.  It  was  subsequently  taken  up  at  the  bank  by 
Moore,  the  plaintiff.  The  question  is  whether,  on  this  state  of  facts, 
Moore  can  recover  in  this  action  against  Cross. 

It  is  quite  conceivable  that,  in  the  ordinary  course  of  business,  a 
promissory  note  may,  before  it  falls  due,  come  to  the  hands  of  a  per- 
son who  already  appears  upon  it  as  payee  or  indorser.  In  such  a  case 
he  cannot  maintain  an  action  against  any  of  the  parties  whose  indorse- 
ments are  subsequent  to  the  first  appearance  of  his  name.  The  legal 
reason  is  that  each  of  those  persons,  on  paying  to  him  the  note,  would 
have  an  immediate  right  to  demand  payment  from  him  on  his  earlier 
indorsement.  The  law,  to  avoid  this  circuity,  denies  an  action  to  a 
party  thus  situated.  If  the  note  had  passed  through  his  hands  without 
indorsement,  or  if  it  had  been  indorsed  without  recourse  by  him,  the 
reason  would  not  exist;  and  there  could  be  no  objection,  founded  on 
his  prior  holding  or  indorsement,  to  the  maintenance  of  an  action  by 
him  against  the  parties  liable  on  the  note. 

Again,  if  a  note  be  made  and  indorsed  for  the  accommodation  of  A., 
who  indorses  it  to  another  person,  and  afterward,  in  the  course  of 
trade,  again  becomes  the  holder,  he  could  maintain  no  action  against 
the  maker  and  indorser  for  his  accommodation,  notwithstanding  their 
apparent  liability  to  him  on  the  face  of  the  paper.  The  fact  of  the 
accommodation  making  and  indorsing  might  be  proved  to  defeat  the 


528  LiADiLiTY  OF  PARTIES.  (Part  3 

action,  and  it  would  establish  that  the  agreement  of  the  parties,  con- 
trary to  the  legal  inference  from  the  face  of  the  paper,  did  not  impobe 
a  liability  on  the  maker  and  indorser  to  pay  the  party  suing.  This,  in 
principle,  is  very  like  what  the  plaintiff  seeks  to  maintain  in  this  case. 
Having  brought  his  action  as  holder,  and  producing  the  paper  indorsed 
in  blank,  he  has  prima  facie  made  out  a  title  as  such ;  and  to  rebut  the 
inference  which  arises  on  the  face  of  the  paper,  that  a  recovery  by  him 
against  Cross,  would  only  lead  to  a  new  recovery  by  Cross  against  him, 
he  shows  that  the  defence  of  circuity  is  not  available  against  him,  in- 
asmuch as  Cross  could  have,  by  the  original  agreement  of  the  parties, 
no  recovery  against  him.  The  case  is,  as  to  its  legal  merits,  the  same 
as  if  Cross  had  taken  up  the  paper  from  the  bank  and  brought  an  action 
against  Moore  as  payee,  and  in  such  a  case  no  one  could  doubt  the 
competency  of  the  proof  of  the  facts  now  in  proof,  or  their  conclusive- 
ness to  defeat  Cross's  action.  Labron  v.  Woram,  1  Hill,  91.  Between 
parties  thus  standing  in  immediate  privity  with  each  other,  an  action 
could  no  more  have  been  maintained  by  Cross  against  Moore  than  it 
could  had  Moore  been  strictly  an  accommodation  indorser  for  Cross. 

When  this  note  was  originally  in  Moore's  hands  the  blank  indorse- 
ment of  Cross  could  have  been  rendered  entirely  conformable  to  the 
real  agreement  and  object  of  the  parties  by  Moore's  making  his  own  in- 
dorsement without  recourse  in  terms.  Upon  such  an  indorsement  the 
paper  would  no  longer  have  afforded  a  prima  facie  answer  to  Moore's 
action  against  Cross,  nor  could  Cross  have  maintained  that  such  an  in- 
dorsement was  unwarranted,  as  it  would  have  exactly  carried  out  the 
intention  of  the  parties.  Between  these  parties  I  can  see  no  reason 
why  the  indorsement  might  not  thus  have  been  made  at  the  trial,  or 
why  it  may  not  now,  being  a  mere  matter  of  form  and  the  right  to 
make  it  being  proved,  be  treated  as  made. 

Some  confusion  has  been  thrown  around  this  subject  from  what 
has  been  finally  settled  to  have  been  an  error,  treating  such  an  indorse- 
ment as  a  guaranty  and  charging  the  indorser  as  a  maker  or  guarantor. 
This  doctrine  was  advanced  in  Herrick  v.  Carman,  12  Johns.  160,  and 
was  adjudged  in  -Nelson  v.  Dubois,  13  Johns.  175,  and  Campbell  v. 
Butler,  14  Johns.  319.  It  was  attacked  in  Dean  v.  Hall,  17  Wend.  211, 
and  in  Seabury  v.  Hunger  ford,  2  Hill,  80,  and  was  finally  overthrown 
in  Hall  v.  Newcomb,  3  Hill,  233,  and  the  same  case  in  error,  7  Hill,  116, 
42  Am.  Dec.  82.  The  Chancellor,  in  his  opinion  in  the  latter  case, 
says:  "If  the  object  of  the  second  indorser  was  to  enable  the  drawer 
to  obtain  money  from  the  payee  of  the  note,  upon  the  credit  of  the 
accommodation  indorser,  he  may  indorse  it  without  recourse,  and,  by 
such  indorsement,  may  either  make  it  payable  to  the  second  indorser, 
or  to  the  bearer ;  and  such  original  payee  may  then,  as  legal  holder  and 
owner  of  the  note,  recover  thereon  against  such  second  indorser,  upon 
a  declaration  stating  such  special  indorsement  by  him,  and  subsequent 
indorsement  of  the  note  to  him  by  the  second  indorser."  He  proceeds 
to  say  that  the  party  might  proceed  on  the  common  counts,  giving  a 


Ch.  2)  DRAWER    AND    INDORSER.  529" 

copy  of  the  note  and  indorsements,  but  that  he  must,  in  either  case, 
show  demand  and  notice  to  charge  the  indorser.  In  Spies  v.  Gilmore. 
1  N.  Y.  321,  the  doctrine  came  before  this  court  under  slightly  different 
circumstances.  Want  of  demand  and  notice  were  held  to  be  excused 
upon  the  circumstances  of  the  case,  in  the  Superior  Court.  In  this 
court  it  was  discussed  and  decided  on  the  question  of  the  sufficiency 
of  the  excuse ;  and  not  an  intimation  is  to  be  found  throwing  any  doubt 
upon  the  position  that,  had  those  defects  not  existed,  the  plaintiff 
might  have  recovered.  The  later  cases  of  Brown  v.  Curtiss,  2  N.  Y. 
225,  Hall  V.  Farmer,  2  N.  Y.  553,  and  Durham  v.  Manrow,  2  N.  Y.  533, 
being  upon  writtten  guaranties,  and  not  upon  indorsements,  are  not 
applicable  to  this  case. 

The  cases  of  Herrick  v.  Carman,  10  Johns.  224,  and  12  Johns.  159, 
and  Tillman  v.  Wheeler,  17  Johns.  326,  are  entirely  in  harmony  with 
this  view.  In  neither  of  them  was  it  made  to  appear  that  the  second 
indorser  put  his  name  on  the  paper  to  give  the  maker  credit  with  the 
payee.  On  that  ground  each  of  them  was  decided,  while  the  whole 
scope  of  the  opinions  shows  that  with  that  proof  the  court  would  have 
sustained  a  recovery.  The  case  of  Waterbury  v.  Sinclair,  16  How. 
Proc.  329,  sustains  the  general  position  of  the  plaintiff,  as  do  the  opin- 
ions of  Mr.  Justice  S.  B.  Strong  and  Mr.  Justice  Emott,  though  the  de- 
cision of  the  former  was  overruled  upon  the  ground  that  there  should 
have  been  an  actual  indorsement  without  recourse.  It  seems  to  me 
that,  under  the  present  system,  if  a  right  so  to  indorse  appears,  and  it 
may  be  done  even  at  the  trial,  that  substantial  justice  is  promoted  by 
regarding  it  as  done  and  looking  upon  its  actual  doing  as  the  merest 
matter  of  form. 

The  recovery  was  founded  on  correct  legal  principles.  The  fact  that 
an  indorsement  without  recourse  would  present  exactly  such  a  case  as 
might  frequently  happen  in  the  transaction  of  business,  and  if  so  hap- 
pening would  strike  no  one  as  violating  the  ordinary  theorj'-  of  prom- 
issory notes,  shows  that  the  real  rights  of  these  parties  are  capable  of 
being  enforced  without  violence  to  any  rule  of  law,  under  the  contract 
they  have  actually  made. 

All  the  Judges  concurring,  judgment  affirmed. 


PHELPS  V.  VISCHER. 

(Court  of  Appeals  of  New  York,  1872.     50  N.  Y.  69.  10  Am.  Rep.  433.) 

Appeal  from  order  of  the  General  Term  of  the  Supreme  Court  in 
the  Third  Judicial  Department,  reversing  a  judgment  in  favor  of  de- 
fendant entered  upon  the  report  of  a  referee  and  ordering  a  new  trial. 

The  action  was  brought  upon  a  promissory  note  made  by  Scudder 
&  Redfield,  dated  May  15,  1867,  payable  to  the  order  of  James  E. 
Sm.&  M.B.&  N.— 34 


530  LIABILITY  OF  PARTIES.  (Part  3 

Brown,  and  before  delivery  to  Brown  indorsed  by  Solomon  Bennet, 
defendant's  testator.  Before  the  note  fell  due  Brown  transferred  the 
note  to  one  Hine,  and  Hine  transferred  it  to  plaintiff  absolutely,  with- 
out condition,  before  due,  for  value  paid  at  the  time  in  money. 

At  the  time  of  the  transfer  to  the  plaintil?  the  note  had  on  it  the 
following  indorsement  of  Brown  written  above  Bennet's  indorsement: 

"For  the  purpose  of  making  this  note  negotiable  I  indorse  the  same, 
payable  to  the  order  of  Solomon  Bennet,  without  recourse  to  me  as 
indorser.  James  E.  Brown." 

The  referee  found  "that,  at  the  time  of  such  transfer  to  the  plain- 
tiff, he  knew  nothing  of  any  defense  to  the  note";  also,  "that  said 
plaintiflF  had  notice,  before  he  purchased  the  note,  that  the  indorse- 
ments made  by  the  said  Brown  upon  the  note  were  made  after  it  passed 
into  the  hands  of  Brown,  with  Bennet's  indorsement  upon  it,"  and  de- 
cided that  the  plaintiff  could  not  recover. 

Judginent  was  entered,  upon  the  report  of  the  referee,  in  favor  of 
the  defendant.     Further  facts  appear  in  the  opinion.^ 

Grover,  J.  The  order  of  the  General  Term  does  not  state  that  it 
was  made  upon  any  error  of  fact.  It  must,  therefore,  be  assumed  by 
this  court  that  the  judgment  was  reversed  and  a  new  trial  granted  up- 
on legal  errors  only.  An  exception  was  taken  by  the  respondent  to  the 
finding  by  the  referee  of  the  fact  that  the  plaintiff  had  notice,  before  he 
purchased  the  note,  that  the  indorsements  made  by  Brown  upon  the 
note  were  made  after  it  had  passed  into  the  hands  of  Brown  with  Ben- 
net's indorsement  upon  it.  This  exception  raises  the  question  in  this 
court  whether  there  was  any  evidence  in  support  of  the  finding.  The 
plaintiff,  in  his  testimony,  speaking  of  these  indorsements,  says :  "I 
can't  say  when  they  were  put  on;  it  was  done — that  is,  both  of  these 
instruments  signed  by  Brown — during  the  negotiation  of  the  sale  of 
the  note  to  me.  Hine  brought  all  the  notes  to  me  to  sell  them  to  me." 
The  witness  has  before  testified  that  he  purchased  several  other  notes 
of  Hine  at  the  same  time  he  bought  this.  Other  testimony  shows  that 
Bennet's  indorsement  was  put  upon  the  note  a  long  time  before  the 
purchase  by  the  plaintiff.  It  follows  that  when  the  plaintiff  first  saw 
the  note  it  had  been  indorsed  by  Bennet  and  not  by  Brown.  This  sus- 
tained the  material  part  of  the  finding.  Whether  the  note  had  been 
in  Brown's  hands  was  not  material ;  but,  if  so,  that  fact  might  be  in- 
ferred from  the  testimony.  This  brings  us  to  the  real  question  in  the 
case,  which  is  whether  the  legal  conclusion  of  the  referee,  from  the 
facts  found,  that  the  plaintiff  was  not  entitled  to  recover  against  Ben- 
net, was  correct.  The  substance  of  the  facts  so  found  is  that  Scudder 
&  Redfield  made  the  note  in  suit  payable  to  the  order  of  James  E. 
Brown,  and,  after  being  indorsed  by  the  defendant  Bennet,  was  by 
them  delivered  to  Brown  the  payee  ;  that  the  note,  before  maturity, 
was  transferred  by  Brown  to  one  Hine,  and  by  Hine,  before  due,  trans- 

T  The  arguments  of  counsel  are  omitted. 


Ch.  2)  DRAWER    AND    INDORSEE.  531 

ferred  to  the  plaintiff  absolutely,  without  condition  for  a  valuable  con- 
sideration; that  at  the  time  of  the  transfer  to  the  plaintiff  he  knew 
nothing  of  any  defense  to  the  note;  and  that  it  then  had  on  it,  in  ad- 
dition to  the  indorsement  of  Bennet,  the  following  indorsement,  made 
by  Brown,  written  above  the  indorsement  of  Bennet,  viz. :  "For  the 
purpose  of  making  this  note  negotiable  I  indorse  the  same,  payable  to 
the  order  of  Solomon  Bennet,  without  recourse  to  me  as  indorser ;" 
and  the  following,  written  below  the  indorsement  of  Bennet:  "For 
value  received  of  Isaac  N.  Hine  I  hereby  guarantee  to  the  said  Hine, 
or  bearer,  the  collection  of  the  within  note  of  the  makers,  and  Bennet, 
the  indorser,"  signed  by  Brown;  that  the  plaintiff  had  notice,  before 
he  purchased  the  note,  that  the  indorsement  made  by  Brown  upon  the 
note  was  made  after  it  had  passed  into  the  hands  of  Brown  with  Ben- 
net's  indorsement  upon  it.  There  would,  at  first  view,  appear  to  be  an 
inconsistency  between  the  finding  that  the  plaintiff,  at  the  time  of  his 
purchase,  knew  of  no  defense  to  the  note,  and  the  one,  in  substance, 
that  he  did,  at  that  time,  know  that  the  note,  after  being  made  and 
indorsed  by  Bennet,  was,  by  the  maker,  delivered  to  Brown,  who,  after 
that,  made  his  indorsements  upon  the  note,  provided  the  latter  finding 
constituted  a  defense  for  Bennet  upon  the  note,  as  held  by  the  referee. 
Be  this  as  it  may,  full  effect  must  be  given  to  this  latter  finding  upon 
the  same  principle  that  a  general  verdict  is  controlled  by  a  special  find- 
ing of  fact.  From  this  finding  it  appears  that  the  plaintiff  did  know 
that  the  note  had  been  indorsed  by  Bennet  before  Brown  made  the 
special  indorsement  thereon. 

This  presents  the  questions  whether  Brown,  had  he  retained  the 
note,  could  have  recovered  against  Bennet  as  indorser ;  and  if  not, 
whether  he  could  transfer  any  such  right  to  a  purchaser  from  him. 
In  Herrick  v.  Carman,  12  Johns.  159,  it  was  held  that  the  payee  of  a 
note,  made  payable  to  his  order,  and  indorsed  by  a  third  person  pre- 
vious to  its  delivery  to  the  payee,  could  not  recover  against  such  in- 
dorser ;  that  the  face  of  the  paper  showed  that  the  payee  occupied  the 
position  of  first  indorser  as  to  the  one  previously  indorsing,  and  could 
not,  therefore,  be  permitted  to  recover  against  one  in  the  position  as 
to  him  of  second  indorser.  In  Herrick  v.  Carman,  10  Johns.  221,  it 
was  held,  upon  a  like  note,  that  the  party  who  had  so  indorsed  might, 
in  an  action  against  him  by  an  indorser  of  the  payee,  show  that  the 
plaintiff  held  the  note  as  agent  of  the  payee,  and  that  this  fact  would 
defeat  a  recovery  for  the  reason  that  the  payee,  as  to  the  defendant, 
stood  in  the  position  of  first  indorser,  and  could  not  therefore  recover 
of  him.  In  Tillman  v.  Wheeler,  17  Johns.  326,  the  same  rule  was  held 
and  applied  in  deciding  the  case.  It  may  be  remarked  that  in  each 
of  these  cases  it  appeared  that  the  payees  received  the  notes  from  the 
makers  for  value,  pursuant  to  an  agreement  by  the  maker  to  give  notes 
with  an  indorser ;  but  it  was  held  that  this  fact  was  of  no  avail  to  the 
plaintiffs,  unless  it  was  further  proved  that  the  person  indorsing  did 
so  with  intent  to  become  surety  for  the  makers  to  the  payees.     It  is 


532  LIABILITY  OF  PARTIES.  (Part  3 

clear  that  a  party  having  no  right  of  action  upon  a  note  himself  can 
transfer  none  to  another  knowing  all  the  facts. 

In  the  present  case  the  plaintilif  not  only  himself  knew  the  facts,  but 
the  case  shows  that  they  were  also  known  to  Hine,  of  whom  he  pur- 
chased the  note.  In  Moore  v.  Cross,  19  N.  Y.  227,  75  Am.  Dec.  326, 
the  doctrine  of  the  above  cases  was  approved ;  and  it  was  further  held 
that  in  case  the  payee  of  a  note,  indorsed  by  a  third  person  before  de- 
livery to  him,  averred  and  proved  that  it  was  the  intention  of  the  in- 
dorser  to  become  surety  of  the  maker  to  him  upon  the  note,  and  that 
he  indorsed  the  same  for  that  purpose,  he  could  maintain  an  action 
and  recover  upon  such  indorsement.  There  is  no  intimation  that  the 
action  could  be  maintained  in  the  absence  of  such  proof.  In  Bacon  v. 
Burnham,  37  N.  Y.  614,  it  was  held  that  where  a  person  indorsed  a 
note,  payable  to  another  or  order,  the  legal  presumption  was,  from  the 
face  of  the  paper,  that  he  stands  in  the  position  of  a  subsequent  in- 
dorser  to  the  payee,  and  that  in  the  absence  of  proof,  showing  him  in 
a  different  position,  the  payee  could  not  recover  against  him,  and,  fur- 
ther, that,  the  payee  having  no  right  of  action,  none  could  be  acquired 
by  transfer  from  him.     This  is  decisive  of  the  present  case. 

The  counsel  for  the  respondent  invokes  the  rule  that  the  right  of 
a  purchaser  of  negotiable  paper  is  not  impaired  unless  he  has  such 
knowledge  of  the  equities  between  the  original  parties  as  to  make  his 
purchase  dishonest.  It  is  obvious  that  this  does  not  include  defenses 
apparent  upon  the  face  of  the  paper,  but  such  only  as  are  dependent 
upon  the  proof  of  other  facts.  In  the  present  case  the  plaintiff  knew 
that  Brown  had  not  indorsed  the  paper  without  recourse  to  Bennet, 
but  that  the  latter  had  indorsed  it,  payable  to  the  order  of  Brown.  The 
plaintiff  must  be  assumed  to  have  known  that,  in  the  absence  of  proof 
that  Bennet  indorsed  with  the  intention  of  becoming  security  for  the 
makers  to  Brown,  Brown  could  maintain  no  action  against  him  upon 
the  indorsement,  and,  having  no  such  right  himself,  could  not  transfer 
it  to  another  except  upon  assuming  the  responsibility  of  first  indorser 
as  to  him;  that  the  transfer  of  tlie  note  by  Brown  otherwise  was  a 
fraud  upon  Bennet.  Had  the  plaintiff  purchased  the  note  of  Hine 
without  the  knowledge  that  Bennet  first  indorsed  the  note,  and  that 
Brown's  indorsement  was  made  thereafter,  the  case  would  have  come 
within  the  rule  insisted  upon  by  counsel.  The  plaintiff,  in  the  absence 
of  such  knowledge,  might  have  suppncpr!  tlint  Brown  first  specially 
indorsed  the  note  to  Bennet,  and  that  he  subsequently  indorsed,  and 
that  Brown's  guaranty  was  made  still  later,  upon  some  other  arrange- 
ment. Under  such  circumstances  the  plaintiff  would  have  been  a  bona 
fide  holder. 

The  cases  cited  by  counsel,  where  notes,  not  negotiable,  were  in- 
dorsed before  delivery,  have  no  ap])lication.  But  in  these  it  was  proved 
that  the  indorsements  were  made  with  the  intention  of  becoming  se- 
curity for  the  makers  to  the  payee.  In  Dean  v.  Hall,  17  Wend.  214, 
where  it  was  held  that  the  indorser  could  only  be  made  liable  when 


Ch.  2)  DRAWER    AND    INDORSER.  533 

properly  charged  as  such,  and  not  as  maker,  the  additional  views  found 
in  the  opinion  are  entirely  predicated  upon  the  assumed  fact  that  the 
indorser  put  his  name  on  the  back  at  the  time  the  note  was  made,  ac- 
cording to  a  promise  to  become  originally  and  directly  responsible,  or 
was  privy  to  the  consideration  of  the  note.  Penny  v.  Innes,  1  Cromp- 
ton,  Neeson  &  Roscoe,  439,  cited  by  counsel,  was  a  case  upon  an  in- 
dorsement of  a  bill  of  exchange,  and  the  indorser  was  held  liable  upon 
the  ground  that  the  indorsement  was  equivalent  to  the  drawing  of  a 
new  bill  by  the  indorser  upon  the  drawee.  If  this  be  so  the  judgment 
was  correct,  as  the  drawer  of  a  bill  is  liable  to  the  payee  unless  it  is 
paid  by  the  drawer,  and  the  proper  steps  are  taken  to  charge  him. 
This  case  has  been  criticised.    See  Gwinnell  v.  Herbert,  5  A.  &  E.  436. 

But  it  is  unnecessary  to  determine  in  this  case  whether  the  point 
was  well  decided  or  not,  as  the  reason  of  the  decision  has  no  applica- 
tion to  the  indorsement  of  a  note  payable  to  the  order  of  the  payee. 
As  we  have  seen  already,  the  law  is  settled  in  this  state  that  such  an 
indorser  is  not  liable  to  the  payee  upon  the  face  of  the  paper,  and  can 
only  be  made  so  by  proof,  showing  that  he  indorsed  with  intent  of  be- 
coming so  liable.  Bennet  could  not  be  made  liable  as  the  maker  of  a 
new  note,  but  only  as  indorser.  Hall  v.  Newcomb,  3  Hill,  233 ;  same 
case  in  error,  7  Hill,  416,  42  Am.  Dec.  82 ;  Brown  v.  Curtiss,  2  N.  Y. 
225. 

The  judge  at  General  Term  fell  into  the  error  of  supposing  that  the 
facts  set  out  in  the  complaint,  bringing  the  case  within  the  principle  of 
Moore  v.  Cross,  were  admitted  in  the  answer.  The  answer  explicitly 
denies  that  the  defendant  Bennet  indorsed  with  intent  to  become  liable 
as  surety  to  the  payee. 

The  order  of  the  General  Term  must  be  reversed,  and  the  judgment 
entered  upon  the  report  of  the  referee  affirmed,  with  costs. 


PAHLMAN  et  al.  v.  TAYLOR. 
(Supreme  Court  of  Illinois,   1874.     75  111.   629.) 

This  was  an  action  of  assumpsit,  brought  by  Allan  H.  Taylor  against 
Herman  J.  Pahlman  and  D.  G.  Rush.  The  opinion  of  the  court  states 
the  facts  of  the  case.    The  defendants  bring  the  record  here  by  appeal. 

ScHOLFiELD,  J.^  This  was  an  action  of  assumpsit,  by  appellee  against 
appellants  as  guarantors  of  a  promissory  note  executed  by  one  Charles 
Welsh  to  appellee,  on  the  13th  day  of  June,  1870,  payable  14  months 
after  date,  for  $5,000,  with  interest  at  the  rate  of  10  per  centum  per 
annum.  Appellants'  names  were  indorsed  in  blank  before  the  note  was 
delivered,  and  the  first  question  presented  is:  Did  they  thereby  as- 
sume the  liability  of  guarantors,  or  only  that  of  successive  indorsers? 

8  Part  of  the  opinion  is  omitted. 


534  LIABILITY  OF  PARTIES.  (Part  3 

The  decisions  of  the  Supreme  Court  of  Indiana,  referred  to  by  ap- 
pellants, seem  to  sustain  the  position  for  which  they  contend  but  in 
so  far  as  they  do  so,  they  are  in  conflict  with  previous  decisions  of  this 
court.  It  is  there  held  that  an  indorsement  in  blank  of  an  instrument 
not  negotiable,  made  at  the  date  of  the  contract,  and  unexplained  by 
extrinsic  evidence,  confers  upon  the  payee  authority  to  hold  the  in- 
dorscr  liable,  on  the  original  contract,  as  surety,  but  that  a  similar  in- 
dorsement of  negotiable  paper  renders  him  liable  only  as  indorser, 
with  the  ordinary  rights  and  privileges  incident  to  that  character. 

Promissory  notes  are  made,  by  our  statute,  negotiable  instruments, 
yet  this  court  has  never  held,  where  they  were  indorsed  by  a  third 
party  before  delivery,  in  the  absence  of  an  agreement  to  that  effect, 
that  the  rule  recognized  by  the  Indiana  cases  applied  to  them. 

Bogue  v.  Melick,  25  111.  93,  also  referred  to  by  counsel,  is  not  in 
point.  In  that  case  the  note  was  executed  by  the  firm  of  Dorsett,  Bro. 
&  Co.,  of  which  firm  Folsom  Dorsett,  the  payee  of  the  note,  was  a 
member.  It  was  then  indorsed  in  blank  b  l-ivsom  Dorsett  and  Abr'm 
Melick.  Under  this  state  of  facts  it  was  said  by  the  court :  "Here  the 
payee  of  the  note  is  also  one  of  the  makers.  It  was  impossible,  there- 
fore, that  the  defendant  put  his  name  upon  the  note  for  the  security  of 
the  payee,  which  is  indispensable  to  create  a  suretyship.  All  the  par- 
ties knew  that  the  note,  while  in  the  hands  of  the  payee,  was  a  mere 
nullity — without  vitality — creating  no  right  or  liability  whatever.  It 
could  never  become  an  operative  instrument  except  by  the  indorsement 
of  tlie  payee.  He  would  then  become  the  first  indorser,  and  his  name 
would  precede  that  of  the  defendant." 

In  the  present  case,  appellants  are  neither  makers  nor  payees  of  the 
note.    They  are  merely  indorsers  in  blank  before  delivery. 

Appellants'  plea,  verified  by  affidavit,  imposed  upon  appellee  the  bur- 
den of  proving  the  liability  of  the  defendants  in  the  capacity  in  which 
they  are  sued.  We  think  these  facts  are  sufficiently  proved  by  the 
evidence  in  the  record:  (1)  That  appellants'  signatures  on  the  back 
of  the  note  are  genuine.  (2)  That  they  were  placed  there  before  the 
note  was  delivered.  (3)  That  there  was  no  agreement  between  the 
parties,  at  or  before  the  indorsement  was  made,  as  to  what  character 
of  liability  appellants  thereby  assumed.  (4)  That  the  note  did  not,  at 
any  time,  pass  to  either  of  the  appellants  by  assignment,  nor  was  either 
of  them,  at  any  time,  the  holder  thereof. 

The  legal  conclusion  from  these  facts  is,  we  think,  clear.  Com- 
mencing with  Cushman  v.  Dement,  3  Scam.  497,  and  running  through 
a  series  of  cases  down  to  and  including  Lincoln  v.  HInzey,  51  111.  435, 
this  court  has  uniformly  held  that  where  the  name  of  a  person,  not 
a  party  to  a  note,  is  indorsed  upon  it  before  delivery,  the  presumption 
is,  in  the  absence  of  evidence  to  the  contrary,  that  he  indorsed  as  guar- 
antor, and  the  rule  thus  declared  has  been  too  long  and  too  firmly  ad- 
hered to,  to  be  now  changed,  unless  it  shall  be  done  by  legislative  enact- 
ment.   In  our  opinion,  the  evidence  before  us  utterly  and  entirely  fails 


Ch.  2)  DRAWER    AND    INDORSER.  535 

to  show  that  the  parties  intended,  by  the  indorsement,  a  liability  other 
or  different  than  that  which  the  law  would  imply  from  the  act  under 
the  circumstances. 

We  fail  to  appreciate  the  force  of  the  argument  of  counsel,  that  al- 
though Pahlman  may  be  considered  as  a  guarantor,  yet  that  the  liabil- 
ity of  Rush  can  only  be  that  of  a  second  indorser.  Who,  then,  was 
the  first  indorser  in  this  sense?  No  names  are  indorsed,  save  those 
of  Pahlman  and  Rush,  and,  so  far  as  we  have  been  able  to  discover, 
they  occupy  the  same  relation  precisely  to  the  note.  The  money  bor- 
rowed by  Welsh,  for  the  payment  of  which  the  note  was  given,  was 
ostensibly  for  the  firm  of  Pahlman  &  Co.,  which  firm  was  composed 
of  Pahlman,  Rush,  and  Welsh.  The  interest  of  one  was  the  interest 
of  all,  and  this  fact  materially  strengthens  the  legal  presumption,  if 
indeed  any  is  needed,  that  the  parties  intended  that  appellants  should 
be  Welsh's  sureties  for  the  payment  of  the  note.    *    *    * 

Judgment  affirmed. 


FAR  ROCKAWAY  BANK  v.  NORTON. 

(Court  of  Appeals  of  New  York,  1906.     186  N.  Y.  4S4,  79  N.  E.  709.) 

Appeal  from  a  judgment  of  the  Appellate  Division  of  the  Supreme 
Court  in  the  Second  Judicial  Department,  entered  January  8,  1906, 
affirming  a  judgment  in  favor  of  plaintiff  entered  upon  the  report  of 
a  referee. 

The  nature  of  the  action  and  the  facts,  so  far  as  material,  are  stated 
in  the  opinion. 

CuLLEN,  C.  J.  The  action  is  brought  on  a  promissory  note  made  by 
one  Smith  to  the  plaintiff,  which  the  defendant  indorsed  prior  to  its 
delivery  to  the  payee.    But  two  questions  are  presented  on  this  appeal. 

First.  It  is  alleged  the  referee  committed  error  in  excluding  evi- 
dence offered  by  the  defendant  to  show  that  Smith,  the  maker,  had, 
some  time  subsequent  to  the  maturity  of  the  note,  a  sufficient  deposit 
in  the  plaintiff  bank  to  pay  it,  which  the  plaintiff  failed  to  appropriate 
for  that  purpose.  The  case  of  National  Bank  of  Newburgh  v.  Smith, 
66  N.  Y.  271,  23  Am.  Rep.  48,  is  a  conclusive  authority  to  the  effect 
that,  in  the  absence  of  any  direction  or  agreement  to  that  effect,  it  was 
optional  with  the  plaintiff  whether  it  would  apply  the  money  or  not 
upon  the  note  in  suit,  and  that  it  was  under  no  positive  legal  obliga- 
tion to  do  so.    Therefore  there  was  no  error  committed  in  this  respect. 

Second.  The  note  was  given  in  renewal  and  to  take  up  an  earlier 
note,  also  indorsed  by  the  defendant.  To  establish  the  fact  that  the 
defendant  had  indorsed  the  note  with  the  purpose  of  giving  the  maker 
credit  with  the  payee,  proof  was  given  tending  to  show  that,  default 
having  been  made  in  the  payment  of  the  earlier  note,  notice  of  protest 
thereof  was  given  to  the  defendant.  It  is  urged  that  the  evidence  as 
to  the  protest  of  the  earlier  note  was  not  of  a  proper  character.     It 


536  LIABILITY  OF  PARTIES.  (Part  3 

is  unnecessary  to  consider  this  question,  for  since  the  enactment  of  the 
negotiable  instruments  law  (Laws  181)7,  p.  719,  c.  G12)  the  law  obtain- 
ing in  the  case  of  such  indorsement  as  that  made  by  the  defendant 
has  been  radically  changed.  Prior  to  that  time  the  indorser  was  pre- 
sumed to  be  a  second  indorser,  and  not  liable  to  the  payee,  though  it 
was  competent  for  the  payee  to  prove  aliunde  that  the  intention  of  the 
indorser  was  to  give  the  maker  credit  with  the  payee.  Bacon  v.  Burn- 
ham,  37  N.  Y.  614  ;  Coulter  v.  Richmond,  59  N.  Y.  478.  Section  114 
of  the  negotiable  instruments  law  prescribes  a  different  rule.  It  is 
enacted  that  "where  a  person,  not  otherwise  a  party  to  an  instrument, 
places  thereon  his  signature  in  blank  before  delivery,  he  is  liable  as  in- 
dorser in  accordance  with  the  following  rules :  "(1)  If  the  instrument 
is  payable  to  the  order  of  a  third  person,  he  is  liable  to  the  payee  and 
to  all  subsequent  parties."  This  note  was  made  in  December,  1898, 
and  therefore  the  proof  offered  by  the  plaintiff  was  not  necessary  to 
maintain  its  cause  of  action,  and  the  error,  if  error  there  was,  was  im- 
material. 

The  judgment  appealed  from  should  be  affirmed,  with  costs. 


DEAHY  V.  CROQUET  et  al. 

(Supreme  Court  of  Rhode  Island.  1907.     28  R.  I.  3.38.  67  Atl.  421,  14  L.  R.  A. 

[N.  S.]  847.) 

Assumpsit  on  promissory  note.  Heard  on  exceptions  of  plaintiff, 
and  overruled. 

Douglas,  C.  J.®  A  few  days  before  June  5,  1901,  the  defendant 
Choquet,  being  desirous  of  borrowing  some  money,  called,  with  de- 
fendant Carroll,  upon  the  plaintiff,  and  asked  him  for  a  loan  upon  a 
proposed  note.  The  plaintiff  oft'ered  to  lend  the  money  if  the  note 
should  be  indorsed  by  reliable  persons.  On  June  5th  Choquet,  ac- 
companied by  Carroll,  called  again  and  offered  to  the  plaintiff  a  prom- 
issory note  in  the  words  and  figures  following: 
"$1,800.00  Pawt.,  R.  I.,  May  29,  1901. 

"Three  months  after  date  I  promise  to  pay  to  the  order  of  Joseph 
H.  Beland  eighteen  hundred  ""/loo  dollars  at  the  Ind.  Trust  Co.,  Pawt. 
Branch.     Value  received.  Ambrose  Choquet." 

Upon  the  back  of  the  note  were  signatures: 
"J.  H.  Beland. 
"Hugh  J.  Carroll. 
"Hugh  J.  McGinn." 

The  plaintiff  examined  the  note  and  approved  it,  whereupon  Car- 
roll wrote  at  the  bottom,  after  the  printed  word  "Due,"  the  words  and 
figures:   "Sept.  5,  '01.     Money  advanced  June  5,  '01" — and  the  plain- 

9  Part  of  the  oi)inion  is  omitted. 


Cll.  2)  DRAWER    AND    INDORSER.  537 

tiff  took  the  note  and  gave  to  Choquet  his  check  for  $1,737,  deduct- 
ing from  the  face  of  the  note  $G3  for  three  months'  interest. 

No  presentation  of  the  note  was  made  at  the  bank,  either  three 
months  from  its  date  or  three  months  from  June  5th.  No  notice  of 
dishonor  was  ever  given  to  the  parties  whose  names  are  upon  the  back 
of  the  note. 

This  action  was  begun  by  a  writ  of  attachment  dated  January  7, 
1904,  which  was  served  January  25th  by  attachment  of  real  estate  of 
defendant  Carroll  and  personal  property  of  defendant  Choquet  and 
by  summons  of  defendants  Beland  and  McGinn.  All  the  defendants 
answered,  and  certain  special  pleas  having  been  overruled  on  demurrer, 
trial  upon  the  general  issue  was  begun  December  5,  1906,  and  ended 
December  7th  by  a  verdict,  by  direction  of  the  court,  against  the  de- 
fendant Choquet  and  in  favor  of  the  other  defendants. 

The  verdict  in  favor  of  the  defendants  Beland,  Carroll,  and  McGinn 
was  directed  on  the  ground  that  they  were  indorsers  and  released  from 
liability  by  failure  of  the  holder  to  make  due  presentment  for  payment 
of  the  note  and  to  give  them  notice  of  the  dishonor,  as  well  as  on  the 
ground  that  the  agreement  referred  to  was  an  extension  of  time  given 
to  the  maker  within  the  meaning  of  section  128,  subd.  6,  Neg.  Instru. 
Act. 

We  think  the  direction  should  be  sustained. 

Article  1,  §  3,  of  the  negotiable  instruments  act  (chapter  674,  Pub. 
Laws),  provides  that:  "The  person  'primarily'  liable  on  an  instrument 
is  the  person  who  by  the  terms  of  the  instrument  is  absolutely  required 
to  pay  the  same.    All  other  parties  are  'secondarily'  liable." 

Article  6,  §  71,  of  the  same  act,  provides  that:  "A  person  placing  his 
signature  upon  an  instrument  otherwise  than  as  maker,  drawer,  or  ac- 
ceptor is  deemed  to  be  an  indorser  unless  he  clearly  indicates  by  ap- 
propriate words  his  intention  to  be  bound  in  some  other  capacity." 

The  defendants  named  come  within  the  plain  language  of  these  sec- 
tions, and  there  is  no  evidence  that  they  made  any  agreement  to  vary 
their  liability. 

They  all  affixed  their  names  to  the  note,  before  delivery,  for  the  ac- 
commodation of  Choquet,  to  whom  the  plaintiff'  directly  paid  the  money 
for  it,  knowing  that  they  were  such  accommodation  indorsers.  As 
such  they  were  entitled  to  notice  of  the  dishonor  of  the  note  by  sec- 
tions 97  and  111,  art.  8,  c.  674,  which  they  never  received. 

It  is  urged,  however,  by  the  plaintiff  that  all  these  defendants  be- 
came liable  to  him  as  joint  makers  because  he  would  not  have  taken 
the  note  if  their  names  had  not  been  upon  it,  and  in  regard  to  defend- 
ant Carroll,  that  there  was  an  express  waiver  by  him  of  presentment 
and  notice. 

The  claim  that  the  indorsers  are  liable  as  makers  because  the  plain- 
tiff" required  good  indorsers  before  he  would  discount  the  note  is  the 
height  of  absurdity.    If  it  were  valid  every  indorser  whose  name  was 


53S  LIABILITY  OF  TARTiES.  (Part  3 

of  any  value  would  be  held  as  a  maker.  The  principle  which  the 
plaintilT  mistakes  as  applicable  to  this  case  is  well  stated  in  the  case 
which  he  cites — Equitable  Marine  Insurance  Co.  v.  Adams,  1T3  Mass. 
43G,  53  N.  E.  883.  In  that  case  the  company  assented  to  the  assign- 
ment of  a  policy  of  insurance  on  condition  that  the  assignee  should  in- 
dorse the  premium  note,  which  of  course  had  been  made  and  delivered 
at  the  time  the  policy  was  issued.  The  court  held  that  Pub.  ot.  !Mass. 
c.  77,  §  15 — "Every  person  becoming  a  party  to  a  promissory  note 
payable  on  time,  by  a  signature  in  blank  on  the  back  thereof,  shall  be 
entitled  to  notice  of  nonpayment  the  same  as  an  indorser" — does  not 
refer  to  a  collateral  contract  made  subsequent  to  the  issuing  of  a  note 
and  upon  an  independent  consideration,  even  if  it  happens  to  be  in- 
dorsed upon  the  note  instead  of  being  written  upon  a  separate  piece 
of  paper.  The  case  of  Downey  v.  O'Keefe,  2G  R.  I.  571,  59  Atl.  921), 
holds  the  familiar  doctrine,  which  prevailed  in  Rhode  Island  until  the 
operation  of  the  negotiable  instruments  act,  that  one  not  the  payee  of 
a  note,  who  indorses  it  or  agrees  to  indorse  it  before  its  issue,  is  liable 
as  a  joint  maker.  Moies  v.  Bird,  11  Mass.  436,  6  Am.  Dec.  179,  and 
Leonard  v.  Wildes,  36  Me.  265,  are  to  the  same  effect.  This  doctrine 
has  no  validity  since  the  passage  of  section  71  of  the  negotiable  in- 
struments act. 

In  the  case  at  bar  the  note  was  issued  when  the  plaintiff"  paid  the 
maker  a  consideration  for  it,  and  there  is  no  evidence  of  any  consid- 
eration being  paid  to  the  indorsers  or  of  any  agreement  with  them  oth- 
er than  that  expressed  by  their  signatures  upon  the  note.  By  indorsing 
the  note  they  assumed  the  obligation  of  successive  indorsers  to  become 
effectual  when  it  came  into  the  hands  of  a  holder  for  value.  This  ob- 
ligation was  released  by  failure  to  make  presentment  and  to  give  no- 
tice of  dishonor,  and  the  plaintiff  has  no  claim  upon  them  unless  they 
have  waived  their  rights  as  indorsers.     There  is  no  claim  that  Beland 

and  McGinn  ever  did  so,  and  the  verdict  in  their  favor  must  stand. 
*    *    * 

Plaintiff's  exceptions  are  overruled,  and  the  case  is  remanded  for 
judgment  on  the  verdict.^** 

10  In  accordance  with  the  doctrine  of  the  two  preceding  cases,  under  sec- 
tions 03  and  04  of  the  ne<rotiahle  instruments  l.iw.  one  who  indorses  an  instru- 
ment before  delivery  to  the  nayee  is  liable  as  indorser  (Wilson  v.  Hendee.  74  N. 
J.  Kaw,  040.  00  Atl.  41.'?  [19071  :  Gibbs  v.  Guaraelia.  75  n.  J.  Law.  16.S.  07  Atl.  81 
[19071),  and  not  as  guarantor  (Farquhar  Co.  v.  TTijrhara,  10  N.  D.  100.  112  X. 
W.  .').57  [1907]),  nor  as  joint  iual-:er  (Baumeister  v.  Kuntz.  .")3  Fla.  .340,  42  South 
880  [1907] ;  Rockfield  v.  Bank.  77  Ohio  St.  311.  S3  N.  B.  392.  14  L.  R  A.  [N  S  j 
842  [19071 ;  Thorpe  v.  \Miite,  18S  Mass.  333.  74  N.  E.  592  [1905]  •  Quinby  v. 
Varnuin.  190  Mass.  211.  70  X.  E.  071  [1900] ;  Toole  v.  Crafts.  193  Mass.  110,  78 
N.  E.  77.5,  118  Am.  St  Rep.  455  [19001;  .McLean  v.  Bryer.  24  R.  I.  599  54  Atl 
373  [19031;  Xat.  Bank  v.  Lubrano.  29  R.  I.  04,  08  Atl.  944  [19081;  see,  also, 
Peck  V.  Easton,  74  Coun.  450,  51  Atl.  134  [1902]  ;  Downey  v.  O'Keefe.  20  R. 
I.  571,  59  Atl.  929  [1905] ;  Leonard  v.  Draper,  1S7  Mass.  530.  73  X.  B.  &44 
[1905]),  to  the  payee  and  subsequent  holders  (McMoran  v  Lange  '^S  \pp 
Div.  11,  48  X.  Y.  Supp.  1000  [1898] ;    Corn  v.  Levy,  97  App.  Div.  48,  55,  89 


Ch.  2)  DRAWER    AND    INDORSER.  539 

SECTION  2.— PRESENTMENT  FOR  ACCEPTANCE 


BRIGHT  V.  PURRIER. 

(London  Sittings,  1765.     BuUer's  N.  P.  269.) 

A  foreign  bill  of  exchange  was  drawn,  payable  at  120  days  after 
sight,  but  when  the  bill  was  presented  for  acceptance,  that  was  re- 
fused ;  upon  which  an  action  was  immediately  brought  against  the 
drawer,  without  waiting  till  the  expiration  of  the  120  days.  On  the 
trial  the  defendant  objected  that  he  was  not  liable  till  the  expiration 
of  the  120  days,  and  offered  to  call  evidence  to  prove  that  the  custom 
of  merchants  was  such.  But  Lord  Mansfield  said  the  law  was  clearly 
otherwise,  and  refused  to  hear  the  evidence.    So  the  plaintiff  recovered. 


ROSCOW  v.  HARDY. 

(Court   of   King's  Bench,    1810.      12    East,   434.) 

The  plaintiff,  as  indorsee,  sued  the  indorser  of  a  bill  of  exchange  for 
£50.  dated  Manchester,  4th  January,  1810,  and  stated  it  to  have  been 
drawn  by  J.  and  P.  Walmsley,  at  three  months  after  date,  in  favor  of 
R.  Kirk  or  order,  on  Messrs.  Shaw  and  Edwards,  Walbrook,  London, 
and  indorsed  by  Kirk  to  the  defendant,  and  by  the  defendant  to  the 
plaintiff.  At  the  trial  at  Guildhall  before  Lord  EHenborough,  C.  J.,  the 
bill,  when  produced,  had  eleven  other  indorsements  upon  it ;  and  it  ap- 
peared that  it  was  in  the  possession  of  the  Warrington  Bank  when  it 
was  tendered  for  acceptance  on  the  23d  of  January,  and  refused  to  be 
accepted ;  but  it  did  not  appear  that  the  Warrington  bankers  had  given 
any  notice  of  the  dishonor  at  the  time  to  any  person ;  but  as  soon  as  the 
bill  was  due,  they  again  tendered  it  for  payment ;  which,  being  refused, 
they  called  upon  the  plaintiff  for  payment ;  and  he,  not  knowing  any 
of  the  circumstances,  took  the  bill  up,  and  then  called  upon  the  defend- 
ant; who,  being  apprised  of  the  dishonor  on  the  23d  of  January,  re- 
fused payment ;  alleging  his  discharge  by  the  laches  of  the  then  holders. 
And  upon  proof  of  these  facts  the  plaintiff  was  nonsuited. 

N.  Y.   Supp.  658  [1904] ;    but  see  Kolin  v.  Ck)nsolidated  Co.,  30  Misc.   Rep. 
725,  63  N.  Y.   Supp.  265  [1900]). 

One  who  irregularly  indorses  a  bill  for  the  accommodation  of  the  acceptor 
before  its  delivery  to  the  payee  is  liable  to  the  payee.  Haddock  v.  Haddock, 
192  N.  Y.  499.  &5  N.  E.  082,  19  L.  R.  A.  (N.  S.)  1.36  (IOCS).  Contra:  Steele 
V.  McKinlav,  5  App.  Cas.  754  (ISSO) ;  Jenkins  v.  Coomber,  [1898]  2  Q.  B,  108. 
Ck)mpare  Glenie  v.  Smith,  [1908]  1  K.  B.  203. 


540  LIABILITY    OF    PAKTIES.  (Part    3 

Topping  moved  to  set  aside  the  nonsuit,  and  contended  that  the  plain- 
tiff ought  not  to  be  prejudiced  by  the  laches  of  the  subsequent  holders 
of  the  bill,  of  which  he  was  wholly  ignorant  at  the  time  when  he  paid 
it,  and  without  any  means  of  information.  The  bill  apparently  carhe 
back  to  him  in  due  course  of  time,  and  there  was  nothing  apparent  upon 
the  face  of  it  by  reference  to  its  date  to  raise  the  suspicion  of  a  diligent 
man  that  it  had  been  presented  for  payment  and  dishonored  two  months 
before,  nor  anything  to  impeach  his  want  of  due  diligence  in  obtain- 
ing knowledge  of  that  fact ;  and  without  that  knowledge  he  could  not 
have  defended  himself  against  an  action  on  the  bill  by  the  Warrington 
bankers.  Then  no  laches  being  imputable  to  himself,  or  apparent  upon 
the  face  of  the  bill  when  paid  by  him,  he  ought  not  to  be  debarred  from 
his  remedy  over. 

Lord  Ellexborough,  C.  J.  If  the  indorsers  on  the  bill  be  once 
discharged  by  the  laches  of  the  holder  at  the  time  in  not  giving  due  no- 
tice of  the  dishonor  of  it,  their  responsibility  cannot  be  revived  by  the 
shifting  of  the  bill  into  other  hands. 

Le  Blanc,  J.  It  is  admitted,  that  the  fact  of  the  dishonor  on  the  23d 
of  January,  and  the  want  of  due  notice,  would  have  been  a  good  de- 
fense to  the  plaintiff  against  the  Warrington  bankers,  if  he  had  been 
apprised  of  it  at  the  time  of  the  demand  made  upon  him;  and  that  such 
laches  was  also  a  discharge  to  the  other  indorsers.  How  then  can  it 
change  the  liability  of  those  other  indorsers,  who  perhaps  might  have 
known  the  fact,  and  had  a  legal  defense  to  the  action,  if  payment  had 
been  then  demanded  of  either  of  them  by  the  Warrington  bankers,  that 
those  bankers  first  called  upon  one  of  the  indorsers,  who  happened  not 
to  know  of  their  laches? 

The  other  Judges  assenting, 

Rule  refused. 


O'KEEFE  v.  DUNN  et  al. 

(Court  of  Common   Pleas,  1815.     6  Taunt.  305.) 

This  was  an  action  brought  against  the  defendants,  as  the  drawers 
of  a  bill  of  exchange  drawn  on  Ricketts  &  Co.,  at  one  month  after  date, 
payable  to  Sinclair,  and  by  him  indorsed  to  the  plaintiff,  for  the 
nonacceptance  of  the  bill  by  Ricketts.  The  defendant  pleaded,  that 
before  the  indorsement  to  the  plaintiff,  and  presentment  by  her  for  ac- 
ceptance, the  bill  was  presented  by  Sinclair  for  acceptance  and  refused, 
and  that  the  defendants  had  no  notice  given  them  oi  such  refusal  to 
accept.  After  verdict  for  the  defendant  on  this  issue  joined  on  a  trav- 
erse of  this  plea,  Vaughan,  Serjt.,  for  the  plaintiff,  who  at  the  trial 
before  Gibbs,  C.  J.,  at  the  sittings  at  Guildhall  after  Hilary  term,  1815, 
proved  the  facts  of  his  declaration  as  above  stated,  in  Easter  term  ob- 
tained a  rule  nisi  to  enter  up  judgment  for  the  plaintiff  non  obstante 


Ch.  2)  DRAWER    AND    INDORSER.  541 

veredicto,  upon  the  ground  that  the  special  plea  averring  no  notice  to 
the  plaintifif  of  the  first  dishonor  of  the  bill,  was  insufficient  in  law.^^ 

DALI.AS,  J.,  stated  the  case,  and  proceeded  as  follows :  Two  points' 
seem  to  be  clear,  first,  that  a  bill  payable  at  a  future  day,  or  so  many 
days  after  date,  need  not  be  presented  for  acceptance,  but  may  be  de- 
manded, without  such  presentment,  when  due.  Secondly,  that  if, 
however,  presentment  be  made,  and  there  be  a  refusal  to  accept,  notice 
of  such  refusal  ought  to  be  given  by  the  party  to  whom  it  was  made ; 
and  that  for  the  want  of  such  notice,  as  between  the  drawer  and  such 
holder  of  the  bill,  the  drawer  will  be  discharged ;  if,  therefore,  this  bill 
had  continued  in  the  hands  of  Sinclair,  the  payee,  to  whom  the  refusal 
to  accept  was  made,  and  by  whom  no  notice  of  such  refusal  was  given, 
the  drawer,  as  to  him,  would  have  been  discharged ;  but  the  action  is 
not  brought  by  Sinclair,  but  by  the  plaintiff  to  whom  he  had  indorsed 
the  bill,  and  without  notice  by  him  to  her  that  the  bill  had  been  refused 
acceptance.  The  question  then  will  be,  whether  she  can  stand  in  a 
situation  different  from  that  in  which  he  would  have  stood  if  he  had 
brought  the  action.  On  the  part  of  the  defendants  it  is  argued,  that 
there  is  no  distinction;  and  this  is  contended,  first,  upon  the  reason  of 
the  rule  by  which  the  drawer  would  be  discharged  against  a  party 
knowing  of  the  refusal  to  accept  and  omitting  to  give  notice ;  secondly, 
on  the  authority  of  a  decided  case,  which  is  said  not  to  be  distinguish- 
able from  the  present.  And  first,  as  to  the  reason  of  the  rule,  the  draw- 
er is  presumed  to  have  effects  in  the  hands  of  the  drawee,  and  the  bill 
is  an  order  to  appropriate  so  much  to  the  payee  or  his  order.  If,  there- 
fore, on  presentment  the  drawee  refuse  to  accept,  from  the  very  nature 
of  the  transaction,  the  drawer  should  have  notice,  that  he  may  withdraw 
his  effects,  or  proceed  against  his  debtor,  as  the  case  may  seem  to  him 
to  require.  But  if  he  have  no  effects,  the  reason  of  the  rule  fails,  and 
with  it  the  rule ;  and  in  such  event,  notice  is  not  necessary. 

Now  it  has  been  contended,  that  this  rule  cannot  vary  by  the  shifting 
of  hands,  for  that  the  drawer  is  equally  injured  by  the  want  of  notice, 
in  whatever  hands  the  bill  may  be ;  and  further,  that  when  the  drawer 
is  once  discharged,  his  responsibility  cannot  be  revived  by  the  acts  of 
others  independent  of  him.  With  respect  to  the  first  part  of  the  state- 
ment, it  may  be  admitted  to  be  true ;  but  with  regard  to  the  latter,  it  is 
begging  the  question ;  for  the  question  is,  if  this  responsibility  have 
ever  ceased  as  to  a  party  in  the  situation  of  the  plaintiff.  Or  rather, 
whether  the  defendants  have  not  agreed  so  to  be  responsible  in  the 
events  which  have  happened  in  the  present  case.  The  inquiry,  there- 
fore, must  be,  whether  an  indorsee  for  a  valuable  consideration,  and 
without  notice  of  any  illegality  not  making  the  bill  void  in  its  origin,  or 
of  any  laches  in  the  course  of  its  circulation,  is  to  be  considered  as  re- 
ceiving a  bill  subject  to  all  that  might  affect  it  in  the  hands  of  the 

11  The  arguments  of  couBsel,  the  concurring  opinions  of  Gibbs,  C.  J.,  and 
Heath,  J.,  and  the  dissenting  opinion  of  Chambre,  J.,  are  omitted. 


542  LIABILITY  OF  PARTIES.  (Part  3 

payee,  or  of  a  previous  indorser,  or,  in  other  words,  may  not  the  drawer 
be  discharged  as  to  the  payee  becoming  indorser  and  yet  continue  Hable 
to  his  indorsee  ?  The  nature  of  the  contract  appears  to  me  to  be  this : 
The  drawer  of  the  bill  payable  at  a  future  day  enables  the  payee,  by 
making  the  bill  payable  to  him  or  to  his  order,  to  hold  out  to  all  the 
world,  that  he  will  pay  the  bill,  in  default  of  the  acceptor,  to  the  party 
entitled  to  present  it  for  the  acceptance  or  payment.  He  does  not  stip- 
ulate for  himself  that  it  shall  be  presented  for  acceptance,  nor  does  the 
law  cast  such  an  obligation  on  the  payee.  The  drawer,  therefore,  must 
be  considered  as  contented  to  rest  in  ignorance  whether  it  has  been  ac- 
cepted or  not,  till  the  bill  becomes  due.  And  whether  presented  or  not, 
depends  upon  the  casualty  of  how  the  holder  of  the  bill  may  choose  to 
proceed.  Any  party  who  takes  it.  paying  a  valuable  consideration, 
takes  it,  then,  knowing  that  presentment  for  acceptance  is  not  neces- 
sary, and  nothing  appearing  upon  the  face  of  the  bill  to  show  it  to  have 
been  presented  and  acceptance  refused.  Indeed  he  has  reason  to  con- 
clude the  contrary  in  every  case  in  which  there  is  no  noting  for  nonac- 
ceptance,  which  noting  would  be  notice  on  the  face  of  the  bill,  and  un- 
der such  a  circumstance  he  would  act  at  his  peril.  Taking  it,  therefore, 
before  it  becomes  due,  and  ignorant  of  a  refusal  to  accept,  he  is  a 
purchaser  for  a  valuable  consideration,  without  notice,  against  a  party 
who  has  enabled  the  indorser  to  put  off  an  instrument,  good  upon  the 
face  of  it,  and  by  which,  as  far  as  appears,  he  has  contracted  to  be 
bound.  And  considered  in  this  light,  I  am  of  opinion,  that  from  the 
very  nature  of  the  contract  he  is  entitled  to  notice  from  the  party  hav- 
ing knowledge  of  the  refusal  to  accept,  and  is  discharged  for  want  of 
such  notice ;  but  that  he  must  be  taken  to  have  stipulated  that  this  rule 
shall  be  confined  to  such  party,  and  not  be  extended  to  an  innocent  and 
ignorant  indorsee. 

On  the  reason  and  convenience  of  the  thing,  this  doctrine  appears 
to  me  to  be  equally  supported.  It  can  do  no  harm  to  the  circulation  of 
bills  of  exchange,  that  the  holder  should  be  required,  when  acceptance 
is  refused,  to  give  immediate  notice  to  the  drawer,  and  that  the  conse- 
quence of  a  neglect  to  do  it  should  devolve  upon  himself ;  but  it  would 
greatly  clog  the  negotiabilit)'  of  such  securities,  if,  upon  some  latent  de- 
fect, and  without  any  default  in  himself,  every  man  shall  be  taught, 
and  so  be  made  to  feel,  that  in  the  moment  of  paying  the  full  value  of 
a  bill,  he  may  be  purchasing  that  which  may  turn  out  to  be  a  mere 
nullity.  This  has  hitherto  been  confined  to  two  or  three  special  cases, 
and  ought  not,  I  think,  to  be  further  extended;  and  I  will  onlv  add, 
that  in  what  I  am  now  saying,  I  mean  such  bills  as  the  genuine  pur- 
poses of  commerce  require.  It  may  be  said,  this  may  be  guarded 
against  by  ascertaining,  before  taking  the  bill,  whether  it  has  been 
refused  acceptance  or  not,  and  this  is  certainly  possible,  but  for  rea- 
sons that  must  be  obvious,  would  in  practice  be  so  inconvenient,  as  al- 
most to  amount  to  a  prohibition  to  take  any  unaccepted  bill.  As  to 
cases  in  point,  I  am  not  aware  of  any  which  are  directly  so,  and  will 


Ch.  2)  DRAWER    AND    INDORSER.  543 

consider,  therefore,  next,  how  the  law  stands  in  these  which  appear  to 
me  to  be  analogous.  And  first,  in  the  instance  of  a  bill  indorsed  over 
after  it  becomes  due.  That  it  is  overdue,  and  has  not  been  paid,  ap- 
pearing upon  the  face  of  it,  is  notice  to  the  party  who  takes  it,  and 
being  therefore  out  of  the  common  course  of  neg-otiability,  he  is  bound 
to  inquire  into  the  cause,  and  taking  it  without  such  inquiry,  is  subject 
to  all  the  equities  that  would  have  affected  it  in  the  hands  of  former 
parties.  This  rests  on  the  ground  of  knowledge  in  him,  or  that  which 
is  equivalent  to  knowledge,  a  fact  amounting  to  notice,  and  demanding 
inquiry;  but  reverse  the  fact,  and  suppose  it  a  taking  by  indorsement 
before  it  became  due,  he  is  then  an  innocent  indorsee,  without  notice 
of  fraud  or  neglect,  and  entitled  to  recover  against  all  those  parties, 
who  under  the  circumstances  of  the  case  might  be  discharged  as  to 
each  other.  A  drawer  may  therefore  be  released  as  to  the  payee,  and 
yet  continue  liable  to  the  last  indorsee.  And  this  appears  to  me  in 
principle  to  apply  to  the  present  question. 

It  remains  only  to  advert  to  the  case  cited  from  Roscow  v.  Hardy,  13 
East,  434,  and  though  said  to  be  in  point,  I  think  it  is  clearly  to  be  dis- 
tinguished from  the  present.  The  facts  were  these:  The  .bill  had  been 
presented  by  the  Warrington  bank,  and  acceptance  refused.  They 
gave  no  notice  to  the  drawer  at  the  time,  nor  to  the  party  from  whom 
they  had  taken  it ;  but  kept  it  till  due,  and  then,  without  notice  to  the 
indorser,  who  was  ignorant  of  these  facts,  recovered  against  him,  and 
when  he  sued  the  drawer,  the  drawer  was  held  to  be  discharged,  and 
the  indorser  to  have  paid  the  money  in  his  own  wrong,  inasmuch  as 
undoubtedly  the  bank  would  not  have  recovered  against  him.  The  dif- 
ference therefore  between  the  two  cases  is  this:  In  the  case  cited,  the 
bill  had  never  passed  into  the  hands  of  an  indorsee  ignorant  of  the  re- 
fusal to  acccept  before  the  bill  became  due,  and  while  it  was  fairly  ne- 
gotiable, but  remained  till  it  became  due  in  the  hands  of  those,  who, 
from  neglect  to  give  notice,  could  not  recover.  Whatever  was  a  dis- 
charge to  the  drawer,  was  a  discharge  to  the  indorser;  and  the  dis- 
charged indorser  having  thought  fit  to  pay,  when  not  liable,  could  not 
recover  against  the  drawer  what  he  had  paid  in  his  own  wrong.  In 
this  case  the  fact  is  directly  the  reverse;  the  bill  when  becoming  due, 
being  in  the  hands  of  an  innocent  holder,  and  having  been  taken  in  a 
course  of  fair  negotiation  during  the  period  that  intervened  between 
the  refusal  to  accept  and  the  bill  arriving  at  maturity  for  payment. 
For  these  reasons  I  am  of  opinion  in  every  view  of  the  case,  that  this 
plea  is  not  a  sufficient  answer  to  the  action. 

Rule  absolute. 


GOUPY  et  al.  v.  HARDEN  et  al. 

(Court  of  Common  Pleas,  1816.     7  Taunt.   159.) 

This  was  an  action  brought  against  the  defendants  as  indorsers  of 
two  bills  of  exchange,  for  £400.  and  £600.  drawn  on  12th  May,  1815, 


i 


y       \^^ 


544  LIABILITY  OF  TARTiES.  (Part  3 

by  De  Franca  &  Co.  upon  Gould  Bros.  &  Co.,  merchants  at  Lisbon,  at 
30  days  after  sight,  payable  to  the  defendants,  and  by  them  indorsed 
to  the  plaintiffs,  who  were  merchants  at  Paris,  and  who  indorsed  the 
bills  to  Ricci  &  Sons,  merchants  at  Genoa,  who  also  negotiated  the  bills. 
The  bills  were  presented  to  Goulds  for  acceptance,  on  the  22d  August 
in  the  same  year,  when  they  were  refused,  and  protested  for  nonaccept- 
ance ;  but  were  accepted  by  Montano,  under  protest,  for  the  honor  of 
Ricci  &  Co.  The  bills  were  again,  on  20th  September,  when  due,  pre- 
sented to  Goulds  for  payment,  which  was  also  refused,  and  a  protest 
made,  and  ISIontano  paid  them  for  the  credit  of  Ricci  &  Co.,  whereby 
the  plaintiffs  were  obliged  to  pay  the  amount  of  the  bills,  with  costs, 
charges,  interest,  exchange,  and  re-exchange.  Upon  the  trial  of  this 
cause,  at  the  sittings  in  London  after  Trinity  term,  1816,  before  Gibbs. 
C.  J.,  it  appeared  that  the  plaintiffs,  had  employed  the  defendants,  who 
were  merchants  in  London,  for  a  commission  of  one  half  per  cent.,  to 
procure  in  London,  and  transmit  to  them  to  Paris,  bills  on  Portugal 
for  £1,000.  The  pl^ntiffs  accordingly  purchased  upon  the  Exchange 
the  bills  in  questioii,  and  having  specially  indorsed  them  to  the  plain- 
V^ tiffs,  transmitted  them  to  Paris;  the  plaintiffs  indorsed  them  to  Ricci 
&  Sons,  merchants  at  Genoa,  who  further  negotiated  them.  On  the 
loth  of  July,  De  Franca  failed.  Goulds  had  paid  bills  drawn  on  them 
so  late  as  the  30th  of  June.  1815.  On  the  12th  of  October,  the  plain- 
tiffs by  letter  apprised  the  defendants  of  the  dishonor  of  the  bills,  and 
in  a  subsequent  letter  stated  that  they  should  certainly  have  sooner 
sent  forward  the  bills  for  acceptance,  had  they  not  relied  on  the  de- 
fendants' guaranty.  The  defendants  contended,  first,  that  they,  hav- 
ing indorsed  these  bills  to  the  plaintiffs  only  as  their  agents,  were  not 
liable  on  that  indorsement.  Evidence  was  given  that  when  agents  in- 
dorse foreign  bills  for  the  mere  purpose  of  transmitting  them,  without 
intending  to  incur  responsibility  for  the  payment,  it  is  their  practice  to 
add  to  the  indorsement  the  words  "sans  recours";  that  these  words 
however,  implying  a  doubt  in  the  mind  of  the  indorser  of  the  stability 
of  some  of  the  parties,  injure  the  credit  of  the  bills,  and  therefore  are 
usually  omitted,  if  a  confidence  exists  between  the  parties,  although  it 
is  nevertheless  intended  that  the  agent  should  not  be  responsible  for  the 
goodness  of  the  bills ;  and  the  defendants  contended,  that  such  was  the 
course  of  dealing  in  the  present  instance,  as  evinced  by  the  low  rate 
of  commission  which  the  defendants  were  to  receive.  The  defendants 
also  contended  that  they  were  discharged  by  laches ;  for  that  the  bills 
ought  to  have  been  sooner  presented  to  the  drawee  for  acceptance, 
and  not  sent  round  from  Paris  to  Italy,  by  which  the  presentment  for 
acceptance,  and  consequently  the  period  of  payment,  had  been  many 
months  delayed ;  and  if  the  bills  had  been  presented  for  acceptance  in 
the  beginning  of  June,  they  would  have  been  payable  before  Goulds 
ceased  to  honor  the  drawers'  demands,  and  before  the  drawers  them- 
selves had  become  insolvent.  The  jury,  however,  found  a  verdict  for 
the  plaintiffs ;  which 


Ch.  2)  DRAWER    AND    INDORSER.  545 

Lens,  Serjt.,  now  moved  to  set  aside,  on  the  grounds,  first,  that  an 
agent,  under  these  circumstances,  was  not  Hable  upon  his  indorsement; 
next,  that  the  presentment  of  a  bill  payable  at,  or  a  certain  time  after 
sight,  could  not  be  protracted  to  an  indefinite  or  unreasonable  period 
without  discharging  the  parties. 

GiBBS,  C.  J.  This  is  an  action  brought  against  the  indorser  of  two 
bills  at  30  days'  sight ;  and  the  verdict  is  for  the  plaintiffs.  Objections 
are  made  to  their  right  to  recover,  on  two  grounds :  First,  that  though 
the  bills  were  indorsed  by  the  defendants,  the  defendant,  under  the 
circumstances,  is  not  liable  on  his  indorsement.  Secondly,  that  there 
has  been  laches  in  not  presenting  the  bills  for  acceptance  within  a 
shorter  time.  As  to  the  first  objection,  here  is  an  unqualified  indorse- 
ment. It  is  not  proved  that  the  plaintiffs  knew  that  the  defendants 
vv-ere  connected  with  the  bill  otherwise  than  as  agents ;  but  if  they  had 
known  it,  and  I  will  take  it  in  the  strongest  way,  that  they  knew  the 
defendants  were  acting  only  as  agents,  still  they  had  a  right  to  con- 
sider, that  in  this  transaction  the  defendants  were  liable  as  indorsers ; 
and  they  may  justly  say,  as  they  have  done:  "We  should  have  sent 
forward  these  bills  for  acceptance,  unless  we  had  seen  your  names  on 
them,  which  placed  the  respectability  of  the  bills  beyond  a  question ; 
otherwise  we  should  have  sought  the  security  of  the  drawee." 

But  this  leaves  the  second  objection  untouched.  If  these  bills  had 
been  locked  up  and  not  sent  into  circulation,  the  case  would  have  been 
widely  different.  I  know  dicta  may  be  found,  that  a  bill  payable  at 
sight  must  be  presented  within  a  reasonable  time ;  but  this  very  ques- 
tion occurred  in  this  Court  in  the  case  of  Muilman  v.  De  Eguino,  2  H. 
Bl.  565,  bills  were  sent  out  to  India,  and  one  question  was,  whether 
they  were  presented  for  acceptance  within  a  reasonable  time  in  India, 
and  it  was  held  that  they  were ;  but  the  main  question  was,  whether 
they  were  delayed  too  long  in  Europe,  before  they  were  sent  out.  Upon 
the  last  point.  Eyre,  C.  J.,  says :  "There  would  be  a  great  difficulty  in 
saying  at  what  time  such  a  bill  should  be  presented  for  acceptance. 
The  courts  have  been  very  cautious,  in  fixing  any  time  for  an  inland 
bill,  payable  at  a  certain  period  after  sight,  to  be  presented  for  accept- 
ance ;  and  it  seems  to  me  more  necessary  to  be  cautious  with  respect 
to  a  foreign  bill  payable  in  that  manner.  I  do  not  see  how  the  courts 
can  lay  down  any  precise  rule  on  the  subject."  Heath,  J.,  says:  "No 
rule  can  be  laid  down  as  to  the  time  for  presenting  bills  drawn  pay- 
able at  sight  or  a  given  time  after."  The  jury  have  found  that  these 
bills  were  presented  in  a  reasonable  time,  but  the  law  prescribes  only 
that  they  must  be  presented  at  some  time.  Buller,  J.,  is  still  stronger, 
and  lays  down  the  rule  only  that  the  bill  must  be  put  into  circulation. 
In  the  present  instance,  these  bills  were  put  into  circulation,  and  they 
passed  through  Paris  and  Genoa.  He  proceeds  to  say:  "If  they  are 
circulated,  the  parties  are  known  to  the  world,  and  their  credit  is  looked 
tOj  and  if  a  bill  drawn  at  three  days'  sight  were  kept  out  in  that  way 
Sm.&  M.B.&  N.— 35 


o46  LIABILITY  OF  PARTIES.  (Part  3 

for  a  year,  I  cannot  say  there  would  be  laches.  But  if,  instead  of 
putting  it  into  circulation,  the  holder  were  to  lock  it  up  for  any  length 
of  time,  I  should  say  that  he  was  guilty  of  laches."  I  am  therefore 
clearly  of  opinion  that  the  parties  were  not  guilty  of  laches  in  putting 
this  bill  into  circulation,  before  it  was  presented  for  acceptance. 

Dallas,  J.  The  defendants  might  have  specially  indorsed  this  bill 
sans  recours,  if  they  had  thought  fit  so  to  do.  but  they  have  not  done  it. 

The  rest  of  the  court  concurred  in  refusing  the  application. 


TANNER  V.  BEAN. 

(Court  of  King's  Bench,  1825.    4  Barn.  &  Cr.  312.) 

Assumpsit  on  a  bill  of  exchange.  The  declaration  stated  that  one 
Challenger  made  his  bill  of  exchange  and  directed  it  to  one  Masters, 
that  Masters  upon  sight  thereof  accepted  it,  that  Challenger  indorsed 
it  to  the  defendant,  who  indorsed  to  the  plaintiff.  Averment  that  the 
bill  was  presented  for  payment  and  dishonored,  and  notice  given  to  the 
defendant.  Plea,  non  assumpsit.  At  the  trial  before  Litlledale,  J.,  at 
the  London  sittings,  after  Easter  term,  the  plaintiff  proved  that  the 
bill  was  drawn  by  Challenger  and  indorsed  by  him  and  the  defendant, 
and  that  it  was  dishonored,  but  he  failed  to  prove  that  it  was  accepted 
by  Masters.  It  was  thereupon  objected  that  the  plaintiff  could  not  re- 
cover, for  that  he  was  bound  to  prove  the  acceptance  of  the  bill  ac- 
cording to  the  allegation  in  the  declaration,  although  that  allegation 
was  unnecessary.  The  learned  judge  overruled  the  objection,  and  di- 
rected a  verdict  to  be  found  for  the  plaintiff,  but  gave  the  defendant 
leave  to  move  to  enter  a  nonsuit. 

Chitty  now  moved  accordingly,  and  renewed  the  objection  taken  at 
the  trial,  and  cited  Jones  v.  Morgan,  2  Camp.  474,  where  Lord  El- 
lenborough  held  that  where,  in  an  action  by  the  indorsee  against  the 
drawer  of  a  bill  of  exchange,  the  declaration  contained  an  averment 
of  acceptance,  the  plaintiff  was  bound  to  prove  it. 

Abbott,  C.  J.  The  holder  of  a  bill  is  not  bound  to  present  it  for  ac- 
ceptance before  it  becomes  due,  and  we  are  of  opinion  that  the  allega- 
tion of  acceptance  is  not  in  the  nature  of  a  description  of  the  instru- 
ment. The  acceptance  or  nonacceptance  does  not  vary  the  responsibil- 
ity of  the  indorser  appearing  on  the  declaration ;  it  is  at  all  events  his 
duty  to  pay  the  bill  when  due,  if  the  prior  parties  do  not.  The  aver- 
ment of  acceptance  was,  therefore,  immaterial,  and  the  plaintiff  was 
not  bound  to  prove  it. 

Rule  refused. 


Ch.  2)  DRAWER   AND    INDORSER.  547 

FIRST  NAT.  BANK  v.  LEACH. 

(Court  of  Appeals  of  New  York,  1873.    52  N.  Y.  350,  11  Am.  Rep.  708.) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme  Court 
in  the  First  Judicial  Department,  affirming  a  judgment  in  favor  of 
defendant,  entered  upon  a  verdict. 

This  action  was  brought  upon  a  check  drawn  by  defendant.  The 
check  was  drawn  upon  the  Ocean  National  Bank,  was  dated  Novem- 
ber 21,  1871,  for  $1,410,  payable  on  the  12th  December,  1871,  to  the 
order  of  James  Dolby.  It  was  delivered  to  the  payee  and  discounted 
for  him  by  plaintiff.  At  11  o'clock  a.  m.  of  the  12th  December,  plain- 
tiff caused  the  same  to  be  presented  to  the  drawee  for  certification,  and 
it  was  certified  as  good.  The  drawer  had  at  that  time  on  deposit  suffi- 
cient to  pay  the  check,  and  the  amount  thereof  was  charged  to  him. 
Within  an  hour  or  two  thereafter  the  Ocean  National  Bank,  the 
drawee,  suspended,  and  a  receiver  was  appointed,  who  took  posses- 
sion afterward.  Upon  the  same  day  the  check  was  presented  for  pay- 
ment, and  payment  being  refused,  the  same  was  duly  protested. 

Upon  this  state  of  facts  the  court  directed  a  verdict  for  defendant, 
to  which,  plaintiff's  counsel  duly  excepted. ^- 

Peckham,  J.  The  defendant  drew  the  check  in  controversy,  it  was 
discounted  by  the  plaintiff,  and  on  the  day  it  was  due  ^^  it  was  pre- 

12  The  arguments  of  counsel  are  omitted. 

13  "I  cannot  assent  to  the  proposition  of  the  plaintiffs,  that  no  demand 
was  necessary  in  this  case.  When  the  action  is  against  the  drawer,  who  has 
drawn  where  he  had  no  funds,  nor  any  reasonable  exi>ectation  that  his  draft 
would  be  paid  by  the  drawee,  he  cannot  object  the  want  of  seasonable  de- 
mand and  notice,  because  in  such  case  he  cannot  possibly  sustain  damage 
from  the  want  of  presentment  of  the  bill.  Such,  however,  is  not  this  case. 
This  suit  is  brought,  not  against  the  drawer,  but  indorsers.  The  rule  on  this 
subject  is  well  laid  down  by  Mr.  Justice  Sutherland  in  Murray  v.  Judah,  G 
Cow.  400:  'As  a  general  rule,  therefore,  a  check  is  not  due  from  the  drawer 
until  payment  has  been  demanded  from  the  drawee  and  refused  by  him.  As 
between  the  holder  of  a  check  and  an  indorser  or  third  person,  payment  must 
be  demanded  within  a  reasonable  time.  But  as  between  the  holder  and 
maker  or  drawer,  a  demand  at  any  time  before  suit  brought  is  sufficient, 
unless  it  appears  that  the  drawee  has  ^failed,  or  the  drawer  has  in  some  other 
manner  sustained  injury  by  the  delay.'  Between  these  parties  a  demand  of 
payment  from  the  drav/ees  was  clearly  necessary.  Nor  can  I  assent  to  the 
proposition  of  the  defendant  that  the  check  in  question  is  a  bill  payable  on 
the  14th  January,  and  that  therefore  it  is  to  be  governed  by  the  same  rules 
as  bills  payable  on  a  particular  day.  The  check  was  both  drawn  and  nego- 
tiated before  its  date,  the  effect  of  which  is  that  it  is  payable  on  demand, 
on  or  after  the  day  on  which  it  purports  to  bear  date,  and  nothing  more." 
Mohawk  Bank  v.  Broderick,  10  Wend.  (N.  Y.)  304,  307  (1S33) ;  s.  c,  13  Wend. 
(N.  Y.)  133,  27  Am.  Dec.  192  (1834). 

Accord:  Gough  v.  Staats,  13  Wend.  (N.  Y.)  549  (1835) ;  Salter  v.  Burt,  20 
Wend.  (N.  Y.)  205.  32  Am.  Dec.  530  (1838);  Stewart  v.  Smith,  17  Ohio  St. 
83  (18Gf])  ;  Frazier  v.  Trow's  Co.,  24  Hun  (N.  Y.)  281  (1881),  affirm!^d  90 
N.  Y.  G7S  (1882).  But  a  "check"  which  specifies  on  its  face  a  futu^-e  day  for 
payment  is  a  bill  of  exchange  and  not  a  check.  Harrison  v.  Bank,  41  Minn. 
488,  43  N.  W.  336,  5  L.  R.  A.  746,  IG  Am.  St.  Rep.  718  (18S9).  Contra:  Way 
V.  Towle,  155  Mass.  374,  29  N.  E.  506,  31  Am.  St.  Rep.  552  (1892). 


548  LIABILITY  OF  PAUTiES.  (Part  3 

sented  by  plaintiff  to  the  drawee,  the  Ocean  Bank,  for  certification, 
was  certified  as  good,  and  in  the  afternoon  of  the  same  day  was  pre- 
sented for  payment,  which  was  refused,  because  between  the  time  of 
its  certificate  and  its  second  presentment  the  drawee,  the  Ocean  Bank, 
had  failed  and  gone  into  the  hands  of  a  receiver.  Did  this  certifica- 
tion operate  as  a  payment  of  the  check  as  between  these  parties? 

The  theory  of  the  law  is  that,  where  a  check  is  certified  to  be  good 
by  a  bank,  the  amount  thereof  is  then  charged  to  the  account  of  the 
drawer  in  the  bank  certificate  account.  Every  well-regulated  bank 
adopts  this  practice  to  protect  itself. 

The  reason  therefor  is  so  strong  that  the  law  presumes  it  is  adopted 
by  the  banks.  Smith  v.  Miller,  43  N.  Y.  171,  3  Am.  Rep.  690;  Meads 
V.  Merchants'  Bank  of  Albany,  25  N.  Y.  148,  82  Am.  Dec.  331 ;  Farm- 
ers' &  Mechanics'  Bank  v.  Butchers'  &  Drovers'  Bank,  16  N.  Y.  125, 
69  Am.  Dec.  678 ;  Merchants'  Bank  v.  State  Bank,  10  Wall.  647,  19 
L.  Ed.  1008.    It  is  found  to  have  been  done  in  this  case. 

If  a  bank  failed  to  keep  such  account  and  to  make  such  entries,  it 
would  necessarily  incur  the  peril  of  the  failure  of  its  customers  wfhose 
checks  it  certified,  without  any  account  of  their  number  or  amount,  al- 
though it  would  be  liable  to  pay  its  certified  checks  to  bona  fide  holders, 
whether  it  had  funds  or  not.  Farmers'  &  Mech.  Bank  v.  Butchers'  & 
Drovers'  Bank,  supra. 

It  follows  that,  after  a  check  is  certified,  the  drawer  of  the  check 
cannot  draw  out  the  funds  then  in  the  bank  necessary  to  meet  the  cer- 
tified check.    That  money  is  no  longer  his. 

If  he  apprehended  danger  from  the  suspected  failure  of  the  bank, 
he  could  not  draw  out  that  money,  because  it  had  already  been  appro- 
priated by  means  of  the  check  thus  certified ;  as  to  him,  it  was  pre- 
cisely as  if  the  bank  had  paid  the  money  upon  that  check  instead  of 
making  a  certificate  of  its  being  good. 

For  that  reason,  the  drawer  could  have  no  remedy  against  the  bank, 
by  any  legal  proceeding,  to  secure  himself  for  the  amount  of  that 
check.  Hence,  if  the  drawer  should  get  the  check  back,  he  would 
strictly  be  entitled  to  get  that  money,  not  by  virtue  of  his  original  de- 
posit, but  solely  by  surrender  of  the  certified  check,  like  any  other 
holder.  1* 

But  all  that  has  been  yet  stated  applies  with  equal  force  to  the  ac- 
ceptance of  a  time  bill  of  exchange  before  due.  Then,  when  the  drawee 
accepts,  it  is  an  appropriation  of  the  funds,  pro  tanto,  for  the  service 
and  use  of  the  payee  or  other  person  holding  the  bill,  so  that  the 
amount  ceases  henceforth  to  be  the  money  of  the  drawer,  and  becomes 
that  of  the  payee  or  other  holder  in  the  hands  of  the  acceptor.  Story 
on  Bills  of  Ex.  §  14 ;   1  Pars,  on  Notes  and  Bills.  323. 

It  is  entirely  clear  that  the  acceptance  of  a  time  draft,  before  due, 

14  Accord:  Schlesiuger  v.  Kurzrok,  47  Misc.  Rep.  634,  94  N.  Y.  Supp.  442 
(1905). 


Ch.  2)  DRAWER    AND    INDORSER.  549 

does  not  operate  as  a  payment  as  respects  the  drawer.  Its  only  effect 
is  to  make  the  acceptor  the  primary  party  to  pay  the  draft. 

But  the  parties  to  a  certified  check,  due  when  certified,  occupy  a 
different  position.  There  the  money  is  due  and  payable  when  the  check 
is  certified.  The  bank  virtually  says :  "That  check  is  good ;  we  have 
the  money  of  the  drawer  here  ready  to  pay  it;  we  will  pay  it  now,  if 
you  will  receive  it."  The  holder  says .  "No,  I  will  not  take  the  mon- 
ey; you  may  certify  the  check  and  retain  the  money  for  me  until  this 
check  is  presented." 

The  law  will  not  permit  a  check,  when  due,  to  be  thus  presented,  and 
the  money  to  be  left  with  the  bank  for  the  accommodation  of  the  hold- 
er, without  discharging  the  drawer. 

The  money  being  due  and  the  check  presented,  it  is  his  own  fault 
if  the  holder  declines  to  receive  the  pay,  and  for  his  own  convenience 
has  the  money  appropriated  to  that  check,  subject  to  its  future  pre- 
sentment at  any  time  within  the  statute  of  limitations. 

The  acceptance  of  a  time  draft  before  due  is  entirely  different;  there 
the  holder  has  then  no  right  to  the  money,  and  the  acceptor  no  author- 
ity to  pay  until  the  maturity  of  the  bill.  There  is  no  necessity  for  pre- 
senting a  check  for  acceptance,  like  a  time  bill,  no  authority  for  such 
presentment,  although  the  holder  has  the  right  to  do  it.  The  authority 
and  the  duty  are  to  present  for  payment. 

If,  however,  the  holder  choose  to  have  it  certified  instead  of  paid, 
he  will  do  so  at  the  peril  of  discharging  the  drawer. 

He  cannot  change  the  position  and  increase  the  risk  of  the  drawer 
without  discharging  him.     Smith  'v.  Miller,  supra. 

This  would  not  discharge  the  drawer  of  a  check,  who  himself  pro- 
cured it  to  be  certified  and  then  put  it  in  circulation.  The  reason  of 
the  rule  fails  to  apply  to  him  in  such  case. 

I  am  not  aware  of  any  direct  authority  upon  this  question;  but 
upon  principle  it  must  be  held  that  the  bank  holds  the  money,  after 
certification  to  the  holder,  not  at  the  risk  of  the  drawer,  but  of  the 
holder  of  the  check. 

The  judgment  must  be  affirmed.^" 


BORNE  V.  FIRST  NAT.  BANK. 

(Supreme  Court  of  Indiana,  1890.     123  Ind.  78,  2-1  N.  E.  173,  7  L.  R.  A.  442. 

18  Am.  St.  Rep.  312.) 

Elliott,  J.  On  the  30th  day  of  January,  18SG,  the  appellant  was 
indebted  to  the  appellee,  and  after  12  o'clock  noon  of  that  day  he  de- 
livered to  it  a  certified  check  drawn  by  him  on  Ritzinger's  Bank,  in 

15  Accord:  St.  Regis  Co.  v.  Tonawanda  Co.,  107  App.  Div.  90,  94  N.  T^ 
Supp.  946  (1905);  Dunn  v.  Whalen.  120  App.  Div  72<^  lOo  N.  Y.  Supp.  o88 
(1907)  ;  Blake  v.  Bank.  79  Ohio  St.  189,  87  N.  E.  73,  20  L.  R.  A.  (^.  b.)  290, 
128  Am.  St  Rep.  iiSi  (IQOH),  semble. 


550  LIABILITY  OF  PARTIES.  (Part  3 

which  bank  he  then  had  money  on  deposit.  The  banks  of  the  city  of 
Indianapohs  had  a  long-estabHshed  rule  requiring  all  checks  presented 
after  13  o'clock  noon  to  be  certified  by  the  bank  upon  which  they  were 
drawn,  and  it  was  the  well-known  custom  of  such  banks  to  immediately 
charge  the  checks  certified  by  them  against  the  depositor.  This  was 
done  in  this  instance,  and  the  amount  of  the  check  was  set  aside  for 
the  purpose  of  paying  it.  Ritzinger's  Bank  suspended  payment,  and 
made  a  voluntary  assignment  for  the  benefit  of  creditors,  prior  to  the 
business  hours  of  the  first  day  after  the  check  was  delivered  to  the 
appellee. 

We  agree  with  the  appellant's  counsel  that  the  drawer  of  a  check 
is  released  if  the  holder,  instead  of  presenting  it  for  payment  himself, 
procures  it  to  be  certified  by  the  bank  upon  which  it  is  drawn.  If  the 
holder  elects  to  procure  the  certification  of  the  check,  it  becomes,  in 
his  hands,  substantially  a  certificate  of  deposit.  By  his  own  act  he 
makes  the  bank  his  debtor,  and  releases  the  drawer  of  the  check.  The 
reason  for  this  rule  is  that  the  moment  the  check  is  certified  the  funds 
cease  to  be  under  the  control  of  the  original  depositor,  and  pass  under 
the  control  of  the  person  who  procures  the  certification  of  the  check 
drawn  in  his  favor.  First  Nat.  Bank  v.  Leach,  52  N.  Y.  350,  11  Am. 
Rep.  708 ;  Thomson  v.  Bank,  etc.,  82  N.  Y.  1 ;  Girard  Bank  v.  Bank 
of  Penn.  Tp.,  39  Pa.  92,  80  Am.  Dec.  507 ;  Freund  v.  Importers',  etc., 
Bank,  76  N.  Y.  352.  It  is  true  that  the  bank  by  which  the  check  is 
certified  becomes  bound  for  its  payment,  and  that  it  cannot  defeat  the 
right  of  the  holder  upon  the  ground  that  the  drawer  has  no  funds  on 
deposit.    Espy  v.  Bank  of  Cincinnati,  18  Wall.  G04,  21  L.  Ed.  947. 

But  it  is  very  clear  that  the  authorities  to  which  we  have  referred 
do  not  directly  rule  this  case,  for  here  the  holder  did  not  procure  the 
certification  of  the  check.  All  that  it  did  was  to  accept  the  check  in 
the  ordinary  course  of  business.  Nor  do  we  regard  this  case  as  within 
the  sweep  of  the  reasoning  of  the  courts  in  the  cases  to  which  refer- 
ence has  been  made.  Here  the  holder  accepted  the  check  as  it  was  of- 
fered, and  did  nothing  to  make  the  drawee  its  debtor.  The  principle 
which  gives  force  and  strength  to  the  decisions  referred  to  fails  en- 
tirely where  there  is  no  act  done  by  the  holder  of  the  check  save  that 
of  receiving  it  in  the  form  in  which  it  is  presented ;  for  the  element 
which  sustains  those  decisions  is  that  the  holder,  by  procuring  the  cer- 
tification of  the  check  after  he  becomes  the  owner,  voluntarily  makes 
the  bank  upon  which  it  is  drawn  his  debtor,  thus  releasing  the  drawer. 
It  is,  in  such  a  case,  the  holder's  own  act  that  changes  the  relation  and 
situation  of  the  parties. 

The  certification  of  a  check  does  not  completely  change  its  char- 
acter ;  on  the  contrary,  it  changes  it  only  in  one  particular,  although 
the  change,  it  is  true,  does  produce  a  difference  in  the  relation  of  the 
original  parties,  inasmuch  as  the  drawee  ceases  to  be  the  debtor  of  the 
drawer  for  the  amount  represented  by  the  check.  But  this  is  the  ex- 
tent of  the  change  in  the  situation  of  the  respective  parties  in  all  cases 


Ch.  2)  DRAWER    AND    INDORSER.  551 

where  the  certification  is  not  procured  by  the  holder  of  the  check  after 
it  passes  into  his  hands.  It  remains  an  order  for  the  payment  of  mon- 
ey, and  the  certification,  when  made  before  deHvery,  operates  in  favor 
of  third  parties  simply  as  an  assurance  that  it  is  genuine,  and  will  be 
paid.  The  bank  that  certifies  it  becomes  bound,  but  beyond  this  noth- 
ing is  added  to  the  legal  force  or  effect  of  the  instrument,  except,  as 
we  have  said,  in  cases  where  the  holder  himself  procures  its  certifica- 
tion. 

The  party  who  accepts  a  certified  check  in  the  usual  course  of  busi- 
ness is  not  bound  to  take  the  risk  of  the  solvency  of  the  bank  upon 
which  it  is  drawn.  He  is  bound  only  to  do  what  the  law  requires,  and 
that  is  to  promptly  and  seasonably  present  the  check  for  payment.  A 
party  to  whom  a  debt  is  owing  has  a  right  to  demand  payment  of  his 
claim  in  money ;  for,  in  the  absence  of  an  express  agreement,  payment 
can  only  be  made  in  money.  Hancock  v.  Yaden,  121  Ind.  366,  23  N. 
E.  253,  6  L.  R.  A.  576,  16  Am.  St.. Rep.  396.  In  accepting  a  check  in- 
stead of  money,  the  creditor  dispenses  with  the  necessity  of  payment 
in  the  legal  mode,  and  the  reasonable  implication  is  that  the  check  shall 
be  a  payment  only  in  the  event  that  it  is  honored  on  presentation.  To 
hold  otherwise  would,  as  the  Supreme  Court  of  the  United  States  has 
suggested,  seriously  interfere  with  commercial  and  financial  transac- 
tions, and  break  down  an  established  system.  Merchants'  Bank  v. 
State  Bank,  10  Wall.  604,  19  L.  Ed.  1008.  Nor  is  there  any  rule  of 
law  which  requires  it  to  be  so  held.  The  analogies  are,  indeed,  the  othei 
way ;  for,  as  only  money  is  payment  where  there  is  no  express  agree- 
ment, there  is  no  sufficient  reason  for  inferring  that  an  order  for  mon- 
ey, although  accepted,  is  money,  or  has  the  same  effect  as  money. 

A  bank  upon  which  a  check  is  drawn  is  not  liable  upon  the  check 
unless  it  is  certified  as  good.  Harrison  v.  Wright,  100  Ind.  515,  58 
Am.  Rep.  805.  The  certification  fixes  the  liability  of  the  bank,  but 
it  does  no  more.  It  does  not  change  the  situation  of  the  party  who 
takes  the  check,  nor  does  it  make  the  check  money.  As  it  is  not  money, 
but  is  simply  an  accepted  order  for  money,  it  does  not,  of  its  own  force 
and  vigor,  operate  as  money.  A  certified  check  cannot  take  the  place 
of  money  without  an  express  agreement  to  that  effect,  and,  therefore, 
cannot  by  its  own  intrinsic  force  operate  as  payment.  To  make  it  a 
payment,  something  must  be  added ;  and  that  something  must  be  an 
agreement,  express  or  implied,  that  it  shall  be  regarded  as  money,  the 
legal  medium  of  payment. 

The  obvious  purpose  of  certifying  checks  is  to  assure  the  persons  to 
whom  they  are  offered  that  they  are  genuine,  and  will  be  paid ;  not 
that  the  bank  that  certifies  them  is  solvent.  There  is  nothing  in  the 
nature  of  the  transaction  that  suggests,  in  the  faintest  degree,  that  cer- 
tification is  evidence  of  the  solvency  and  ability  of  the  drawee.  It  is 
perfectly  clear  that  the  certification  of  a  check  means  simply  that  the 
bank  upon  which  it  is  drawn  will  honor  it,  and  there  is  no  reason  for 
implying  that  one  who  receives  it  in  the  usual  course  of  business  does 


552  LIABILITY  OF  PARTIES.  (Part  3 

so  upon  the  faith  that  the  certification  implies  that  the  bank  is  both 
wiUing  and  able  to  pay  it.  The  certification  is  not  intended  to  convey 
information  as  to  the  solvency  of  the  bank.  None  of  the  parties  can 
be  regarded  as  giving  it  that  force ;  and,  if  not,  then  it  cannot  be  in- 
ferred that  any  of  them  agreed  that  the  certification  of  the  check  im- 
pressed it  with  the  character  of  money.  We  suppose  that  no  one  who 
accepts  a  certified  check  gives  a  thought  to  the  question  of  the  solvency 
of  the  bank  upon  which  it  is  drawn  other  than  such  as  he  would  give 
if  there  were  no  certification;  for  it  would  be  unnatural  and  unrea- 
sonable to  do  so,  inasmuch  as  the  certification  is,  in  terms  and  in  im- 
plication, no  more  than  an  agreement  that  the  check  will  be  paid  on 
presentation.  It  neither  represents  nor  touches  the  question  of  the 
solvency  of  the  bank  upon  which  it  is  drawn.  There  is,  therefore,  no 
just  reason  for  concluding  that  the  party  who  takes  a  certified  check 
in  the  ordinary  course  of  business  assumes  the  risk  of  the  solvency  of 
the  bank  chosen  by  the  drawer  of  the  check  as  his  place  of  deposit. 
The  fair  and  reasonable  implication  is  that  the  party  who  selects  for 
himself  the  bank  which  he  wall  trust  with  his  money  assumes  the  risk 
of  its  solvency. 
^  'The  certification  of  a  check  is  hot  intended  to  convey  to  the  person 
to  whom  it  is  offered  an  assurance  that  the  bank  upon  which  it  is  drawn 
is  solvent ;  for  there  is  nothing  in  the  nature  of  the  transaction,  nor 
in  the  form  of  the  contract,  which  authorizes  the  inference  that  any  of 
the  parties  expected,  or  intended,  that  it  should  have  that  Ciicct.  It 
cannot,  therefore,  be  implied  that  the  acceptance  of  the  check  by  the 
creditor,  ipso  facto,  released  the  drawer,  and  imposed  upon  the  cred- 
itor the  risk  of  the  solvency  of  the  bank  by  which  the  check  was  cer- 
lified. 

It  is,  and  long  has  been,  settled  law  that  an  ordinary  check  does  not 
constitute  payment.  This  doctrine  is  so  well  settled  that  it  is  unneces- 
sary to  refer  to  the  authorities.  Accepting,  as  we  must,  this  rule  as 
obligatory,  we  cannot  conclude  that  a  certified  check  constitutes  pay- 
ment, unless  we  assume  that  the  certification  m.akes  it  the  equivalent 
of  money  as  a  medium  of  payment.  But  neither  in  principle  nor  au- 
thority is  there  to  be  found  warrant  for  this  assumption ;  for,  as  we 
have  seen,  the  nature  of  a  check  is  not  changed  by  certification,  except 
in  the  one  particular  already  indicated.  As  there  is  no  other  change, 
it  is  logically  impossible  that  the  effect  of  that  change  can  make  the 
check  the  equivalent  of  money. 

From  whatever  point  of  view  the  question  is  examined,  it  appears 
clear  that  there  is  no  release  of  the  drawer  of  the  check  unless  there  is 
either  an  express  or  an  implied  agreement  to  that  effect. 

There  is  scant  authority  upon  the  direct  question.  The  reason  for 
this  barrenness  is  that  the  use  of  certified  checks  is  of  modern  origin. 
But,  scarce  as  the  authorities  are,  our  conclusion  that  a  certified  check 
does  not  of  its  own  force  and  vigor  operate  as  a  payment,  is  not  with- 
out support  from  the  decided  cases.     In  Bickford  v.  First  Nat.  Bank, 


Ch.  2)  DRAWER    AND    INDORSER.  553 

42  111.  238,  it  was  expressly  decided  that  a  certified  check  does  not  con- 
stitute payment.  To  the  same  effect  are  the  decisions  in  Rounds  v. 
Smith,  42  111.  245 ;  Brown  v.  Leckie,  43  111.  497 ;  Mutual  Nat.  Bank 
V.  Rotge,  28  La.  Ann.  933,  26  Am.  Rep.  126;  Andrews  v.  Bank,  9 
Heisk.  (Tenn.)  211,  24  Am.  Rep.  300.  The  .question  received  consid- 
eration in  the  recent  case  of  Larsen  v.  Breene,  12  Colo.  480,  21  Pac. 
498,  and  it  was  held  that  a  certified  check  was  not  a  payment.  This 
general  doctrine  is  asserted  by  Mr.  Tiedeman,  who  says :  "And  the 
same  rule  applies  although  the  check  had  been  certified  before  its  de- 
livery to  the  payee  or  holder;  the  certification  only  having  the  effect 
in  that  case  of  increasing  its  currency  by  adding  the  liability  of  the 
bank  to  that  of  the  drawer."    Tiedeman  Com.  Paper,  §  456. 

There  was  no  substitution  of  one  debtor  for  another,  in  this  instance, 
and  the  contention  of  appellant's  counsel  that  there  was  a  novation 
cannot  prevail.  The  delivery  of  the  check  was  simply  a  conditional 
payment.  The  release  of  the  original  debtor  was  dependent  upon  the 
condition  that  the  check  should  be  honored  on  presentation.  He  still 
remained  the  debtor,  for  he  was  bound  for  the  debt  as  long  as  the 
check  remained  unpaid.  Culver  v.  Marks,  122  Ind.  554,  23  N.  E. 
1086,  7  L.  R.  A.  489.  17  Am.  St.  Rep.  377. 

Judgment  affirmed.^® 


SECTION  3.— PRESENTMENT  FOR  PAYMENT 
I.  Day 


BROWN  V.  HARRADEN. 

(Court  of  King's  Bench,  1791.     4  Term  R.  148.) 

This  was  an  action  on  a  promissory  note  by  the  indorsee  against 
the  indorser.  The  declaration  stated  that  W.  German  on  the  15th  of 
September,  1789,  made  the  note  in  question  for  £20.  payable  to  the 
defendant  or  order  on  the  2d  of  November ;  it  then  deduced  a  title  to 
the  plaintiff,  and  averred  a  refusal  to  pay  by  the  defendant  on  the  2d 
of  November.  The  defendant  pleaded  a  tender  on  the  5th  of  Novem- 
ber. The  plaintiff  replied  that  he  sued  out  a  bill  of  Middlesex  on  the 
4th  of  November,  and  that  the  defendant  did  not  at  any  time  before 
that  day  tender  the  £20.,  etc.  Rejoinder  that  the  bill  of  Middlesex 
was  sued  out  on  the  4th  of  November,  and  that  before  that  time  the 
defendant  was  not  by  force  of  the  statute  liable  to  pay,  etc.,  nor  did 
he  promise  to  pay  before,  etc.     Surrejoinder,  that  he  did  become  liable 

16  Accord:  Cullinan  v.  Union  Surety  Co.,  79  App.  Div.  409,  SO  N.  Y. 
Supp.  58  (1903). 


554  LIABILITY  OF  PARTIES.  (Part  3 

by  force  of  the  statute  before  the  suing  out  of  the  bill  of  Middlesex, 
and  promised,  etc.  To  this  there  was  a  general  demurrer,  and 
joinder.^^ 

Lord  Kknvon,  C.  J.  This  question  is  of  such  infinite  importance  in 
every  hour's  transaction  in  the  commercial  world,  that  (I  think)  we 
should  not  discharge  our  duty  to  the  public,  if  we  were  to  keep  this 
matter  in  suspense.  And  we  are  the  more  ready  to  deliver  our  opinion 
as  this  question  is  upon  the  record;  for  if  our  judgment  be  erroneous. 
it  may  be  corrected  by  a  superior  tribunal.  It  is  not  necessary  now  to 
consider  whether  or  not  Lord  Holt  was  right  in  so  pertinaciously  ad- 
hering to  his  opinion  before  the  statute  of  Anne,  that  no  action  could 
be  maintained  on  promissory  notes,  as  instruments,  but  that  they  were 
only  to  be  considered  as  evidence  of  the  debt.  That  question  exercised 
the  judgments  of  the  ablest  men  at  that  time;  but  the  authority  which 
his  opinion  had  in  Westminster  Hall  made  others  yield  to  him ;  and  it 
was  thought  necessary  to  resort  to  the  Legislature  to  apply  a  remedy. 
It  is  extremely  clear  that  on  foreign  bills  of  exchange  three  days  grace 
are  allowed.  I  think  it  is  as  little  to  be  doubted  that  they  are  also  al- 
lowed on  inland  bills ;  and  that  observation  is  of  some  use  as  applicable 
to  some  of  the  authorities  which  have  been  cited.  It  is  not  too  much  to 
say  that  in  former  times,  recently  after  the  passing  of  the  statute  of 
Anne,  this  kind  of  questions  were  not  so  well  understood  as  they 
have  been  since;  the  judges  were  not  so  conversant  with  the  subject; 
but  they  have  now  raised  a  system  to  answer  the  exigencies  of  the 
public,  without  departing  from  the  rules  of  law.  But  when  it  is  stated 
in  Lord  Raym.  743,  that  there  was  no  certain  time  assigned  by  the 
custom  of  merchants  for  the  payment  of  inland  bills  of  exchange,  it 
only  shows  that  the  judges  were  very  cautious  on  the  subject;  but  now 
it  has  been  settled  for  more  than  half  a  century  that  they  are  payable 
at  the  same  time  as  foreign  bills  of  exchange.  Then  it  has  been  argued 
that  there  is  a  substantial  difference  between  bills  of  exchange  and 
promissory  notes,  and  that  there  are  reasons  why  the  acceptor  of  the 
one  should  be  allowed  more  time  than  the  maker  of  the  other ;  but  I 
confess  I  see  no  difference  whatever.  They  both  make  engagements  of 
the  same  nature,  and  when  the  acceptor  has  accepted  a  bill,  he  is 
equally  bound  to  be  prepared  to  pay  on  the  day  appointed  as  the  maker 
of  the  promissory  note. 

Then  the  ground,  on  which  our  judgment  must  proceed,  is  the  stat- 
ute of  Anne;  since  which  the  holder  of  a  promissory  note  may  declare 
upon  it  according  to  the  form  of  the  statute,  though  not  according  to 
the  custom  of  merchants.  The  words  of  the  preamble  ought  to  de- 
cide the  question,  which  the  common  usage  of  mankind  has  since  put 
into  a  state  of  repose.  It  recites  that  promissory  notes  were  not  as- 
signable or  indorsable  within  the  custom  of  merchants,  and  that  the 

17  The  arguments  of  counsel,  and  the  opinions  of  Ashhurst,  Buller,  and 
Grose,  JJ.,  are  omitted. 


Ch.  2)  DRAWER    AND    INDORSEE.  555 

indorsee  could  not  maintain  any  action  upon  them,  within  the  custom 
of  merchants ;  "therefore,  to  the  intent  to  encourage  trade  and  com- 
merce, which  will  be  much  advanced  if  such  notes  shall  have  the  same 
effect  as  bills  of  exchange,  and  shall  be  negotiated  in  like  manner,"  etc., 
it  is  enacted,  etc.  The  struggle  between  the  merchants  and  the  courts 
of  law  before  this  statute  was,  whether  the  party  could  declare  on  these 
notes  according  to  the  custom  of  merchants ;  Lord  Holt  thought  not. 
But  this  statute,  which  was  passed  at  the  instance  of  the  merchants,  has 
made  them  that  which  they  were  not  before;  and  they  are  now,  with 
the  assistance  of  the  statute,  acted  upon  as  if  they  had  been  within  the 
custom  of  merchants.  The  operative  part  of  the  statute  proceeds  to 
say  that  such  "notes  shall  be  assignable  and  indorsable  over  in  the  same 
manner  as  inland  bills  of  exchange" ;  that  the  holders  may  maintain 
actions  on  them  in  such  manner  as  they  might  upon  inland  bills  of  ex- 
change against  the  makers,  or  against  the  indorsees,  in  like  manner  as 
in  cases  of  inland  bills  of  exchange,  etc.  In  short,  they  were  wholly 
to  assume  the  shape  oi  inland  bills  of  exchange.  The  case  cited  from 
Fortescue,  indeed,  is  undoubtedly  against  our  opinion;  but  that  case 
was  determined  when  the  doctrine  on  paper  currency  was  not  so  well 
established  as  it  has  been  since,  and  it  has  been  constantly  contradicted 
by  the  uniform  practice  to  this  time,  and  by  the  courts  of  law.  The 
case  of  Tindal  v.  Brown,  1  Term  R.  167,  is,  in  my  opinion,  very  im- 
portant. That  case  was  argued  several  times  in  this  court,  and  after- 
wards in  the  Exchequer  Chamber ;  but  this  question  was  not  even 
raised,  though  it  would  have  been  decisive,  if  well  founded ;  and  it  was 
taken  for  granted  in  all  the  different  stages  of  that  cause  that  the 
laches  of  the  holder  did  not  commence  until  the  expiration  of  the  three 
days  grace.  Therefore  on  the  act  of  Parliament,  and  on  the  authori- 
ties, I  thmk  we  are  warranted  in  deciding  that  the  three  days  grace 
ought  to  be  allowed  on  promissory  notes  as  well  as  on  bills  of  ex- 
change, and  consequently  that  the  tender  made  by  the  defendant  in  this 
case  is  a  sufficient  answer  to  the  plaintiff's  action.  In  addition  to  these 
considerations  we  are  now  told  that  it  has  been  the  constant  practice 
at  the  bank,  and  at  the  principal  bankers,  to  make  this  allowance  on 
promissory  notes.  Then  if  we  were  to  make  a  decision  in  opposition 
to  all  this  practice,  it  would  be  attended  with  the  most  serious  conse- 
quences ;  for  these  notes  are  circulated  not  only  throughout  this  coun- 
try, but  also  over  several  other  countries  in  Europe.  Many  of  them 
have  been  discounted,  and  interest  taken,  on  the  supposition  that  three 
days  grace  are  allowed ;  but,  if  we  were  to  determine  that  no  such  al- 
lowance ought  to  have  been  made,  all  those  parties  would  be  involved 
in  the  crime  of  usury ;  and  again  all  holders  of  notes,  who  made  no  de- 
mand on  the  makers  till  the  expiration  of  the  three  days,  and  who 
afterwards  resorted  to  the  indorsers,  will  have  been  guilty  of  laches. 
Therefore  I  am  glad  to  find  that  the  later  judicial  determinations  and 
the  statute  of  Anne,  which  was  passed   for  the  purpose  of  putting 


556  LIABILITY  OF  PARTIES.  (Part  3 

promissory  notes  on  the  same  footing  with  bills  of  exchange,  warrant 
the  practice  which  has  obtained  in  this  respect,  notwithstanding  the 
former  cases  seem  to  be  against  it. 
Judgment  for  defendant. 


HART  V.  SMITH. 
(Supreme  Court  of  Alabama,   1S49.     15  Ala.  807.  50  Am.   Dec.   161.) 

Error  to  the  county  court. 

The  facts  of  this  case  are  fully  shown  in  the  opinion  of  the  court. 

Stone,  for  plaintiff  in  error. 

T.  J.  Judge,  contra. 

1.  Bills  payable  at  sight,  being  different  from  those  payable  on 
demand  (Chit.  [9th  Ed.]  410),  should  be  presented  for  acceptance 
within  a  reasonable  time,  and  before  payment  thereof  be  demanded. 
Chitty  on  Bills  (10th  Ed.)  274;  Fernandez  v.  Lewis,  1  McCord  (S.  C.) 
322.  For  (sight  meaning  acceptance)  bills  payable  at  or  after  sight 
do  not  become  due  until  after  they  are  accepted,  or  protested  for  non- 
acceptance.  Brown  v.  Turner,  11  Ala.  752;  Chitty  on  Bills  (10th 
Ed.)  272;  Stephen's  N.  P.  875,  and  authorities  there  cited.  And. 
after  acceptance,  it  is  now  well  settled  that  such  bills  are  entitled  to 
days  of  grace.  Chitty  on  Bills  (9th  Ed.)  marg.  pp.  409,  410;  Chit, 
on  Bills  (10th  Ed.)  marg.  pp.  370,  377.  and  note  T,  on  page  377 ;  Bailey 
on  Bills  (5th  Ed.)  98;  Forbes  on  Bills,  142;  Janson  v.  Thomas,  B. 
R.  Trinity  Term,  24  Geo.  HI ;  Dixon  v.  Nuttail.  1  C,  M.  &  R.  307 
Dehers  v.  Harriot,  1  Show.  163 ;  Coleman  v.  Sayer,  1  Barnard,  303 
Viner's.Ab.  tit.  "Bills  Ex.";  3  Dougl.  431;  Selwyn's  N.  P.  (9th  Ed.'i 
351.  In  the  case  at  bar,  then  the  presentment  for  payment  was  pre- 
mature, and  a  nullity.  1  Mason,  176  ;  W'ift'en  v.  Roberts,  1  Espinasse, 
262 ;  Brown  v.  Harraden,  4  Term  R.  148  ;  Griffin  v.  Goff,  12  Johns. 
(N.  Y.)  423;  Savings  Bank  v.  Bates,  8  Conn.  505;  Piatt  v.  Eads,  1 
Blackf.  (Ind.)  87.  The  authorities  cited  by  plaintiff  in  error,  show- 
ing it  unnecessary  to  protest  an  inland  bill,  to  authorize  a  holder  to 
recover,  have  no  application.  There  is  a  difference,  between  protest 
and  notice. 

Dargan,  J.  This  was  an  action  of  assumpsit,  on  a  bill  of  exchange, 
drawn  by  the  defendant,  in  favor  of  the  plaintiff,  on  Desha  &  Smith, 
dated  the  26th  February,  1846,  payable  at  sight.  The  only  evidence 
introduced  to  charge  the  drawer  was  the  bill,  and  protest,  showing  a 
demand  of  payment  made  of  the  drawees,  on  the  4th  of  March,  1846, 
and  notice  to  the  drawer.  The  court  charged  the  jury  that  the  plain- 
liff  could  not  recover. 

A  bill,  payable  on  demand,  or  at  any  fixed  time,  need  not  be  pre- 
sented for  acceptance ;  but  a  demand  of  payment,  at  the  time  the 
holder  has  the  legal  right  to  demand  payment,  is  all  that  is  necessary. 


Ch.  2)  DRAWER    AND    INDORSER.  557 

And  if  the  bill  be  not  paid,  the  holder  may  protest  it  for  nonpayment, 
and,  on  his  giving  due  notice  to  the  drawer  and  indorsers,  their  lia- 
bility is  fixed.  Evans  v.  Bridges,  4  Port.  345;  Bank  of  Washington 
V.  Triplett,  1  Pet.  25,  7  h.  Ed.  37;  Townsley  v.  Sumrall,  2  Pet.  170, 
7  L.  Ed.  386;  Chitty  on  Bills  (10th  Ed.)  272.  But  when  the  time  of 
payment  is  uncertain  and  a  presentation  of  the  bill  is  necessary,  in 
order  to  ascertain,  and  fix,  the  time  of  payment,  as  if  the  bill  be  pay- 
able at  a  number  of  days  after  sight,  then  the  bill  must  be  presented 
for  acceptance  before  payment  is  demanded.  Story  on  Bills,  §  11?, 
227;  Chitty  on  Bills  (10th  Ed.)  272;  Bayley  on  Bills  (5th  Ed.)  217, 
218. 

It  is  contended  that  a  bill  payable  at  sight  is  entitled  to  days  of 
grace,  and  therefore  it  must  be  presented  for  acceptance  before  pay- 
ment can  be  demanded. 

I  am  free  to  confess  that  my  opinion,  untrammeled  by  authority, 
would  incline  me  to  hold  that  a  bill  of  exchange,  payable  at  sight, 
is  not  entitled  to  days  of  grace,  and  that  payment  may  be  demanded 
on  presenting  the  bill,  which,  if  refused,  would  authorize  the  holder 
forthwith  to  have  it  protested  for  nonpayment,  and,  on  giving  notice 
to  the  drawer,  to  hold  him  liable.  But  the  law  seems  to  be  settled 
otherwise.  Judge  Story,  in  his  treatise  on  Bills,  says  "that  days  of 
grace  are  allowed  on  all  bills,  whether  payable  at  a  certain  time  after 
date,  after  sight,  or  even  at  sight;  and  although  there  has  been  some 
diversity  of  opinion  whether  bills  payable  at  sight  are  entitled  to  days 
of  grace,  it  is  now  settled  by  the  decisions,  both  in  England  and  Ameri- 
ca, that  days  of  grace  are  allowable  on  such  bills."  Section  343,  p. 
429.  To  the  same  effect,  see  Chitty  on  Bills  (10th  Ed.)  376;  Bayley 
on  Bills  (5th  Ed.)  244,  245;  Selwyn's  N.  P.  (9th  Ed.)  351;  Colem.an 
V.  Sayre,  1  Barnard,  303  ;  Dehers  v.  Harriet,  1  Show.  165 ;  Stephen's 
N.  P.  876.  Under  the  influence  of  these  authorities,  I  feel  constrained 
to  hold  that  a  bill  payable  at  sight  is  entitled  to  days  of  grace;  con- 
sequently, a  demand  of  payment  made  of  the  drawer,  upon  the  first 
presentation  of  the  bill  to  him,  is  insufficient  to  charge  the  drawer, 
for  the  bill  is  not  then  due.  As  there  was  no  evidence  of  any  previous 
presentation  of  the  bill  for  acceptance,  nor  notice  given  of  nonaccept- 
ance,  the  demand  of  payment  was  prematurely  made,  and  was  there- 
fore a  nullity. 

As  the  evidence  fails  to  show  a  demand  of  payment  on  the  day 
the  bill  was  payable,  the  court  correctly  instructed  the  jury  that  the 
plaintiff  could  not  recover. 

Let  the  judgment  be  affirmed. 


558  LIABILITY  OF  PARTIES.  (Part  3 

JEX  V.  TUREAUD. 

(Supreme  Court  of  Louisiaua,   1SG7.     19   La.   Ann.   64.) 

Ilsley,  J.  The  administrator  of  the  succession  of  the  late  Robert 
Many  sues  the  defendant  to  recover  from  him  as  the  indorser  of  the 
following  described  promissory  notes,  the  several  amounts  thereof, 
with  interest  and  costs: 

(1)  A  note  for  $452,  payable  on  the  1-4  January,  1863. 

(2)  A  note  for  $2,400,  payable  on  the  end  of  March,  1863. 

(3)  A  note  for  $452,  payable  on  the  1-4  January,   1863. 

(4)  A  note  for  $452,  payable  on  the  1-4  January,  1864. 

(5)  A  note  for  $5,650,  payable  on  the  1-4  January,  1864. 

The  demand  is  resisted  by  the  defendant,  who,  besides  pleading 
the  general  issue,  denies  all  liability  as  the  indorser  of  the  notes  de- 
clared on,  for  the  following  reasons,  viz. : 

That  the  notes  indorsed  by  him  were  not  presented,  and  payment 
thereof  demanded,  at  the  time  and  place  when  and  where  they  became 
due;  that  no  diligence  was  shown  by  the  plaintiff,  or  any  previous 
holder  of  the  said  notes,  in  presenting  them  for  payment,  or  in  having 
them  protested  at  the  time  and  place  of  their  respective  maturity ; 
that  the  notes  could  and  should  have  been  protested  before  the  period 
at  which  the  plaintiff  states  that  protest  was  made,  viz.,  on  the  26th 
July,  1865. 

The  court  below  rendered  judgment  in  favor  of  the  plaintiff  for  the 
amount  of  the  two  notes,  4  and  5,  maturing  in  January,  1864,  but 
dismissed  his  action  for  those  which  were  payable  in  the  years  1863 
and  1863,  and  from  this  judgment  the  defendant  has  appealed. 

It  is  a  settled  rule  of  the  commercial  law  that  a  demand  should 
be  made  of  the  maker  of  a  note  on  the  very  day  on  which  by  law  it 
becomes  due,  and  unless  the  demand  is  so  made  it  is  generally  a  fa- 
tal objection  to  any  right  of  recovery  against  the  indorser,  although 
the  maker  himself  may  and  will  be  liable  on  the  note.  This  rule,  al- 
though apparently  harsh,  and  perhaps  severe,  in  its  practical  operation, 
yet  is,  for  the  general  purpose  of  business,  highly  useful  to  the  com- 
mercial community  by  introducing  promptness,  fidelity,  and  exactness 
in  the  demand  of  payment.     See  Story. 

There  are,  however,  exceptions  to  the  rule:  "Any  inevitable  acci- 
dent, or  irresistible  force,  or  unforeseen  occurrence,  which  could  not 
be  provided  against,  will  constitute  a  sufficient  excuse  for  nonpresent- 
ment,  etc.,  at  the  maturity  of  the  note." 

Such  accident,  irresistible  force,  or  unforeseen  occurrence  must, 
however,  be  patent,  real,  positive,  and,  as  a  natural  consequence,  ex- 
cuses derived  from  any  such  cause,  vis  major,  as  they  arise  with,  and 
are  dependent  on,  such  cause,  must  also  disappear  with  it. 

The  special  grounds  relied  on  by  the  plaintiff  to  bring  him  within 
the  exception  to  the  general  rule  in  regard  to  the  demand,  etc.,  are: 


Ch.  2)  DRAWER    AND    INDORSER.  559 

(1)  The  presence  of  political  circumstances  and  civil  war,  amount- 
ing to  a  virtual  interruption  of  all  ordinary  negotiations  of  trade  and 
intercourse  with  the  state  of  Louisiana  and  the  parish  of  St.  James. 

(2)  The  state  of  war  between  the  northern  and  southern  sections 
of  the  United  States. 

(3)  The  occupation  of  the  state  of  Louisiana  and  the  parish  of  St. 
James  by  Confederate  forces,  which  suspended  commercial  intercourse 
and  access  to  said  parish  and  state. 

(4)  Public  and  positive  interdictions  and  prohibitions  of  the  United 
States  and  blockades,  which  obstructed  and  suspended  commercial 
intercourse  with  the  said  state  and  parish, 

(5)  The  absence  of  the  late  Robert  Many  from  the  state  of  Louisi- 
ana, and  his  sojourn,  detention,  illness,  and  death  in  the  city  of  New 
York. 

(6)  The  absence  of  civil,  judicial,  and  ministerial  officers,  and  the 
closing  of  their  offices  and  of  tlie  courts  of  justice  in  the  parish  of 
St.  James. 

(7)  The  succession  of  Robert  Many  being  unrepresented  until  the 
appomtment  of  the  petitioner  as  administrator,  and  his  qualifications 
as  such  on  the  26th  July,  1865. 

As  regards  the  notes  which  matured  in  January  of  the  year  1862 
and  1863,  we  can  perceive  no  reason  why  the  judgment  of  the  lower 
court,  in  regard  to  them,  should  be  disturbed;  for,  supposing  that 
Robert  Many  had  these  notes  with  him  on  his  arrival  in  New  York, 
in  June,  1861,  there  was,  from  the  time  of  the  capture  of  New  Orleans 
by  the  United  States  army  in  April,  1862,  open,  free,  and  uninterrupted 
communication  by  regular  public  conveyance  between  New  York,  New 
Orleans,  and  the  parish  of  St.  James ;  and  as  all  that  part  of  Louisi- 
ana, in  which  are  situated  New  Orleans  and  St.  James,  were  then  and 
and  continued  to  be  "occupied  and  controlled  by  the  forces  of  the 
United  States,"  etc.,  commercial  intercourse  between  New  York,  New 
Orleans,  and  St.  James  parish  was  by  the  proclamation  of  the  Presi- 
dent of  the  United  States  of  July  1,  1861,  not  deemed  unlawful,  and 
did  not  become  so  until  it  was  so  declared  by  the  proclamation  of  31st 
March,  1863. 

The  office  of  recorder  of  the  parish  of  St.  James  was  filled  until 
the  15th  June,  1862.  It  was  again  in  operation  in  December  of  that 
year,  and  was  not  afterwards  vacated.  There  was  then  ample  time  to 
make  demand  of  payment  of  the  notes,  which  became  due  in  January 
and  March,  1862,  and  in  January,  1863,  as  Robert  Many  died  only 
on  the  28th  August  of  1863,  retaining  all  his  mental  vigor  until  the 
time  of  his  demise. 

It  was  not  necessary  that  the  demand  should  have  been  made,  nor 
notice  of  demand  and  nonpayment  given,  by  a  notary.  These  requi- 
sites might  have  been  performed  and  proved  by  any  person  lawfully  in 
possession  of  the  notes,  and  competent  to  testify  as  a  witness.     See 


560  LIABILITY   OF    PARTIES.  (Fart  3 

Lathrop  v.  Lawson,  5  La.  Ann.  238,  52  Am.  Dec.  585,  Follain  \. 
Dupre,  11  Rob.  454,  Waldron  v.  Turpin,  15  La.  552,  35  Am.  Dec.  210, 
and  Burke  v.  McKay,  2  How.  71,  11  L.  Ed.  181. 

The  two  notes  due  in  January  and  March,  1862,  could  not  have 
been  presented  for  payment  to  the  drawer  at  the  time  and  place  of 
their  respective  maturity,  but  a  demand  should  have  been  made,  etc., 
as  soon  after  as  was  practicable.  Pothier,  Foute  du  Contrat  de 
Chang^e,  partie  1,  c.  5,  §  144. 

No  valid  excuse  is  shown  for  the  nonperformance  of  the  requisites 
of  the  law,  as  to  demand  and  notice,  in  regard  to  the  notes  which  fell 
due  in  1863. 

We  concur,  therefore,  with  the  judge  of  the  district  court  that  the 
holder  of  the  notes  which  matured  in  1862  and  1863,  by  his  negligence 
and  want  of  diligence,  has  lost  all  recourse  against  the  indorser  of 
them. 

The  two  notes  payable  in  1864  stand  upon  a  different  footing.  It 
is  true  they  were  not  protested  until  many  months  after  their  maturity ; 
but  by  the  President's  proclamation  of  March  31,  1863,  commercial 
intercourse  was  interdicted  until  the  end  of  the  rebellion,  which  was 
virtually  suppressed  in  the  month  of  May,  1865,  by  the  surrender  to 
the  United  States  forces  of  the  last  of  the  Confederate  armies. 

Two  months  elapsed  between  that  event  and  the  date  of  the  pro- 
test, and,  under  ordinary  circumstances,  that  unnecessary  delay  would 
have  been  fatal ;  but  it  seems  that  no  administrator  was  appointed  to 
the  succession  of  Robert  IMany  until  the  very  day  on  which  the  pro- 
test was  made.  Under  the  commercial  law,  which  in  cases  like  this  is 
not  in  conflict  with  the  positive  injunctions  of  our  statutes,  neither 
demand  nor  notice  are  required  until  a  reasonable  time  after  the  ap- 
pointment of  an  administrator.  See  Story  on  Promissory  Notes,  § 
250,  and  Parsons  on  Bills  and  Notes,  p.  360. 

No  laches  is  imputed  to  the  administrator,  and,  as  the  indorser  was 
duly  and  legally  notified  of  the  protest  of  the  notes  due  in  1864,  he 
is  liable  therefor. 

For  the  reasons  assigned  by  the  judge  of  the  lower  court,  and  those 
now  given  by  this  court — 

It  is  ordered,  adjudged,  and  decreed  that  the  judgment  of  the  district 
court  be  affirmed,  at  the  costs  of  the  appellant. ^^ 

18  See,  also,  Wilson  v.  Senier,  14  Wis.  411  (ISGl),  delay  incident  to  the 
holder's  sickness:  Windham  Bank  v.  Norton,  22  Conn.  213,  56  Am.  Dec.  397 
(1S52);  Pier  v.  Heinrichshoffen,  67  Mo.  163,  29  Am.  Rep.  501  (1877),  delay 
in  the  mails. 


Ch.  2)  DRAWER    AND    INDORSER.  661. 

PATTERSON  v.  TODD  &  LEMON. 

(Supreme  Court  of   Pennsylvania,   1852.     18  Pa.  420,  57   Am.  Dec.  622.) 

This  was  a  suit  before  a  justice  of  the  peace,  by  Todd  &  Lemon- 
against  George  W.  Patterson,  indorser  of  a  promissory  note,  as  follows : 
"Sixty  days  after  date,  I  promise  to  pay  to  G.  W.  Patterson,  or  or- 
der, the  just  and  full  sum  of  fifty-eight  dollars  and  sixty-two  cents,  for 
value  received.     Witness  my  hand  and  seal,  IGth  day  of  December,  1841. 
58.62  [Signed]     John  S.  Wilt. 

1.17,  4  months'  interest. 

$59.79." 

Indorsed : 

"George  W.  Patterson,  per  Samuel  M.  Greer. 

"For  value  received,  we  assign  the  within  note  to  Wm.  K.  Piper, 
and  do  guaranty  the  payment  of  the  same. 

"June  1,  1842.  *      Todd  &  Lemon." 

The  trial  court  charged  in  part  as  follows : 

"The  claim  is  upon  the  alleged  indorsement ;  and  the  plaintiffs  must 
recover  upon  that  indorsement,  if  at  all.  They  do  not  claim,  and 
cannot  claim,  to  recover  in  their  name  on  any  guarantee  given  by  Pat- 
terson to  Barr. 

"Was  the  note  indorsed  by  Patterson,  and  indorsed  after  due?  This 
is  a  question  of  fact  for  you.  If  it  was,  it  thence  went  into  circula- 
tion on  the  credit  of  the  indorser.  Such  indorsement  is  to  be  con- 
sidered as  the  making  of  a  new  note,  and  imposing  on  the  indorser 
the  primary  obligation  of  a  drawer;  and  to  charge  him  demand  and 
notice  need  not  be  shown.  Jordan  v.  Hurst,  P.  L-  J.  vol.  9,  p.  258.  If 
Patterson  indorsed  the  note  after  it  was  due,  then  the  plaintiffs  are, 
therefore,  entitled  to  a  verdict  for  its  amount,  with  interest;  otherwise 
they  are  not.    The  question  of  fact  is  for  you." 

The  defendant  excepted.  Verdict  for  the  plaintiffs.  The  defendant 
brings  error.^* 

Lewis,  J.  '  The  questions  for  decision  in  this  case  have  relation  to 
the  effect  of  indorsing  a  promissory  note  overdue.  (1)  What  is  the 
contract  which  the  law  implies  from  such  an  indorsement?  (2)  Is  the 
implied  contract  subject  to  modification  by  parol  evidence  of  the  spe- 
cial agreement  made  by  the  parties  at  the  time  of  the  transaction? 
In  1816,  Chief  Justice  Parker,  in  Field  v.  Nickerson,  13  Mass.  131, 
considered  it  remarkable  that  the  law  on  so  familiar  a  contract  as  the 
indorsement  of  a  note  on  demand  should  at  that  late  period  he  doubt- 
ful; and  it  is  certainly  to  be  regretted  that  on  a  kindred,  if  not  th. 
identical,  question  it  remains  in  the  same  condition  in  Pennsylvania. 

3  9  The  statement  of  the  case  is  abridged,  and  the  arguments  of  couiisc: 
are  omitted. 

Sm.&  M.B.&  N.— Bfi 


•562  LIABILITY  OF  PARTIES.  (Part  3 

The  law  of  bills  of  exchanc:e  seems  to  be  well  understood.  Every 
business  man  knows  that,  when  he  receives  an  inland  bill  of  exchange, 
it  is  his  duty  to  present  it  for  payment,  at  maturity,  if  payable  at  a  par- 
ticular time;  or  within  a  reasonable  time,  if  payable  at  sight;  and,  in 
either  case,  to  give  immediate  notice  to  the  drawer,  if  the  bill 
be  dishonored.  If  these  duties  be  neglected  by  the  holder,  the 
drawer  is,  in  general,  discharged  from  all  further  liability  on  the  bill. 
It  is  also  well  understood,  among  the  learned  and  unlearned,  that  the 
rules  of  the  law  merchant  which  regulate  the  liabilities  of  the  parties 
on  bills  of  exchange  apply  also  to  the  indorsement  of  promissory  notes. 
The  indorser  of  a  note  is  considered  as  the  drawer  of  a  bill  of  ex- 
change upon  the  maker,  and  the  body  of  the  note  is  referred  to  for 
the  purpose  of  showing  the  sum  to  be  paid,  the  time  and  place  of 
payment,  and  the  fact  that  the  bill  is  already  accepted  by  the  maker 
of  the  note,  whose  signature  thereto,  places  him,  as  between  the  in- 
dorsee and  himself,  in  the  condition  of  a  drawee  of  a  bill  of  exchange, 
after  acceptance.  Where  a  note  is  indorsed  before  it  is  due,  the 
holder  must  present  it  for  payment  at  maturity,  and  in  case  of  default 
must  give  immediate  notice  of  the  dishonor.  But,  after  the  note  be- 
comes due,  it  is  payable  whenever  the  holder  chooses  to  demand  it, 
and  for  this  purpose  an  action  at  law  is  a  sufficient  demand,  as  between 
the  maker  and  holder.  Like  a  contract  for  the  payment  of  money, 
where  no  time  of  payment  is  specified,  it  is  legally  payable  presently. 
So  that,  when  such  a  note  is  indorsed,  the  indorser  still  stands  in  the 
condition  of  the  drawer  of  an  inland  bill  of  exchange;  and  we  refer 
to  the  note,  as  before,  for  the  purpose  of  ascertaining  the  amount, 
and  the  time  and  place  of  payment.  The  time  of  payment  having 
passed,  the  note  is,  in  law,  payable  on  demand,  and  this  shows  that 
the  indorsement  is  to  be  considered  as  if  made  upon  a  new  note  pay- 
able on  demand,  and  the  legal  effect  of  it  is  precisely  the  same  as  if 
the  indorser  had  drawn  an  inland  bill  of  exchange  upon  the  maker, 
payable  at  sight.  It  is  the  duty  of  the  holder  of  such  a  bill  to  present 
it  for  payment  within  a  reasonable  time,  and  if  the  bill  be  dishonored 
to  give  immediate  notice  thereof  to  the  drawer.  In  the  case  of  an  in- 
dorsement of  a  note  overdue,  the  holder  is,  in  like  manner,  bound  to 
present  it  for  payment  within  a  reasonable  time,  and,  in  case  of  non- 
payment, to  give  immediate  notice  of  the  dishonor  to  the  indorser, 
otherwise  the  latter  is  discharged  from  liability.  This  doctrine  is 
fully  sustained  by  the  authorities. 

It  is  stated  in  Chitty  on  Bills,  15,  IG.  that  a  bill  may  legally  be  in- 
dorsed after  it  is  due  and  has  been  dishonored,  but  not  after  it  has 
been  paid  by  the  acceptor  (Mutford  v.  W'alcot,  1  Ld.  Raym.  575; 
Dehers  v.  Harrid,  1  Show.  163 ;  Callow  v.  Lawrence,  3  Maule  &  S, 
97  ;  Beck  v.  Robley,  1  H.  Bl.  89  n ;  Hubbard  v.  Jackson,  1  .AIo.  &"  P. 
11),  and  that  a  bill,  indorsed  after  due,  is  equivalent  to  drawing  a  new 
bill  payable  at  sight  (Dwight  v.  Emerson,  2  N.  H.  159;    Rugley  v. 


Ch.  2)  DRAWER    AND    INDORSER.  563 

Davidson,  2  Mill's  Const.  [S.  C]  33).  But  there  is  this  distinction 
between  notes,  etc.,  indorsed  after  and  before  due :  That  in  the  first 
case  the  holder  takes  them  subject  to  all  the  defenses  to  which  they 
were  subject  in  the  hands  of  the  original  parties.  Chitty  on  Bills,  15, 
16.  It  may  fairly  be  inferred,  from  Mr.  Chitty's  statement  of  the 
distinction  between  indorsements  of  bills  after  due  and  before  due, 
that  the  only  difference  is  that  in  the  first  case  the  holder  takes  them 
subject  to  all  the  equities  which  existed  between  the  original  parties, 
and  in  the  last  case  he  takes  them  discharged  of  all  such  defenses. 

That  the  indorsement  of  a  note  overdue  is  equivalent  to  drawing  a 
new  bill  payable  at  sight,  upon  which  the  indorser  is  liable  only  upon 
proof  of  a  demand  upon  the  maker  within  a  reasonable  time,  and  im- 
mediate notice  of  the  default,  is  fully  established  by  the  following  de- 
cisions made  by  the  highest  courts  of  our  sister  states,  and  pronounced 
by  judges  whose  learning  and  experience  in  this  particular  branch  of 
the  law  entitle  their  opinions  to  the  highest  regard:  Poole  v.  Tolle- 
son,  1  McCord  (S.  C.)  199,  10  Am.  Dec.  663;  Ecfert  v.  Des  Coudres 
&  Co.,  1  Mill,  Const.  (S.  C.)  70;  Course  &  McFarlane  v.  Shackle- 
ford's  Adm'rs,  2  Nott  &  McC.  (S.  C.)  283;  Bishop  v.  Dexter,  2  Conn. 
419 ;  Field  v.  Nickerson,  13  Mass.  131 ;  Colt  et  al.  v.  Barnard,  18 
Pick.  (Mass.)  260,  29  Am.  Dec.  584;  Berry  v.  Robinson,  9  Johns. 
(N.  Y.)  121,  6  Am.  Dec.  267;  Agan  v.  McManus,  11  Johns.  (N.  Y.) 
180;  Leavitt  v.  Putnam,  3  N.  Y.  494,  53  Am.  Dec.  322;  Id.,  1  Sandf. 
(N.  Y.)  199;  McKinney  v.  Crawford,  8  Serg.  &  R.  (Pa.)  353;  Bren- 
zer  v.  Wightman,  7  Watts  &  S.  (Pa.)  265. 

The  cases  which  are  supposed  to  conflict  with  this  view  of  the  sub- 
ject, and  to  sustain  the  position  that  the  contract  of  indorsement, 
when  made  upon  a  note  overdue,  changes  its  character,  and  becomes 
an  original  and  unconditional  engagement  to  pay  the  amount,  are : 
Brown  v.  Davies,  3  T.  R.  80 ;  Bank  of  N.  America  v.  Barriere,  1 
Yeates  (Pa.)  360;  Leidy  v.  Tammany,  9  Watts  (Pa.)  353;  and  Jor- 
dan V.  Hurst,  2  Jones  (Pa.)  269.  In  Brown  v.  Davies,  the  only  ques- 
tion was  whether  the  maker,  in  an  action  against  him  by  an  indorsee, 
could  be  permitted  to  prove  a  payment  to  the  payee  before  the  indorse- 
ment. No  question  touching  the  liability  of  the  indorser  arose  in  the 
cause,  or  was  decided  by  the  court ;  and  the  misapprehension  which 
has  since  occurred  in  relation  to  some  of  the  loose  remarks  of  one 
of  the  judges  on  a  question  to  which  his  attention  was  not  drawn,  and 
on  which  he  did  not  feel  called  upon  to  speak  with  precision,  shows 
the  danger  of  relying  upon  such  obiter  dicta  as  authority  for  any- 
thing. The  case  of  Bank  v.  Barriere,  1  Yeates  (Pa.)  360,  was  decided 
by  a  single  judge,  upon  its  ov/n  special  circumstances,  and  has  not 
only  been  so  explained  and  understood,  but  it  was  solemnly  decided 
by  this  court,  nearly  30  years  ago,  that  it  furnished  no  authority  for 
the  doctrine  that  the  conditional  contract  of  indorsement  may  be  tor- 
tured into  an  original  unconditional  engagement.  McKinney  v.  Craw- 
ford, 8  Serg.  &  R.    (Pa.)  351.     The  case  of  Leidy  v.  Tammany,  9 


564  LIABILITY  OF  PARTIES.  (Part  3 

Watts  (Pa.)  353.  like  that  in  1  Yeates,  360,  was  properly  decided  upon 
its  special  circumstances;  and  the  observations  of  the  judge,  in  going 
further  than  the  case  required,  must  not  be  received  to  unsettle  the 
established  rules  of  law. 

There  are  other  cases  in  which  the  erroneous  idea  that  an  indorse- 
ment of  a  note  overdue  is  a  new  note  seems  to  float  in  the  minds  of 
the  judges;  but  the  error  arises  from  a  want  of  precision  in  the  lan- 
guage used  in  some  of  the  early  cases.  When  it  was  intended  to  say 
that  such  an  indorsement  was  a  new  bill,  payable  at  sight,  the  judge 
has  been  erroneously  supposed  to  mean  a  new  note  payable  on  de- 
mand. The  difference  is  so  manifest  as  to  need  no  explanation.  In 
Jordan  v.  Hurst,  2  Jones  (Pa.)  3G9,  a  demand  was  made  upon  the 
maker  of  the  note  on  the  fourth  day  after  the  indorsement,  and  it  wa- 
stated  in  the  case  "tliat  the  drawer  [of  the  note]  had  no  property  or 
effects  out  of  which  the  debt  could  be  levied."  There  was  no  com- 
plaint of  a  want  of  diligence  in  making  demand  upon  the  maker  of 
the  note,  and  we  do  not  propose  to  inquire  into  the  propriety  of  the 
decision  that  his  insolvency  dispensed  with  the  necessity  of  notice  to 
the  indorser.  But  it  cannot  be  denied  that  the  observations  of  the 
judge  who  delivered  the  opinion  of  this  court  in  that  case  had  a  ten- 
dency to  mislead  the  intelligent  and  excellent  president  who  decided 
this  cause  in  the  court  below.  The  observations  of  Mr.  Justice  Coul- 
ter lose  much  of  their  weight,  however,  when  it  is  remembered  that 
they  extended  to  a  question  not  necessarily  arising  in  the  case,  that 
they  are  founded  chiefly  upon  the  cases  already  explained  as  not  sus- 
taining the  position  that  an  indorsement  of  a  note  overdue  is  a  new 
note,  and  that  the  learned  judge  himself  virtually  abandons  the  posi- 
tion when  he  concedes  that  the  action  against  the  indorser  can  only 
be  sustained  "after  the  original  maker  of  the  note  has  refused  pay- 
ment." This  implies  the  necessity  of  a  demand  upon  the  maker,  which 
is  altogether  repugnant  to  the  idea  that  the  indorsement  is  a  new  note. 

The  interrogatories  of  Mr.  Justice  Duncan,  in  McKinney  v.  Craw- 
ford, 8  Serg.  &  R.  (Pa.)  353,  have  never  been  satisfactorily  answered 
by  those  who  desire  to  convert  an  indorsement  into  an  absolute  and 
unconditional  engagement  to  pay  the  amount.  "If  it  was  a  contract 
of  absolute  and  immediate  liability,  why  indorse?  For  what  purpose 
draw?  Why  not  give  his  own  note?"  8  Serg.  &  R.  353.  We  full'. 
adopt  the  language  of  Mr.  Justice  Duncan,  in  the  case  last  cited,  in 
which  he  declares  that  "it  is  now  a  doctrine  well  settled  that  in  the 
case  of  all  notes,  whether  overdue  or  not,  to  render  the  indorser  Hable, 
there  must  be  a  demand  on  the  maker  and  notice  to  the  indorser,  unless 
a  contract  of  a  different  nature  from  that  of  indorsement  is  to  be  im- 
plied from  the  special  circumstances,  and  the  understanding  of  the 
parties  at  the  time  of  the  transaction."  McKinney  v.  Crawford,  8 
Serg.  &  R.  (Pa.)  357.  A  note  overdue  and  a  note  payable  on  demand 
are,  in  legal  effect,  identical,  and  therefore  the  decision  in  McKinney 
V.  Crawford  is  a  direct  decision  on  the  question  involved  in  this  case. 


Cll.  2)  DRAWER    AND    INDORSER.  5G5 

We  have  seen  that  the  contract  of  indorsement  may  be  converted 
by  parol  evidence  into  an  absolute  and  unconditional  ens^agement  to 
pay  the  amount.  1  Yeates,  360;  9  Watts,  353.  It  follows  that  it 
may  be  explained,  by  the  same  kind  of  evidence,  to  mean  nothing  fur- 
ther than  a  transfer  of  the  debt,  without  recourse  to  the  indorser. 
The  evidence  on  this  part  of  the  case  ought  to  be  submitted  to  the 
jury,  if  the  plaintiff,  on  another  trial,  by  the  proof  of  demand  and 
notice,  should  establish  a  prima  facie  title  to  recover.  But  in  the  ab- 
sence of  evidence  of  a  demand  upon  the  maker  of  the  note  and  notice 
to  the  indorser,  the  instructions  given  by  the  court  below  were  erro- 
neous. The  instruction  ought  to  have  been  given  that  the  plaintiffs 
were  not  entitled  to  recover. 

Judgment  reversed. 


MORRISON  V.  McCartney. 

(Supreme  Court  of  Missouri,  1860.    30  Mo.  1S3.) 

Napton,  J.^**  This  was  a  suit  by  Morrison  &  Lackland  upon  a 
check  payable  in  currency,  drawn  by  the  defendant  upon  E.  W.  Clark 
&  Bros.,  bankers  in  St.  Louis,  in  favor  of  Bohn  &  Co.,  and  indorsed 
to  plaintiffs.  The  check  was  dated  and  delivered  to  Bohn  &  Co.  on 
the  2d  of  October,  1857,  and  transferred  by  indorsement  to  the  plain- 
tiffs on  the  same  day.  It  was  not  presented  to  the  drawees  until  the 
29th  of  January,  1858,  when  payment  was  refused,  and  it  was  duly 
protested  and  notice  given  to  the  defendant.  It  appears  that,  about 
3  o'clock  of  the  3d  of  October,  the  house  of  Clark  &  Bros,  was  closed 
or  stopped  payment;  but  on  the  6th  of  October,  1857,  the  defendant, 
who  had  previously  commenced  suits  by  attachment,  compromised 
these  suits,  settled  with  Clark  &  Bros.,  and  withdrew  his  deposit?. 
The  question  in  the  case  was  whether  the  plaintiffs  were  entitled  to 
recover,  notwithstanding  their  failure  to  present  the  check  on  the  day 
after  it  was  indorsed  to  them,  upon  showing  that  the  drawer  sustained 
no  injury  by  the  delay,  and  that  before  suit  brought,  and  within  a 
reasonable  time,  demand,  protest,  and  notice  were  duly  given. 

The  law  on  this  subject  is  stated  in  Kent's  Commentaries  as  follows: 
"The  drawer  of  a  check  is  not  a  surety,  but  the  principal  debtor,  as  much 
as  the  maker  of  a  promissory  note.  The  check  is  the  acknowledgment 
of  a  certain  sum  due.  It  is  an  absolute  appropriation  of  so  much 
money  in  the  hands  of  his  banker  to  the  holder  of  the  check,  and  there 
it  ought  to  remain  till  called  for;  and  unless  the  drawer  actually 
suffers  by  the  delay,  as  by  the  intermediate  failure  of  his  banker,  he 
has  no  reason  to  complain  of  delay  not  unreasonably  protracted.  If 
the  holder  does  so  unreasonably  delay,  he  assumes  the  risk  of  the 

2  0  The  statement  of  the  case,  tlie  arguments  of  counsel,  and  part  of   the 

opinion  are  omitted. 


566  LIABILITY  OF  PARTIES.  (Part  3 

drawee's  failure,  and  he  may,  under  circumstances,  be  deemed  to  have 
made  the  check  his  own  to  the  discharge  of  the  drawer.  But  this  is 
quite  distinct  from  the  strict  rule  of  diligence  applicable  to  a  surety, 
in  which  light  stands  the  indorser,  who  has  a  right  to  require  diligence 
on  the  part  of  the  holder  to  relieve  him  from  responsibility."  4  Kent, 
549. 

This  view  of  the  law  is  adopted  by  Judge  Story  in  the  chapter,  in 
his  work  on  Promissory  Notes,  devoted  to  the  subject  of  checks. 

His  language  is  that  "the  drawer  [of  a  check]  will  at  all  times  be 
liable  to  pay  the  same  if  the  holder  can  show  that  the  drawer  has 
sustained  and  can  sustain  no  loss  or  damage  from  the  omission  to 
demand  payment,  at  an  earlier  date,  of  the  bank  or  banker  on  whom 
the  check  is  drawn."  "In  case  of  a  check,"  says  Judge  Story,  "the 
drawer  is  treated  as  in  some  sort  the  principal  debtor,  and  he  is  not 
discharged  by  any  laches  of  the  holder  in  not  making  due  presentment 
thereof,  or  in  not  giving  him  notice  of  the  dishonor,  unless  he  has 
suffered  some  loss  or  injury  thereby,  and  then  only  pro  tanto."  Story 
on  Prom.  Notes,  492-. 

The  same  doctrine  is  maintained  in  the  most  recent  decisions  of 
the  highest  courts  of  New  York.  Little  v.  Phenix  Bank,  2  Hill,  425. 
The  opinion  of  Judge  Cowen,  in  Harker  v.  Anderson,  21  Wend.  372, 
has  not  been  sustained.  In  a  word,  this  opinion  appears  to  prevail 
generally  both  in  England  and  in  the  United  States,  where  the  ques- 
tion has  arisen.  Alexander  v.  Burchfield,  3  Scott,  N.  R.  558  ;  Robinson 
V.  Hawkeford,  9  Q.  B.  52;   Byles  on  Bills,  14,  and  note  2. 

The  justice  and  policy  of  the  rule  are  sufficiently  obvious,  and  are 
forcibly  alluded  to  and  illustrated  by  Judge  Story,  in  his  opinion  in 
the  Matter  of  Brown,  2  Story,  516:  "If  the  drawee,  upon  the  pre- 
sentment, refuses  to  pay  the  check  because  he  has  no  funds,  then  the 
drawer  is  not  injured;  and  if  he  has  funds,  and  refuses  to  pay,  then, 
if  the  bank  is  still  in  good  credit,  as  the  drawer  has  sustained  and  can 
sustain  no  loss,  there  is  every  reason  to  hold  him  liable  therefor. 
Every  check  is  prima  facie  presumed  to  be  given  for  value  received 
by  the  drawer;  and  if,  by  reason  of  the  want  of  due  presentment 
or  want  of  due  notice  of  the  dishonor,  he  is  to  be  totally  exonerated, 
he  pockets  both  the  original  consideration  and  his  funds  in  the  hands 
of  the  bank  or  banker.  In  such  a  case,  can  it  be  said,  with  truth  or 
justice,  that  he  is  to  be  enriched  at  the  expense  of  the  holder  of  the 
check?  or  that  he  shall  not  be  deemed  to  hold  the  money  as  money 
had  and  received  for  the  use  of  the  holder,  either  because  he  had  no 
funds  in  the  bank  or  because  he  still  retains  those  funds  appropriated 
to  the  use  of  another  for  his  own  use?" 

The  argument  seems  to  be  conclusive.  Whether  it  is  not  just  as 
applicable  to  bills  of  exchange  is  another  question  not  necessary  to 
be  considered.     See  Edwards  on  Bills,  p.  396. 

In  the  case  of  St.  John  v.  Homans,  8  Mo.  382,  decided  by  this  court 
in  1844,  the  judgment  turned  upon  the  fact  of  a  loss  to  the  drawer  of 


Oh.  2)  DRAWER   AND    INDORSER.  567 

the  check.  An  opinion  was  expressed  that  the  weight  of  authority 
recognized  no  distinction  between  the  degrees  of  dihgence  required 
in  checks  and  bills  of  exchange  in  determining  the  responsibility  of 
the  drawer.  However  that  may  have  been  at  that  time,  the  current 
of  authority  now  is,  as  we  have  seen,  decidedly  the  other  way.  *  *  * 
Judgment  affirmed.^^ 


NATIONAL  NEWARK  BANKING  CO.  v.  SECOND  NAT. 

BANK  OF  ERIE. 

(Supreme  Court  of  Pennsylvania,  1870.     63  Pa.  404.) 

This   was  an  amicable  action  of   assumpsit,   commenced   May   15, 
1866,  between  the  National  Newark  Banking  Company,  plaintiffs,  and 
the  Second  National  Bank  of  Erie,  defendants. 
The  suit  was  on  the  following  draft: 

"Second  National  Bank  of  Erie, 

"Erie,  Pa.,  March  17,  1866. 
"Pay  to  the  order  of  A.  Judson,  Esq.,  three  hundred  dollars. 

"Wm.  C.  Curry,  Cashier. 
"To  Culver,  Penn  &  Co.,  New  York. 
"$300." 

The  draft  was  afterwards  indorsed  by  Judson,  who  sold  it  to  the 
plaintiffs  on  the  27th  of  March.  It  was  presented  for  payment  on 
the  28th  of  March,  payment  was  refused,  and  the  draft  was  duly 
protested.  The  facts  of  the  case  are  stated  fully  and  in  detail  by 
Mr.  Justice  Read  in  delivering  the  opinion  of  the  Supreme  Court. 

The  court  below  (Derrickson,  J.),  after  referring  to  the  facts, 
charged : 

"I  am  not  aware  at  this  moment  of  any  decision  which  defines  the 
time  within  which  a  bill  must  be  presented,  but  all  the  authorities  say 
it  must  be  within  a  reasonable  one.  What  this  will  be  in  any  one 
given  case  would  very  seldom,  if  ever,  answer  for  another,  because 
the  circumstances  attendant  on  each  are  so  varied  and  different,  and 
in  most  cases  it  would  be  a  question  of  fact  for  the  jury  to  pass  upon, 
and  it  would  be  so  now,  were  there  any  disputed  facts  arising  out  of 
the  testimony,  which  there  are  not.  Admitting,  then,  what  the  wit- 
ness testifies  to  be  true,  we  think  it  affords  no  excuse  for  the  delay, 
which  we  also  think  was  unreasonable.  That  the  Newark  Bank  itself 
is  free  from  the  charge  we  readily  admit,  but  not  from  that  of  its 
indorser,  for  the  time  which  had  elapsed  was  patent  on  the  face  of 
the  bill.  What  is  thus  said  will  answer  the  several  points  made  by 
the  counsel  of  the  plaintiffs."' 

The  verdict  was  for  the  defendants. 

21  Accord:     Matlock  v.   Scheuerman,  51  Or.  49,  93  Pac.   823,   17  L.   R.  A. 

(N.  S.)  747  (1908). 


568  LiAiuLiTY  OF  r'AUTiES.  (Part  3 

The  plaintiffs  took  a  writ  of  error,  assigning  the  charge  for  error.^- 

Read,  J.  The  court,  assuming  that  there  were  no  disputed  facts  in 
this  case,  undertook  to  decide  the  question  whether  the  presentment  of 
the  bill  or  draft  which  was  the  subject  of  this  suit  was  made  to  the 
drawees  in  New  York  within  a  reasonable  time.  Their  decision  was 
that  the  time  taken  was  unreasonable,  and  that  the  defendants  were 
not  liable  to  pay  the  amount  of  their  draft. 

A.  Judson,  who  was  acting  as  the  agent  of  T.  H.  Hubbard  in  the 
collection  of  money  claimed  by  him,  by  way  of  damages,  from  differ- 
ent persons  for  the  unlawful  use  or  infringement  of  a  photographic 
patent,  on  Saturday,  17th  March,  1866,  purchased  the  following  draft 
from  the  defendants:     *     *     *  23 

Mr.  Judson  was  a  resident  of  Newark,  New  Jersey,  and  his  busi- 
ness took  him  through  the  oil  region.  He  stayed  at  Erie^  over  Sunday, 
and  on  Monday,  the  19th  of  March,  left  Erie  and  traveled  as  far  as 
Oil  City  that  day,  stopping  at  Meadville  and  Franklin  on  his  way ;  he 
stopped  at  Oil  City  on  Monday  night,  and  on  Tuesday  morning,  the 
20th,  left  for  Pithole,  and,  reaching  that  place  Tuesday  evening,  stayed 
there  Tuesday  night ;  on  Wednesday  he  went  to  Titusville,  where  he 
stayed  Wednesday ;  on  Thursday  he  went  to  Corry  and  stayed  there 
Thursday  night ;  on  Friday  the  23d  of  March  he  left  Corry  and  trav- 
eled continually  night  and  day.  until  he  arrived  at  Newark,  his 
place  of  residence,  on  Sunday,  March  2oth.  Until  he  reached  Corry 
he  traveled  partly  by  cars  and  partly  by  stage,  making  collections  on 
his  route  at  different  places  where  he  stopped.  On  Monday,  the  26th 
of  March,  he  remained  at  home  very  much  fatigued  and  overcome 
by  the  journey.  On  Tuesday,  the  27th  of  IMarch.  he  transferred  the 
bill  to  the  plaintiffs,  receiving  from  them  in  money  the  full  face  of 
the  bill.  It  was  sent  by  them,  by  mail  to  their  correspondent,  the 
Merchants'  National  Bank  of  New  York,  and  was  on  the  28th  of 
March  presented  by  them  for  payment  to  the  drawees,  and  payment 
refused;   they  having  failed  the  day  before. 

There  is  no  allegation  that  the  plaintiffs,  so  far  as  regards  them- 
selves, did  not  present  the  draft  in  due  time,  but  it  is  alleged  that  the 
delay  on  tJie  part  of  Judson  was  unreasonable,  and  so  the  court  held. 

The  bill  was  drawn  at  Erie,  in  the  state  of  Pennsylvania,  at  the 
extreme  western  end  of  it,  upon  persons  in  the  city  of  New  York, 
and  sold  to  a  traveling  agent  whose  residence  was  in  Newark,  in  the 
state  of  New  Jersey.  As  all  bank  notes  in  the  present  day  are  at  par 
everywhere,  the  object  in  purchasing  a  draft  was  to  prevent  loss  by 
theft,  robbery,  or  accident.  The  business  of  the  agent  led  him  through 
the  different  places  we  have  stated,  and  detained  him  necessarily  on 
the  road,  and  he  was  therefore  not  obliged,  nor  could  it  be  expected, 
while  so  doing,  that  he  would  transmit  this  draft  for  collection  to  New 

22  The  arguments  of  counsel  are  omitted. 

23  A  copy  of  the  draft  given  above  is  here  printed  in  the  original  report 
of  the  case. 


Cll.  2)  DRAWER    AND    INDORSICR.  569 

York,  nor  would  there  be  in  fact  any  opportunity  to  negotiate  it  until 
he  reached  his  own  home  in  New  Jersey. 

We  are  therefore  of  opinion  that  under  these  circumstances  the 
bill  was  presented  within  a  reasonable  time,  and  that  the  defendants 
are  liable  to  pay  the  same. 

Judgment  reversed.^* 

24  It  is  urged  we  should  hold  as  a  matter  of  law  there  was  unreasonable  de- 
lay to  make  such  presentment  before  the  failure  of  Gilmau,  Son  &  Co.  was  made 
public  on  October  16,  1902.  According  to  the  general  tenor  of  the  testimony 
a  draft  purchased  and  forwarded  from  West  Branch  to  Ortouville,  Minn., 
on  October  7th,  and  forwarded  theuce  without  intermediate  negotiation  to 
New  York,  would  ordinarily  be  presented  to  the  drawee  somewhere  from 
October  12th  to  October  14th.  Taking  the  average  of  these  dates,  a  delay 
of  about  three  days  had  occurred'  when  the  correspondent  closed  its  doors. 
Now,  while  it  is  true  that  the  court  may  sometimes  determine  the  rea- 
sonableness or  unreasonableness  of  delay  in  presentment  of  a  negotiable 
instrument  as  a  matter  of  law,  the  question  is  ordinarily  one  of  fact.  As 
between  the  drawer  and  payee  in  this  case,  the  question  whether  the  delay 
was  reasonable  depends  upon  circumstances  disclosed  in  evidence.  If  the 
bank  knew  that  appellee  desired  to  send  the  draft  to  Ortonville,  to  be 
there  held  for  a  few  days  for  the  completion  of  the  land  purchase,  and 
issued  the  paper  to  him  for  that  purpose,  then  appellant  can  claim  no 
advantage  from  the  fact  that  it  was  not  forwarded  to  New  York  for  pay- 
ment on  the  same  or  ifoUowing  day,  provided,  of  course,  that  such  delay 
was  reasonably  necessary  for  the  accomplishment  of  the  known  purpose 
for  which  it  was  obtained.  Obviously  this  is  a  question  for  the  jury  to  con- 
sider and  pass  upon,  in  view  of  all  the  proved  facts  and  the  ordinary  course 
and  methods  of  business.  Bank  drafts  or  bills  of  exchange  differ  from  or- 
dinary bank  checks,  in  that  the  latter  usually  contemplate  practically  imme- 
diate presentation  for  payment.  This  is  especially  true  when  the  check  is 
drawn  upon  a  bank  in  the  town  or  city  where  both  drawer  and  payee  reside. 
On  the  other  hand,  a  bank  draft,  bill,  or  check  upon  a  distant  bank,  used 
as  a  means  of  transmission  of  funds  between  different  sections  of  the  coun- 
try, is  more  usually  than  otherwise  negotiated,  and  passes  through  various 
hands,  and  serves  the  pui'pose  of  perhaps  many  persons  before  final  present- 
ment. For  instance,  a  resident  of  Iowa  may  send  a  New  York  draft  to  a 
creditor  in  San  Francisco,  and  the  latter  may  indorse  it  to  his  own  creditor 
in  Chicago,  and  the  latter  in  turn  indorse  it  to  his  creditor  in  New  York,  who 
indorses  it  to  his  local  bank,  which  presents  it  to  the  drawee  for  payment. 
Sent  directly  from  the  place  of  its  issuance,  such  draft  would  have  been  pre- 
sented within  from  two  to  'four  days  of  its  date;  but  by  the  circuitous 
route  we  have  described  its  transmission  requires  ten  days  or  more.  Yet  no 
one,  we  think,  would  contend  for  the  proposition  that  a  delay  in  present- 
ment thus  occasioned  would  work  a  discharge  of  the  drawer.  Of  course, 
if  any  person  to  whom  the  bill  is  indorsed  fails  to  promptly  negotiate  and 
pass  it  along  on  its  course  to  final  presentation,  and  loss  follows,  he  alone 
must  bear  it,  unless  the  delay  has  been  occasioned  with  the  express  or  im- 
plied consent  of  the  drawer.  If  a  person,  being  about  to  set  out  upon  an  ex- 
tended visit  to  a  distant  state,  and  wishing  to  carry  his  funds  in  bank  drafts 
to  be  negotiated  from  time  to  time  as  he  may  need  the  money,  applies  to 
his  banker,  who  issues  the  desired  paper,  knowing  the  purpose  for  and  the 
manner  in  which  it  is  to  be  used,  we  think  it  unquestionable  that  the  risk  of 
loss  by  the  insolvency  of  the  drawee  is  not  shifted  from  the  drawer  to  the 
payee  simply  because  the  latter  does  not  put  the  bills  in  immediate  course 
of  collection."  West  Branch  Bank  v.  Haines,  135  Iowa,  313,  112  N.  W.  552, 
554  (1907). 


570  LIABILITY  OF  PAUTiES.  (Part  3^ 


GIFFORD  V.  HARDELL. 

(Supreme  Court  of  Wisconsin,  1894.     88  Wis.  538,  60  N.  W.  1064.  43  Am.  St 

Kep.  925.) 

This  action  was  brought  to  recover  against  the  defendant,  as  in- 
dorser,  the  amount  of  four  checks  drawn  on  the  Commercial  Bank  of 
Milwaukee  by  one  Musselman,  in  favor  of  divers  persons,  and  which 
had  been  indorsed  to  the  defendant,  who  on  the  17th  of  July,  1893,  sold 
and  indorsed  them  to  the  plaintiff.  They  were  indorsed  and  delivered 
to  the  plaintiff's  father,  at  Dousman,  Waukesha  county,  Wis.,  who  at 
once  mailed  them  to  the  plaintiff,  at  New  Richmond,  Wis.  The  checks 
were  not  presented  for  payment  until  the  21st  of  July,  when  the  Com- 
mercial Bank  had  failed,  and  were  protested  for  nonpayment. 

The  only  question  was  whether  the  plaintiff,  or  his  agent,  the  ISIanu- 
facturers'  Bank  of  New  Richmond,  Wis.,  which  undertook  the  collec- 
tion of  the  checks,  used  due  diligence  in  presenting  them  for  payment. 
They  were  forwarded  to  the  plaintiff,  at  New  Richmond,  by  his  father, 
on  the  day  they  were  indorsed,  and  received  by  him,  by  due  course  of 
mail,  July  ISth,  at  5  o'clock  p.  m.,  and  were  at  once  delivered  to  said 
Manufacturers'  Bank  for  collection.  It  immediately  inclosed  and 
mailed  the  checks  to  its  bank  correspondent  in  Chicago  for  collection, 
according  to  its  usual  custom,  having  no  regular  bank  correspondent  in^ 
Milwaukee.  They  were  received  and  forwarded  by  the  National  Bank 
of  Illinois,  of  Chicago,  to  Milwaukee,  Wis.,  but  were  not  presented 
for  payment  until  the  21st  of  July.  The  Commercial  Bank  of  Milwau- 
kee, upon  which  they  were  drawn,  failed,  closing  its  doors  at  the  usual 
hour  on  the  20th  of  July.  There  was  a  direct  mail  route  from  New 
Richmond  to  Milwaukee,  and  thence  to  Chicago,  the  latter  city  being 
about  85  miles  south  of  Milwaukee.  The  evening  mail  of  the  18th  of 
July  at  this  time  left  New  Richmond  at  8  :41  p.  m.,  and  would  have 
reached  Milwaukee  at  11  o'clock  in  the  forenoon  of  the  19th,  and  Chi- 
cago at  about  1  o'clock  of  the  same  day;  and  the  checks  arriving  at 
Milwaukee,  as  above  stated,  could  have  been  presented  for  payment 
at  10  o'clock  in  the  morning  of  the  20th,  while  the  bank  on  which  they 
were  drawn  was  honoring  its  checks.  The  court  held  that  sending 
them  by  way  of  Chicago  for  collection  was  not  the  use  of  reasonable 
diligence  in  presenting  them  for  payment,  and  directed  a  verdict  for 
the  defendant,  and  from  a  judgment  thereon  in  favor  of  the  defend- 
ant the  plaintiff  appealed. 

PixNEY,  J.  (after  stating  the  facts  as  above).  The  same  rules  which 
exist  in  relation  to  the  necessity  of  presentment  and  notice,  in  order 
to  charge  the  indorser  of  bills  of  exchange  in  general,  apply  as  well  to 
an  indorser  of  a  check.  A  check  on  a  bank  is  presumed  to  be  drawn 
against  deposited  funds,  and,  unlike  a  bill  of  exchange,  which  need 
not  be  drawn  on  a  deposit,  is  generally  designed  for  immediate  pay- 


Cll.  2)  DRAWER    AND    INDORSER.  571 

ment,  and  not  for  circulation.  For  this  reason  it  is  of  greater  impor- 
tance than  in  the  case  of  a  bill  that  a  check  shall  be  promptly  present- 
ed, and  the  drawer  notified  of  nonpayment,  so  that  he  may  speedily 
inquire  into  the  cause  of  refusal,  and  take  prompt  measures  to  secure 
his  funds  deposited  in  the  bank.  The  indorsers  of  bills  and  of  checks 
stand  on  the  same  footing  in  reference  to  the  effect  of  delay  or  failure 
in  making  presentment,  or  giving  notice  of  nonpayment,  and  are  ab- 
solutely and  entirely  discharged  if  presentment  be  not  made  within  a 
reasonable  time ;  and  this  rule  applies  as  between  an  indorser  and  in- 
dorsee, as  in  the  present  case. 

It  is  plain  from  the  facts  that,  if  the  bank  at  New  Richmond  had 
forwarded  the  checks  direct  to  ^Milwaukee  for  collection,  they  would 
have  been  received,  at  the  furthest,  in  time  for  presentation  and  pay- 
ment on  the  20th  of  July,  and  while  the  bank  on  which  they  were 
drawn  was  transacting  its  usual  business ;  and  it  appears  that  it  had 
ample  funds  of  the  drawer,  with  which  to  have  paid  them.  The  period 
of  reasonable  time  for  presentation,  as  between  the  plaintiff  and  the 
defendant,  as  indorser,  undoubtedly  began  when  the  checks  were  de- 
livered to  the  plaintiff's  father  for  him,  at  Dousman,  Waukesha  coun- 
ty. Wis.,  on  the  17th  of  July.  Daniel,  Neg.  Inst.  §§  1586,  1587,  and 
cases  in  notes.  The  drawer  of  a  check  cannot  rightfully  withdraw  his 
funds  necessary  for  the  payment  of  it  upon  proper  presentation,  and 
it  would  be  unjust  to  hold  that,  however  long  the  holder  might  permit 
the  fund  to  remain,  it  should  be  at  the  drawer's  risk.  Hence,  the  check 
must  be  presented  within  a  reasonable  time,  or  the  indorser  will  be 
discharged,  and  the  fund  is  at  the  risk  of  the  holder,  if  he  permits  the 
deposit  to  remain.  No  transfer,  or  series  of  transfers,  can  prolong 
the  risk  of  the  drawer  or  indorser  beyond  this  period,  though  each  par- 
ty is  allowed  the  same  period,  as  between  himself  and  his  immediate 
predecessor,  that  the  payee  had,  as  between  himself  and  the  drawer ; 
for  no  transferee  can  stand  on  any  better  footing  than  his  transferrer, 
in  respect  to  the  time  within  which  the  check  must  be  presented  in  or- 
der to  render  the  drawer's  or  previous  indorser's  liability  absolute  in 
the  event  of  the  failure  of  the  bank.  Daniel,  Neg.  Inst.  §  1595,  and 
cases  in  note. 

The  rule  of  diligence,  as  between  indorsee  and  indorser,  is  the  same 
as  between  payee  and  drawer.  This  requires,  in  general,  that,  where 
the  payee  receives  the  check  from  the  drawer  in  a  place  distant  from 
the  place  where  the  bank  on  which  it  is  drawn  is  located,  it  will  be  suf- 
ficient for  him  to  forward  it  by  post  to  some  person  at  the  latter  place 
on  the  next  secular  day  after  it  is  received,  and  then  it  will  be  sufficient 
for  the  person  to  whom  it  is  thus  forwarded  to  present  it  for  payment 
on  the  day  after  it  has  reached  him  by  due  course  of  mail.  When  the 
defendant  delivered  the  checks,  properly  indorsed,  at  Dousman,  Wis., 
on  the  17th  of  July,  he  had  a  right  to  assume  and  expect  that  the  plain- 
tiff, or  his  father,  would  present  them  for  payment  within  a  reasonable 


572  LIABILITY  OF  TARTiES.  (Part  3 

time,  and  they  took  the  risk  of  making  such  presentment.  Instead, 
they  were  sent  several  hundred  miles  to  the  northwest  of  Milwaukee, 
to  New  Richmond,  and  then  back,  through  Milwaukee,  to  Chicago, 
and  were  then  returned  to  Milwaukee  for  payment  on  the  21st,  as  be- 
fore stated.  It  is  clear  that  they  were  not  presented  for  payment  with- 
in a  reasonable  time  after  indorsement  and  delivery  by  the  defendant, 
and  the  judgment  of  the  county  court  was  therefore  correct.  First 
Nat.  Bank  v.  iMiller,  37  Neb.  500,  55  N.  W.  1064,  40  Am.  St.  Rep. 
499,  and  cases  cited. 

The  judgment  of  the  county  court  is  affirmed.-'' 


•  GRANGE  V.  REIGH  et  al. 
(Supreme  Court  of  Wisconsin.  1S96.    93  Wis.  552,  G7  N.  W.  ll.'^O.) 

On  the  20th  day  of  July,  1893,  defendants  were  indebted  to  plain- 
tiff in  the  sum  of  $1,211.  After  banking  hours  on  that  day,  in  the  city 
of  Milwaukee,  where  plaintiff  resided,  defendants  gave  him  a  check 
for  the  amount  of  such  indebtedness  on  the  South  Side  Savings  Bank, 
located  in  said  city.  Such  check  was  not  presented  for  payment  either 
on  that  or  the  succeeding  day,  July  21st.  The  bank  was  open  for  busi- 
ness all  of  such  succeeding  day,  and  would  have  paid  the  check  had  it 
been  presented  during  that  time.  The  bank  did  not  open  for  business 
after  the  21st,  by  reason  of  which  the  check  was  not  paid.  This  ac- 
tion is  to  recover  the  amount  of  the  check  from  the  drawers.  The  cir- 
cuit court  decided  that,  because  of  the  failure  to  present  the  check  for 
payment  to  the  bank  within  a  reasonable  time,  recourse  upon  the  draw- 
ers was  lost ;  and  accordingly  judgment  was  rendered  for  the  defend- 
ants, and  plaintiff  appealed. 

Marshall,  J.  (after  stating  the  facts  as  above).  The  settled  law 
applicable  to  the  facts  of  this  case  is  that,  if  a  person  receives  a  check 
on  a  bank,  he  must  present  it  for  payment  within  a  reasonable  time,  in 
order  to  preserve  his  right  of  recourse  on  the  drawer  in  case  of  non- 
payment by  the  drawee ;  and  that,  when  such  person  resides  and  re- 
ceives the  check  at  the  same  place  where  such  bank  is  located,  a  rea- 
sonable time  for  such  presentation  reaches,  at  the  latest,  only  to  the 
close  of  banking  hours  on  the  succeeding  day,  excluding  Sundavs  and 
holidays.  Tiedeman  Com.  Paper,  §  413 ;  2  Daniel,  Neg.  Inst.  §  1590, 
1591,  and  cases  cited;  Lloyd  v.  Osborne,  92  Wis.  93,  65  N.  W.  859. 
Plaintiff  failed  to  comply  with  the  law  in  this  respect ;  hence  defend- 
ants were  discharged  from  all  liability  to  answer  for  the  default  of  the 
bank.    Such  was  the  decision  of  the  trial  court,  and  it  must  be  affirmed. 

^5  Accord:  Aebi  v.  Bank,  124  Wis.  73.  102  N.  W.  329.  68  L.  R.  A.  9G4, 
109  Am.  St.  Rep.  925  (190.">).  Comixire  Citizens'  Bank  v.  Bank,  135  Iowa. 
G05,  113  N.  W.  4S1,  13  L.  R.  A.  (N.  S.)  303  (1907). 


Ch.  2)  DRAWEE    AND    INDORSER.  573 


GORDON  V.  LE\aNE. 

(Supreme  Judicial  Court  of  Massachusetts,  Suffolk,  1907.     IM  Mass.  418, 
80  N.  E.  505,  10  L.  R.  A.  (N.  S.)  1153,   120  Am.   St.  Rep.  5G5.) 

Morton,  J.  This  is  an  action  upon  a  check  by  the  plaintiff  as  payee 
against  the  defendant  as  drawer.  The  check  was  dated  December  30, 
1905,  which  was  Saturday,  thotigh  there  was  some  question  whether 
it  was  actually  drawn  and  delivered  on  that  day,  or  the  31st.  The 
plaintiff  is  described  in  the  writ  as  of  Chelsea  and  the  defendant  as  of 
Boston.  The  bank  on  which  the  check  was  drawn  was  in  Boston  and 
the  check  was  drawn  and  delivered  there.  The  plaintiff  testified  that 
the  defendant  asked  him  not  to  present  the  check  for  a  couple  of  days 
as  he  did  not  have  sufficient  funds  to  meet  it,  but  that  he  presented  it 
Monday  morning-,  January  1st,  and  was  told  there  were  no  funds ;  and 
that  he  went  to  see  the  defendant  at  his  place  of  business  but  did  not 
see  him.  The  plaintiff  also  testified  that  in  the  afternoon  of  the  same 
day  be  passed  the  check  to  one  Saievitz  in  payment  of  a  bill  which  he 
owed  him,  receiving  the  balance  in  cash.  And  there  was  testimony 
tending  to  show  that  on  the  next  day  Saievitz  indorsed  it  to  one  Root- 
stein  who  deposited  it  on  January  4th,  in  the  Faneuil  Hall  National 
Bank,  in  Boston,  for  collection,  and  that  that  bank's  messenger  went 
with  it  on  the  afternoon  of  the  following  day,  Friday,  January  5th,  to 
the  bank  on  which  it  was  drawn,  the  Provident  Securities  &  Banking 
Company,  and  found  its  doors  closed.  The  plaintiff  also  testified  that 
he  told  the  defendant  the  bank  had  failed,  and  that  the  defendant 
promised  to  make  the  check  good.  The  defendant  denied  this,  and  al- 
so the  plaintiff's  statement  that  he  had  asked  the  plaintiff  not  to  pre- 
sent the  check  for  a  couple  of  days,  and  introduced  testimony  tending 
to  show  that  at  the  time  when  the  check  was  drawn  he  had  sufficient 
funds  on  deposit  at  the  bank  to  meet  it,  and  continued  to  have  down  to 
the  failure  of  the  bank.  It  was  admitted  that  the  bank  failed  on  Fri- 
day, January  5th,  and  the  defendant  introduced  evidence  tending  to 
show  that  he  had  received  no  payment  or  dividend  on  account  of  his 
deposit.  There  was  a  verdict  for  the  plaintiff"  and  the  case  is  here  on 
exceptions  by  the  defendant  to  the  refusal  of  the  judge  to  give  certain 
instructions  that  were  requested,  and  to  the  admission  of  certain  tes- 
timony. 

The  defendant,  in  substance,  asked  the  judge  to  instruct  the  jury 
that  a  check  must  be  presented  for  payment  in  a  reasonable  time  and 
that  in  order  to  have  been  presented  within  a  reasonable  time  the 
check  in  suit  should  have  been  presented  before  the  close  of  banking 
hours  on  Monday ;  that  its  transfer  to  successive  holders  would  not 
extend  the  time  for  presentment,  and  a  presentment  on  January  5th 
would  not  be  within  a  reasonable  time  and  if  the  bank  failed  in  the 
meantime  and  the  defendant  sustained  a  loss  in  consequence  of  delay 
in  presenting  the  check,  he  would  be  discharged  from  liability  to  that 


674  LIABILITY  OF  PAUTiES.  (Part  3 

extent.  The  judge  gave  in  part  the  instruction  thus  requested,  and  re- 
fused it  in  part.  He  instructed  the  jury  that  the  check  must  have  been 
presented  for  payment  within  a  reasonable  time,  and  that  if  it  was  pre- 
sented on  Monday  that  would  be  wiihin  a  reasonable  time.  But  he  re- 
fused to  instruct  the  jury  that  the  transfer  to  successive  holders  would 
not  extend  the  time,  or  that  a  presentment  on  Friday  was  not  within  a 
reasonable  time.  On  the  contrary  he  instructed  them  that  "the  court 
had  occasion  to  consider  that  in  one  case  in  this  commonwealth  (refer- 
ring, we  assume  to  Taylor  v.  Wilson,  11  JMetc.  44,  45  Am.  Dec.  180); 
and  it  is  there  stated  that  a  check  may  also  be  passed  from  hand  to 
hand  and  a  reasonable  time  is  allowed  to  each  party  receiving  the  same 
to  present  it  for  payment."  And  after  calling  their  attention  to  the 
provisions  of  the  statute  (Rev.  Laws,  c.  73,  §  209)  that  in  considering 
what  a  reasonable  time  is  "regard  is  to  be  had  to  the  nature  of  the  in- 
strument, the  usage  of  trade  or  business,  if  any,  with  respect  to  such 
instruments,  and  the  facts  of  the  particular  case,"  left  it  to  them  to  de- 
termine whether  the  check  was  presented  on  Monday,  or,  if  they  were 
not  satisfied  that  it  was,  then  to  determine  whether  if  it  passed,  from 
hand  to  hand  and  each  one  had  a  reasonable  time  to  present  it  the  pre- 
sentment on  Friday  was  within  a  reasonable  time.  For  aught  that  ap- 
pears the  jury  may  not  have  been  satisfied  that  the  check  was  present- 
ed on  Monday  and  may  have  found  for  the  plaintiff  on  the  ground 
that  the  presentment  on  Friday  was  within  a  reasonable  time.  The 
question  is  therefore  distinctly  raised  whether  a  presentment  on  Fri- 
day could  have  been  found  to  be  within  a  reasonable  time. 

The  general  rule  is  as  was  stated  by  the  judge  and  as  is  provided  in 
the  negotiable  instruments  act  (Rev.  Laws,  c.  73,  §  203)  that  a  check 
must  be  presented  for  payment  within  a  reasonable  time  after  it  is  is- 
sued. If  it  is  not  so  presented  and  the  drawer  sustains  a  loss  by  rea- 
son of  the  failure  of  the  drawee  he  will  be  discharged  from  liability  to 
the  extent  of  such  loss,  continuing  liable  otherwise.  This  results  from 
the  nature  of  the  instrument  which  though  defined  in  the  negotiable 
instruments  act  (Rev.  Laws,  c.  73,  §  202)  as  "a  bill  of  exchange  drawn 
on  a  bank  payable  on  demand"  is  intended  for  immediate  use  (Mussey 
V.  Eagle  Bank,  9  Mete.  30G,  314)  and  not  to  circulate  as  a  promissory 
note,  and  it  consequently  would  be  unjust  to  subject  the  drawer  to  the 
loss  if  any  resulting  from  failure  to  present  it  for  payment  within  a 
reasonable  time.  \\' hat  is  a  reasonable  time,  however,  still  remains  for 
consideration.  The  negotiable  instruments  act  provides  generally 
(Rev.  Laws,  c.  73,  §  209)  as  the  judge  said  that  "in  determining  what 
is  a  'reasonable  time'  or  an  'unreasonable  time'  regard  is  to  be  had  to 
the  nature  of  the  instrument,  the  usage  of  trade  or  business,  if  any, 
with  respect  to  such  instruments  and  the  facts  of  the  particular  case." 
This,  however,  would  not  seem  to  lay  down  or  to  establish  any  new 
rule.  The  nature  of  the  instrument  and  the  facts  of  the  particular 
case  have  always  been  considered  in  passing  upon  the  question  of  rea- 
sonable or  unreasonable  time.     In  deciding,  therefore,   whether  this 


Ch.  2)  DRAWER    AND    IXDORSER.  575 

check  was  presented  within  a  reasonable  time,  if  presented  on  Friday, 
resort  must  be  had  to  the  rules  which  have  been  hitherto  established  in 
similar  cases.  And  one  of  the  rules  which  has  been  established  is  that 
where  the  drawer  and  drawee  and  the  payee  are  all  in  the  same  city  or 
town  a  check  to  be  presented  within  a  reasonable  time  should  be  pre- 
sented at  some  time  before  the  close  of  banking  hours  on  the  day  aft- 
er it  is  issued  and  that  its  circulation  from  hand  to  hand  will  not  ex- 
tend the  time  of  presentment  to  the  detriment  of  the  drawer.  If  it  is 
presented  and  paid  afterwards  the  drawer  suffers  no  harm.  But  if 
not  presented  within  the  time  thus  fixed,  and  there  is  a  loss  it  falls  not 
on  him  but  on  the  holder.     *     *     * 

The  case  of  Taylor  v.  Wilson,  11  Mete.  44,  45  Am.  Dec.  180,  relied 
on  by  the  plaintiff,  was  a  case  where  a  check  was  drawn  by  one  doing 
business  in  Charlestown  and  living  in  Roxbury  on  a  bank  in  Charles- 
town  in  favor  of  a  resident  of  Newport.  The  check  was  dated  Sep- 
tember 30,  1843,  which  was  Friday,  and  was  received  by  the  payee 
Saturday  evening,  October  1st.  On  Tuesday,  October  4th,  having 
been  previously  cashed  for  the  payee  by  a  local  bank,  it  was  given  by 
the  cashier  of  that  bank  to  a  messenger  to  be  carried  to  the  Merchants* 
Bank  at  Providence  in  the  usual  course  of  remitting  its  funds  and  se- 
curities and  was  received  by  that  bank  on  Wednesday  and  sent  by  its 
cashier  to  the  Suffolk  Bank  at  Boston.  That  bank  received  it  on  the 
next  day  (October  6th)  and  presented  it  on  the  same  day  to  the  bank 
on  which  it  was  drawn  and  payment  was  refused ;  the  bank  having 
closed  its  doors  on  Monday  morning,  October  3d,  and  being  insolvent. 
The  case  was  submitted  to  the  court  on  agreed  facts  with  power  to 
draw  inferences  and  the  court  found  in  favor  of  the  payee  and  against 
the  drawer.  The  court  held  in  effect  that  under  the  circumstances 
there  had  been  no  laches  and  that  the  check  had  been  presented  with- 
in a  reasonable  time.  There  is  a  sentence  in  the  opinion  to  the  effect 
that  a  check  may  pass  from  hand  to  hand  and  that  a  reasonable  time  is 
allowed  to  each  party  receiving  it  to  present  it  for  payment  and  the 
case  has  been  cited  to  that  point  with  approval  in  Veazie  Bank  v. 
Winn,  40  Me.  60.  But  we  do  not  think  that  the  court  meant  to  lay 
down  the  rule  that  under  any  and  all  circumstances  each  party  receiv- 
ing a  check  from  a  previous  holder  was  entitled  to  a  reasonable  time 
to  present  it  for  pa}Tiient,  or  that  the  case  required  that  it  should  lay 
down  such  a  rule.  On  the  contrary  the  court  expressly  said  that  a 
party  receiving  a  check  was  not  guilty  of  laches  if  he  did  not  present 
it  on  the  same  day  on  which  it  was  drawn,  but  was  allowed  a  reasona- 
ble time  for  that  purpose,  and  that  the  next  day  was  held  to  be  such 
reasonable  time.  The  decision  should  be  limited  to  the  case  before  the 
court  which  was  that  of  a  check  drawn  on  a  bank  in  one  place  and  sent 
to  a  payee  in  another  place  at  considerable  distance  and  forwarded  for 
presentment  in  the  usual  course  of  business,  and,  so  understood  and 
applied,  was  correct.  It  follows  from  what  has  been  said  that  the  ex- 
ceptions must  be  sustained.    The  conclusion  to  which  we  have  come  on 


576  LIABILITY  OF  PARTIES.  (Part  3 

the  principal  question  renders  it  unnecessary  to  consider  the  questions 
of  evidence,  though  we  may  observe  that  we  see  no  error  in  regard  to 
them. 

Exceptions  sustained.^' 


COLUMBIAN  BANKING  COMPANY  v.  BOWEN. 
(Supreme  Court  of  Wisconsin,  1908.    134  Wis.  218,  114  N.  W.  451.) 

Appeal  from  Barron  county  circuit  court, 

June  10,  li)03,  the  banking  tirni  known  as  the  Farmers'  &  Mer- 
chants' Bank,  of  Bangor,  Wis.,  sold  to  the  defendant  a  $400  draft, 
drawn  in  the  usual  form,  dated  on  that  day,  payable  to  defendant's  or- 
der, and  drawn  by  such  firm  on  the  National  Bank  of  North  America, 
at  Chicago,  111.  The  draft  was  sent  to  the  defendant  at  Barron,  Wis., 
and  was  indorsed  by  him  to  A.  R.  Tabbert,  to  whom  it  was  forward- 
ed by  mail,  at  Spokane,, Wash.,  June  16,  1903,  and  was  there  received 
by  him  June  20th  thereafter.  He  was  at  Spokane  temporarily  and 
was  on  his  way  to  the  city  of  San  Francisco,  Cal.  July  14,  1903,  he 
indorsed  the  draft  and  sold  the  same  to  the  plaintiff  at  such  city,  re- 
ceiving $100  therefor.  On  that  day,  in  due  course,  plaintiff  sent  the 
draft  by  mail  to  the  Bankers'  National  Bank,  of  Chicago,  111.,  by  which 
it  was  received  July  18th  thereafter,  and  was  then,  as  requested,  duly 
presented  to  the  drawee  for  payment,  which  was  refused,  whereupon 
it  was  duly  protested  for  nonpayment  by  a  duly  authorized  notary  pub- 
lic, who  forwarded  a  manifest  thereof  with  notices  of  protest  for  A. 
R.  Tabbert,  the  plaintiff  and  the  defendant,  to  the  plaintiff  at  San 
Francisco,  Cal.,  and  also  sent  due  notice  to  the  National  Bank  of  North 
America  at  Chicago,  111.,  and  to  the  drawer  at  Bangor,  Wis.,  July  19, 
1903.  Plaintiff  upon  receipt  of  the  manifest  and  notices  duly  sent  the 
one  for  defendant  to  him  at  Barron,  Wis.,  by  whom  it  was  duly  receiv- 
ed, and  sent  the  one  for  Tabbert  by  mail  to  his  post  office  address  and 
reputed  place  of  residence,  that  being  San  "Francisco,  Cal.  Thereafter 
due  demand  was  made  on  defendant  for  payment  of  the  draft,  and  the 
same  was  refused.  Jiily  28,  1903,  the  property  of  the  drawer  was 
placed  in  the  possession  of  a  receiver,  who  duly  paid  upon  the  draft 
•$144.49,  January  6,  1904,  $61.93,  May  20th  thereafter,  and  $30.96, 
June  oth  followang.  Plaintiff  was  the  owner  of  the  draft  at  the  time 
of  the  commencement  of  the  action,  and  at  the  time  of  the  trial  thereof 
there  was  due  thereon  $210. 

The  pleadings  presented  issues  for  decision  involving  facts  as  above 
detailed.  The  case  was  tried  by  the  court  resulting  in  findings  of  fact 
in  accordance  with  the  statement,  'and  a  conclusion  of  law  that  plaintiff 
became  the  owner  of  the  draft  in  due  course,  and  was  entitled  to  judg- 
ment for  $210,  with  costs.    Judgment  was  accordingly  rendered. 

2  8  SaiUR  rase.  197  Mass.  2G3,  S5  N.  E.  SGI,  15  L.  R.  A.  (N.  S.)  243  (1908). 


Ch.  2)  DIIAWKR    AND    INDOIISER.  577 

MarshalIv,  J.  (after  stating  the  facts  as  above).  Counsel  for  appel- 
lant have  presented  quite  an  extended  argument,  referring  to  many  au- 
thorities, as  to  the  law  antedating  and  independently  of  the  negotiable 
instrument  statute  (Sanborn's  St.  Supp.  1906,  §§  1675  to  1684—6; 
chapter  356,  p.  681,  Laws  1899)  to  support  the  proposition,  that  appel- 
lant was  released  from  liability  on  the  instrument  in  question,  because 
of  the  period  intervening  between  his  parting  therewith  and  the  pres- 
entation thereof  to  the  drawee  for  payment.  Such  statute  was  enacted 
for  the  purpose  of  furnishing,  in  itself,  a  certain  guide  for  the  deter- 
mination of  all  questions  covered  thereby  relating  to  commercial  paper, 
and,  therefore,  so  far  as  it  speaks  without  ambiguity  as  to  any  such 
question,  reference  to  case  law  as  it  existed  prior  to  the  enactment  is 
unnecessary  and  is  liable  to  be  misleading. 

The  negotiable  instrument  law  is  not  merely  a  legislative  codifica- 
tion of  judicial  rules  previously  existing  in  this  state  making  that  writ- 
ten law,  which  was  before  unwritten.  It  is,  so  far  as  it  goes,  an  in- 
corporation into  written  law  of  the  common  law  of  the  state,  so  to 
speak,  the  law  merchant  generally  as  recognized  here,  with  such  chang- 
es or  modifications  and  additions  as  to  make  a  system  harmonizing,  so 
far  as  practicable,  with  that  prevailing  in  other  states.  That  it  con- 
tains some  quite  material  changes  in  previous  rules  governing  com- 
mercial paper  we  have  had  occasion  heretofore  to  point  out.  Hodge  v. 
Smith,  130  Wis.  326,  110  N.  W.  192 ;  Aukland  v.  Arnold,  131  Wis. 
64,  111  N.  W.  212. 

The  primary  question  discussed  by  appellant's  counsel,  it  is  believed 
is  fully  covered  by  the  negotiable  instrument  law.  There  are  a  multi- 
tude of  decisions  regarding  the  character  of  a  bill  of  exchange  and  that 
of  a  check,  as  those  terms  are  used  in  business  transactions,  and  to 
what  extent  the  incidents  of  one  are  identical  with  those  of  the  other, 
which  decisions  are  so  variant  in  their  phrasing  of  the  matter  as  to 
produce  more  or  less  confusion  in  respect  thereto  with  many  apparent, 
and  some  real,  conflicts,  to  remedy  which  was  one  of  the  principal  ob- 
jects of  the  law. 

To  that  end  it  was  provided  in  section  1680,  "A  bill  of  exchange  is 
an  unconditional  order  in  writing  addressed  by  one  person  to  another, 
signed  by  the  person  giving  it,  requiring  the  person  to  whom  it  is  ad- 
dressed to  pay  on  demand  or  at  a  fixed  or  determinable  future  time  a 
sum  certain  in  money  to  order  or  bearer,"  and  it  was  further  provided 
in  section  16S4 — 1,  "A  check  is  a  bill  of  exchange  drawn  on  a  bank, 
payable  on  demand." 

As  to  whether  the  incidents  of  the  species  of  bills  of  exchange  last 
mentioned  are  the  same  as  those  of  bills  of  exchange  generally,  it  was 
further  provided  in  the  section  last  referred  to,  "Except  as  herein  oth- 
erwise provided,  the  provisions  of  this  act  applicable  to  a  bill  of  ex- 
change payable  on  demand  apply  to  a  check."  The  only  exception  re- 
ferred to  material  to  this  case  is  contained  in  section  1684 — 2,  in  these 
Sm.&  M.B.&  N.— 37 


578  LIABILITY  OF  PARTIES.  (Part  3 

words :  "A  check  must  be  presented  for  payment  within  a  reasonable 
time  after  its  issue  or  the  drawer  will  be  discharged  from  liability 
thereon  to  the  extent  of  the  loss  caused  by  the  delay." 

Keeping  in  mind  that  the  discharge  from  liability  above  referred  to 
because  of  unreasonable  delay  after  the  issuance  of  a  check  in  present- 
ing it  for  payment,  is  of  the  drawer  only,  and  that  this  action  is  against 
the  payee  who  indorsed  the  instrument  in  question  without  qualifica- 
tion and  put  it  in  circulation,  we  turn  to  section  1678 — 1,  which  pro- 
vides, as  to  a  bill  of  exchange  payable  on  demand,  which  from  the  fore- 
going obviously  includes  a  check  or  draft  on  a  bank  of  the  character 
of  the  one  in  question,  "presentment  for  payment  will  be  sufficient  if 
made  within  a  reasonable  time  after  the  last  negotiation  thereof." 

From  the  foregoing  it  seems  plain  that  as  regards  the  payee  of  such 
an  instrument  as  we  have  here,  who  puts  the  same  in  circulation  with 
his  unqualified  indorsement  thereon,  and  all  subsequent  parties  thereto 
so  indorsing  the  same,  presentment  for  payment  is  sufficient,  as  re- 
gards their  liability,  if  made  within  a  reasonable  time  after  the  last 
negotiation.  A  bill  of  exchange  payable  on  demand,  regardless  of  its 
character,  put  in  circulation,  so  long  as  its  circulating  character  is  pre- 
served may  be  outstanding  without  impairing  the  liability  of  indorsers 
thereof.  Formerly  the  length  of  time  within  which  a  bill  of  exchange 
might  circulate  without  impairing  such  liability  was  more  or  less  un- 
certain, rendering  it  very  difficult  to  determine  any  one  case  by  the  de- 
cision in  another.  That  difficulty  was  removed,  so  far  as  practicable, 
by  the  provision  that  only  the  time  need  be  considered  intervening  be- 
tween the  last  negotiation  and  the  presentment.  That  is  recognized  as 
a  radical  change  in  the  law  as  it  formerly  existed.  Section  195,  Sel- 
over,  Neg.  Inst.  Law. 

As  to  an  ordinary  bill  of  exchange  put  in  circulation,  it  was  quite 
anciently  held  that  the  period  between  July  18th  of  one  year  and  Jan- 
uary 16th  of  the  next  year  was  not  necessarily  unreasonable.  Go  wan 
v.  Jackson,  20  Johns.  (N.  Y.)  176.  Perhaps  one  might  now  keep  a  bill 
of  exchange  for  such  length  of  time  as  to  destroy  its  circulating  char- 
acter notwithstanding  he  ultimately  passed  it  along  to  another  per- 
son, but  that  situation,  as  we  view  the  case,  does  not  exist  here. 

Applying  the  law  as  aforesaid  to  the  facts  of  this  case  it  is  readily 
seen  that  the  delay  in  presenting  the  paper  for  payment  between  its 
date  and  the  negotiation  to  the  bank  at  San  Francisco  is  immaterial. 
Appellant  unqualifiedly  indorsed  the  paper  and  put  it  in  circulation  by 
sending  it  to  Tabbert  at  a  distant  part  of  the  country,  probablv  know- 
ing that  he  was  a  traveler.  Tabbert  received  the  paper  while  journey- 
ing with  the  intention  of  going  to  San  Francisco  and  held  it  till  he  ar- 
rived there  and  then  negotiated  it.  It  was  promptly  presented  for  pav- 
ment  thereafter  and  so  in  time,  as  regards  that  circumstance,  to  pre- 
serve the  liability  of  appellant. 

The  court  decided,  as  indicated,  that  Tabbert  was  a  traveler  with 
San  Francisco  as  his  destination  and  properly  held  that  such  circum- 


Ch.  2)  DRAWER    AND    INDORSER.  579 

Stance  sufficiently  explained,  if  any  explanation  were  necessary,  the 
lapse  of  time  between  his  reception  of  the  paper  and  his  negotiation 
thereof,  preserving  its  circulating  character  and  warranting  the  find- 
ing that  the  respondent  came  thereby  in  due  course. 

The  point  is  made  that  the  instrument  was  not  presented  to  the 
drawee  for  payment  during  banking  hours.  The  negotiable  instru- 
ment law  at  section  1678 — 2  provides  that  "Presentment  for  payment 
to  be  sufficient,  must  be  made :  *  *  *  at  a  reasonable  hour  on  a 
business  day.  *  *  *  "  'j^j^g  evidence  shows  that  the  paper,  after 
taking  its  course  through  the  clearing  house,  was  presented  to  the 
drawee  for  payment  on  the  afternoon  of  the  same  day  between  the 
hours  of  3  and  6  o'clock.  The  proof  is  to  the  effect  that  such  was  the 
customary  way  of  doing  such  business  in  Chicago,  where  the  drawee 
was  located.  That  is,  as  we  understand  it,  that  the  business  day  of  the 
bank  continued  after  the  closing  of  the  clearing  house  transactions  so 
as  to  enable  banks  holding  paper  for  collection,  refused  recognition  in 
such  transactions,  to  present  the  same  for  payment  as  was  done  in  this 
case.  That  satisfies  the  statute.  What  constitutes  business  hours  of  a 
bank,  within  the  meaning  of  the  statute,  has  reference  to  the  general 
custom  at  the  place  of  the  particular  transaction  in  question.  In  case 
of  a  transaction  occurring  in  a  foreign  jurisdiction,  as  in  the  instance 
in  question,  the  court  cannot  take  judicial  notice  of  what  constitutes 
reasonable  hours  on  a  business  day.  1  Daniel  on  Neg.  Inst.  (5th  Ed.) 
§  601.  It  is  a  matter  of  proof,  though  in  case  of  the  notarial  certifi- 
cate of  the  transaction,  as  here,  being  regular  so  as  to  furnish  prima 
facie  proof  that  the  paper  was  duly  presented  for  payment,  that  raises 
the  presumption  that  the  presentment  was  made  at  a  proper  time. 
Cayuga  County  Bank  v.  Hunt,  2  Hill  (N.  Y.)  635. 

Judgment  affirmed.  ^^ 


COMMERCIAL  NAT.  BANK  OE  SYRACUSE  v.  ZIMMERMAN 

et  al. 

(Court  of  Appeals  of  New  York,  1906.     185  N.  Y.  210,  77  N.  E.  1020.) 

Appeal  from  a  judgment  of  the  Appellate  Division  of  the  Supreme 
Court  in  the  Fourth  Judicial  Department,  entered  June  5,  1905,  af- 
firming a  judgment  in  favor  of  defendant  Zimmerman,  entered  upon 
a  decision  of  the  court  on  trial  at  Special  Term. 

The  plaintiff  brought  this  action  to  foreclose  a  lien  on  certain  bonds 
of  a  railroad  company,  which  it  had  held  as  collateral  security  for  the 
payment  of  a  note  of  the  defendant,  the  Syracuse  Construction  Com- 
pany, indorsed  by  Joseph  Zimmerman,  and  to  recover  a  judgment  for 
any  deficiency,  arising  upon  the  sale  of  the  bonds,  against  Zimmer- 

27  Accord:    Plover  Bank  v.  Moodie.  l."5  Iowa.  085,  110  N.  W.  29,  11.3  N.  W, 
476  (1900)  semble.     See  Gordon  v.  Leviue,  197  Mass.  2G3,  83  N.  E.  SGI,  15  U 
R.  A.  (N.  S.)  243  (1908). 


580  LIABILITY  OF  PARTIES.  (Part  3 

man's  estate.  The  note  reads  as  follows :  "$10,000.  Syracuse,  N.  Y., 
Sept.  16,  18'jy.  (Jn  demand  after  date  we  promise  to  pay  to  the  order 
of  Joseph  Zimmerman  ten  thousand  dollars  at  Commercial  Bank.  Val- 
ue received  with  interest.  Syracuse  Construction  Co.,  per  J.  S.  Kauf- 
mann,  Treas." 

Upon  the  trial  of  the  issue,  which  was  had  without  a  jury,  the  trial 
judge  found,  as  the  facts  of  the  case,  that  the  note  was  indorsed  by 
Zimmerman,  without  consideration  and  for  the  accommodation  of  the 
maker;  that  on  September  20,  1899,  the  plaintiff  discounted  the  note 
for  the  maker,  the  defendant  construction  company,  receiving  the  bonds 
of  the  railroad  company  as  collateral  security  for  its  payment ;  that,  in 
January,  1903,  Zimmerman  died  intestate,  and  his  widow,  this  defend- 
ant, was  appointed  his  administratrix ;  that  on  April  9,  1903,  the  note 
was  presented  to  the  maker  for  pajTiient  and,  payment  being  refused, 
was  duly  protested  for  nonpayment ;  that  "said  note  was  not  present- 
ed within  a  reasonable  time  after  it  was  issued  and  that  said  plaintiff 
did  not  demand  the  payment  thereof,  or  give  notice  of  the  dishonor 
thereof,  within  a  reasonable  time."  Upon  these  facts,  he  reached  the 
legal  conclusion  that  the  plaintiff  was  entitled  to  enforce  a  lien  upon 
the  bonds  by  the  sale  thereof ;  but  that,  as  the  "presentment  of  said 
note  was  not  made  within  a  reasonable  time  after  the  discount,"  the 
indorser,  Zimmerman,  and  his  estate  were  released  from  all  liability 
thereon.  Upon  the  plaintiff's  appeal  from  so  much  of  the  judgment 
thereupon  entered,  as  adjudged  that  it  was  not  entitled  to  judgment 
against  the  estate  of  the  indorser  for  the  deficiency  upon  a  sale  of  the 
bonds,  the  Appellate  Division,  in  the  fourth  department,  by  a  unani- 
mous vote,  affirmed  the  judgment  as  rendered.  The  plaintiff  now  ap- 
peals to  this  court. 

Gray,  J.  (after  stating  the  facts  as  above).  The  only  question  of  im- 
portance, which  this  appeal  presents,  is  of  the  correctness  of  the  de- 
cision that  the  presentment  of  the  note  for  payment  had  not  been  made 
by  the  plaintiff  within  a  reasonable  time.  That  must,  necessarily,  turn 
upon  the  effect  of  the  enactment  of  the  provisions  of  the  negotiable 
instruments  law  of  1897.  Laws  1897,  p.  719,  c.  612.  Section  131,  p. 
736,  of  that  law  provides  that,  where  the  instrument  "is  payable  on 
demand,  presentment  must  be  made  within  a  reasonable  time  after  its 
issue,  except  that  in  the  case  of  a  bill  of  exchange,  presentment  for 
payment  will  be  sufficient  if  made  within  a  reasonable  time  after  the 
last  negotiation  thereof."  By  section  4,  it  provided  that  "in  determin- 
ing what  is  a  'reasonable  time,'  or  an  'unreasonable  time,'  regard  is  to 
be  had  to  the  nature  of  the  instrument,  the  usage  of  trade  or  business 
(if  any)  with  respect  to  such  instruments,  and  the  facts  of  the  particu- 
lar case." 

Prior  to  this  legislative  enactment,  the  decision  of  this  court  in  Mer- 
ritt  V.  Todd,  23  N.  Y.  28,  80  Am.  Dec.  243,  was  regarded  as  having 
settled  the  rule  of  law  applicable  to  the  determination  of  such  cases. 
In  that  case,  the  note  was  payable  on  demand,  with  interest,  and  the 


Ch,  2)  DRAWER    AND    INDOUSER.  581 

question  arose  as  to  the  continuance  of  the  indorser's  liability,  where 
three  years  had  intervened  between  the  making  and  presentment  for 
payment.  Chief  Judge  Comstock,  with  the  concurrence  of  the  majority 
of  the  judges,  undertook  to  resolve  wliat  he  regarded  as  the  existing 
uncertainty,  as  to  the  rule,  which  conflicting  decisions  had  brought 
about,  by  referring  the  interpretation  of  the  contract  to  the  adoption 
of  one  of  two  principles.  By  the  one  principle,  a  promissory  note,  pay- 
able on  demand  with  interest  and  indorsed,  is  to  be  regarded  as  a  con- 
tinuing security  and  no  dishonor  attaches  until  payment  is  required 
and  refused.  By  the  other,  or  opposing,  rule  the  holder,  if  he  wishes 
to  charge  the  indorser,  must  make  his  demand  of  the  maker  without 
delay.  Judge  Comstock  finds  no  intermediate  ground  to  stand  upon 
and  holds  "that  questions  of  this  kind  ought  to  be  determined  accord- 
ing to  one  of  the  two  rules  which  have  been  mentioned ;  in  other 
words,  that  the  demand  may  be  made  in  due  season  at  any  time  so  as 
to  charge  the  indorser,  or  else  that  he  is  discharged  unless  it  be  made 
with  due  diligence,  in  the  general  sense  of  the  commercial  law.  Be- 
tween these  alternatives,  we  are  to  select  the  one  which  will  best  har- 
monize with  the  language  of  the  contract  and  the  intention  of  the  par- 
ties. A  demand  note  may  be  payable  with  or  without  interest.  If  the 
security  be  not  on  interest,  it  may  be  a  fair  exposition  of  the  contract 
to  hold  that  no  lime  of  credit  is  contemplated  by  the  indorser,  and  that 
the  demand  should  be  made  as  quickly  as  the  law  will  require  upon  a 
check  or  sight  draft.  *  *  *  g^^  *  *  *  ^g  think  that  a  note 
payable  on  demand  with  interest  is  a  continuing  security,  from  which 
none  of  the  parties  are  discharged  until  it  is  dishonored  by  an  actual 
presentment  and  refusal  to  pay.  *  *  *  jf  the  parties  declare  in 
the  written  instrument,  which  is  the  only  evidence  of  their  agreement, 
that  the  money  shall  be  paid  on  call,  with  interest  in  the  meantime  a 
productive  investment  of  the  sum  for  some  period  of  time  is  plainly 
intended.  What,  then,  is  that  period  ?  The  only  answer  which  can  be 
given  is  that  it  is  indefinite  or  indeterminative,  and  ascertainable  only 
by  an  actual  call  for  the  money ;  and  if  that  be  the  meaning  of  the 
principal  parties  the  indorser  must  be  deemed  to  lend  his  name  to  the 
contract  with  the  same  intention.  *  *  *  \Ye  see  no  good  reason 
whv  a  note,  like  the  one  now  in  question,  should  not  be  construed  pre- 
cisely according  to  its  terms,  and  if  we  follow  that  construction  such 
instruments  are  not  dishonored  by  the  mere  effluxion  of  time." 

Although  the  decision  in  Merritt  v.  Todd  was  subsequently  discuss- 
ed, and  in  some  cases  criticised,  its  authority  was  not  shaken  as  estab- 
lishing a  rule  of  law  and  it  was  expressly  followed  as  late  as  in  Parker 
v.  Stroud,  98  N.  Y.  379,  50  Am.  Rep.  685.  See  Herrick  v.  Woolver- 
ton,  41  N.  Y.  581,  1  Am.  Rep.  461 ;  Pardee  v.  Fish,  60  N.  Y.  265,  19 
Am.  Rep.  176 ;  Crim  v.  Starkweather,  88  N.  Y.  339,  42  Am.  Rep.  250. 
Judge  Comstock  followed  the  doctrine  of  the  English  courts,  in  dif- 
ferentiating notes  payable  on  demand  with  interest,  from  those  paya- 
ble on  demand  merely.     He  sought  to  give  effect,  in  the  former  case. 


582  LIABILITY  OF  PARTIES.  (Part  3 

to  wliat  sconicd  to  be  an  intention  of  the  parties  that,  notwithstanding 
the  terms,  there  should  be  no  immediate  demand,  and  that  t)ie  time  of 
payment  should  be  future;  thus  making  the  instrument  a  continuing 
obligation. 

The  law  being  thus  settled  in  this  state,  the  negotiable  instruments 
law  was  passed,  in  1897,  as  the  outcome  of  a  general  movement  to 
bring  about  a  uniform  law  in  this  country  covering  the  subject  of  bills 
and  notes.  It  was  a  codification  of  the  law  and  in  the  respect  which 
we  are  considering  it  modified  the  rule  as  formulated  in  Merritt  v. 
Todd.  It  established  one  rule,  which  was  to  be  applicable  to  all  cases, 
that  where  an  instrument  "is  payable  on  demand  presentment  must  be 
made  within  a  reasonable  time  after  issue."  No  distinction  was  to  be 
made,  as  theretofore,  when  the  instrument  was  an  interest-bearing 
obligation.  While  therefore  it  must  be  regarded  as  changing  the  rule 
upon  the  subject  of  the  time  for  the  presentment  of  such  instruments, 
by  placing  them  upon  the  same  footing,  the  fourth  section  of  the  law 
has  to  be  given  effect ;  which  requires,  in  determining  what  is  a  rea- 
sonable time,  a  consideration  to  be  had  of  the  nature  of  the  instru- 
ment, any  usage  of  trade  and  the  facts  of  the  particular  case.  That 
would  certainly  be  sufficient  to  authorize  the  differentiation  of  bills,  or 
promissory  notes,  from  other  instruments  for  the  payment  of  money ; 
but  even  where  it  is  a  question  of  the  time  within  which  a  demand  note 
must  have  been  presented,  the  facts  and  circumstances  of  the  case 
must  be  regarded.  If  a  note  is  payable  on  demand,  it  is  always  mature 
and  may  at  any  time  be  demanded.  The  statute  of  limitations  com- 
mences to  run  against  the  maker  from  its  issue.  Herrick  v.  Woolver- 
ton,  41  N.  Y.  587,  1  Am.  Rep.  461.  After  its  issue,  what  constitutes 
reasonableness  of  time  for  its  presentment  cannot  be  determined  by 
any  fixed  rules ;  for,  plainly,  the  particular  circumstances  may  be  such 
as  to  evidence  some  intention  of  the  parties  as  to  its  continuance.  And 
certainly  they  may  be  sufficient  to  justify  an  inference  of  unreason- 
able delay. 

In  my  opinion,  what  the  Legislature  intended  to  accomplish  by  the 
provisions  of  the  negotiable  instruments  law  in  question  was  to  do 
away  with  the  distinction  between  notes,  or  bills,  payable  on  demand, 
which  Merritt  v.  Todd  had  created,  and  to  leave  the  question  of  their 
reasonable  presentment  for  payment,  in  order  to  charge  the  parties  to 
them,  as  one  for  the  determination  of  the  court  upon  the  facts.  That 
question,  if  the  facts  were  unsettled  and  the  testimony  was  conflicting, 
might  be  a  mixed  one  of  law  and  fact,  which  the  jury  should  decide, 
under  the  instructions  of  the  court  as  to  the  law ;  but  where  they  are 
ascertained,  and  are  not  in  dispute,  the  question  is  one  of  law.  Avmar 
v.  Beers,  7  Cow.  705,  709,  17  Am.  Dec.  538 ;  Mohawk  Bank  v.  Brod- 
erick,  10  Wend.  304,  308 ;  Carroll  v.  Upton,  3  N.  Y.  272 ;  Hunt  v. 
Maybee,  7  N.  Y.  266,  272. 

In  the  present  case  the  defendant  offered  no  evidence,  and  there  was 
no  dispute  about  the  facts.    The  trial  judge  had  before  him  the  facts 


Oh.  2)  DRAWER    AND    INDOUSER.  583 

of  the  discount  of  a  demand  note,  bearing  interest;  that  the  indorse- 
ment by  Zimmerman  was  without  consideration  and  for  the  maker's 
accommodation ;  that  its  payment  was  secured  by  the  deposit  of  cer- 
tain securities;  that  notwithstanding  that  some  two  years  after  the 
making  of  the  note  the  plaintiff  had  complained  to  Zimmerman  of  its 
nonpayment  and  twice,  a  year  later,  had  written  that  the  maker  was 
in  default  as  to  the  interest,  no  steps  were  taken  to  charge  the  indors- 
er,  by  presentment  of  the  note  for  payment  and  by  protest  for  non- 
payment, until  more  than  three  and  a  half  years  had  elapsed.  If  the 
finding  that  the  note  was  not  presented  within  a  reasonable  time  de- 
pended for  its  justification  upon  the  evidence,  we  should  be,  undoubt- 
edly, concluded  from  reviewing  it  by  the  rule  of  unanimous  affirmance. 
But  viewing  it,  as  I  think  we  must,  as  a  question  of  law  to  be  decided 
by  the  court  upon  the  ascertained  facts,  it  depended  upon  the  interpre- 
tation of  the  statute  as  applied  to  the  facts  and,  in  my  opinion,  the  de- 
cision of  the  trial  court  was  correct. 

It  is  argued  by  the  appellant  that  the  defense  that  the  note  was  not 
presented  within  a  reasonable  time  after  its  issue  was  one  which  should 
have  been  specially  pleaded  in  the  answer.  This  objection  was  not  tak- 
en upon  the  trial ;  but,  assuming  that  it  could  properly  be  raised  upon 
the  appeal,  it  is  untenable.  The  burden  is  on  the  holder  of  a  note, 
when  seeking  to  charge  an  indorser,  to  prove  due  and  timely  present- 
ment, and  the  giving  of  notice  to  the  indorser  of  its  dishonor.  The 
obligation  of  the  indorser  is  conditional  upon  all  the  steps  having  been 
taken  by  the  holder,  which  the  statute  has  prescribed  as  to  present- 
ment, and  as  to  notice  of  nonpayment,  etc.  The  negotiable  instruments 
law  is  the  codification  of  the  law  merchant  upon  the  subjects  treated, 
and  in  setting  forth  what  is  required  of  the  holder  of  a  note  it  casts 
upon  him  the  burden  to  prove  that  the  requirements  were  all  complied 
with.  They  were  necessary  conditions  of  his  right  to  recover.  Pre- 
sentment of  a  demand  note  within  a  reasonable  time  is  a  requirement 
of  the  statute,  and  the  liability  of  the  indorser  to  make  good  the  con- 
tract of  the  maker,  unlike  that  of  a  guarantor,  is  conditional  and  de- 
pends upon  the  holder's  having  made  a  case  under  the  statute  of  an 
obligation,  which  he  has  caused  to  mature  and,  by  appropriate  legal 
steps,  to  become  an  indebtedness  of  the  contracting  parties.  Brown  v. 
Curtis,  2  N.  Y.  225.  Therefore  I  think  it  would  be  incorrect  to  hold 
of  this  defense  that  it  is  of  an  affirmative  nature  and,  like  the  defense 
of  usury,  or  any  other  defense  which  avoids  an  obligation,  that  it  must 
be  pleaded  to  be  available. 

No  other  question  demands  consideration  and,  for  the  reasons  given, 
I  advise  the  affirmance  of  the  judgment,  with  costs.     ♦     *     ♦ 

Judgment  affirmed.'^ 

28  Accord:  Schlesin^rer  v.  Schnltz.  110  N.  Y.  App.  Dlr.  35G,  00  N.  Y.  Sr-p 
3a3  (IflOo),  ten  months  a  reasonable  time.  See.  also,  Morritt  r.  .Tackson.  ISl 
Mass.  69,  02  N.  E.  987  (1902),  three  mouths  au  unreasonable  delay. 


584  LiADiLiTY  OF  PARTIES.  (Part  3 

II.  Hour 

LUNT  et  al.  v.  ADAMS  et  al 
(Supreme  Judicial  CJourt  of  Maine,   1810.     17  Me.  230.) 

Assumpsit  on  a  promissory  note,  made  by  the  defendants  to  the 
plaintiffs,  dated  December  2,  183G,  for  $864. 8i,  payable  in  six  months 
with  interest.  The  writ  was  dated  June  2,  1837.  After  the  note  had 
been  read,  Jones,  the  deputy  sheriff  who  served  the  writ,  was  offered 
as"  a  witness  by  the  plaintiff's,  and  was  objected  to  by  the  defendants 
on  account  of  his  liability  by  reason  of  his  having  served  the  writ;  it 
appearing,  as  the  defendants  insisted,  upon  the  face  of  the  writ  that 
the  note  was  not  then  payable.  The  objection  was  overruled.  The 
witness  then  testified,  that  the  writ  was  handed  to  him  by  Caldwell, 
one  of  the  plaintiff's,  between  6  and  7  o'clock  on  the  morning  of  June  2, 
1837,  a  mile  or  two  distant  from  the  store  of  the  defendants  ;  that  on 
arriving  near  the  store,  Caldwell  directed  Jones  to  go  to  the  store  and 
wait  there,  and  make  no  service  until  he  should  come,  which  would  be 
done  shortly ;  that  Jones  went  to  the  store,  and  that  Caldwell  came 
there  soon  after,  and  told  one  of  the  defendants  he  wanted  an  adjust- 
ment of  his  demand ;  that  the  reply  was  that  he  would  see  the  other 
promisors ;  that  in  a  few  minutes  they  came  in ;  that  the  conversation 
after  Caldwell  came  in  had  lasted  half  an  hour,  when  Caldwell  told 
Jones,  the  witness,  that  it  was  of  no  use  to  try  further,  and  directed 
an  attachment  to  be  made  upon  the  writ ;  and  that  the  writ  was  im- 
mediately served  by  an  attachment  of  the  goods  of  the  defendants. 
Here  the  plaintiffs  rested  their  case,  and  the  judge  directed  a  nonsuit. 
To  that  direction  the  plaintiff's  excepted.-® 

SheplEY,  J.  The  most  favorable  position  of  the  case  for  the  plain- 
tiffs is  that  a  demand  was  made  about  8  o'clock  on  the  morning  of  the 
day  upon  which  the  note  became  payable,  and  payment  not  being  then 
made  a  suit  was  immediately  commenced.  It  was  decided  in  the  case 
of  Greeley  v.  Thurston,  4  Greenl.  479,  16  Am.  Dec.  285,  that  a  suit 
might  be  lawfully  commenced  on  the  day  the  bill  or  note  became  pay- 
able after  a  demand  had  been  made  at  a  reasonable  hour  of  the  same 
day. 

There  may  be  little  difficulty  in  towns  and  cities,  where  there  are 
business  or  banking  hours,  in  deciding  that  a  demand  should  be  made 
during  those  hours.  But  in  places  where  no  particular  hours  are 
known  for  making  and  receiving  payments  there  is  more  difficulty  in 
determining  what  would  be  a  reasonable  hour  for  this  purpose.  It 
may  often  happen  that  the  party  having  a  payment  to  make  would  ap- 
propriate the  earlier  part  of  the  day  to  obtain  the  means,  either  by  col- 
lecting, or  by  procuring  a  loan  from  a  bank  or  from  some  person  in  a 
neighboring  town.    To  establish  a  rule  that  would  deprive  him  of  that 

28  Arguments  of  counsel  are  omitted. 


Ch.  2)  DRAWER    AND    INDORSER.  585 

Opportunity  and  subject  him  to  a  suit,  and  that  would  render  him  liable 
to  have  his  business  broken  up,  while  thus  employed,  might  justly  be 
regarded  as  unreasonable.  The  general  rule  being  that  the  party  has 
all  the  day  to  make  his  payment,  that  in  relation  to  bills  and  notes 
should  not  be  so  varied  as  to  prevent  his  having  a  fair  opportunity  to 
make  arrangements  and  provide  the  means  of  payment  before  he  is 
subjected  to  a  suit.  In  this  case  the  demand  was  made  at  an  hour  so 
early  as  to  deprive  him  of  that  opportunity ;  and  it  was  not  therefore 
made  at  a  reasonable  hour.^° 
Exceptions  overruled. 


DANA  v.  SAWYER. 
(Supreme  Judicial  Court  of  Maine,  1S43.     22  Me.  244,  39  Am.  Dec.  574.) 

The  action  is  on  a  promissory  note  signed  by  T.  Sawyer  &  Co.,  dat- 
ed December  34,  1838,  for  $202.50,  on  four  months,  payable  to  and 
indorsed  by  the  defendant.  The  case  was  submitted  on  an  agreed 
statement  of  facts.  The  court  were  to  enter  a  nonsuit  or  default,  as 
they  might  determine  the  law  in  the  matter.^ ^ 

Shepley,  J.  This  case  is  presented  upon  an  agreed  statement  of 
facts,  from  which  it  appears  that  a  demand  for  payment  was  made  up- 
on the  maker  of  the  note,  between  11  and  12  o'clock  at  night  on  the 
day  that  it  became  payable,  by  calling  him  from  his  bed,  and  that  he 
did  not  pay  it.  There  is  no  further  statement  of  anything  else  said 
or  done,  except  that  a  notice  and  demand  for  payment  was  left  with 
him.  When  a  bill  or  note  is  payable  at  a  bank,  banking  house,  or  other 
place,  where  it  is  well  known  that  business  is  transacted  only  during 
certain  hours  of  the  day,  the  law  presumes  that  the  parties  intended  to 
conform  to  such  established  course  of  business,  and  requires  that  a  de- 
mand should  be  made  during  those  business  hours.  Parker  v.  Gordon, 
7  East,  385.  The  cases  of  Garnett  v.  Woodcock,  1  Starkie,  475,  and 
of  Henry  v.  Lee,  2  Chitty,  124,  may  show  an  exception  to  this  rule, 
that,  when  a  person  is  found  at  such  place  after  business  hours  author- 
ized to  give  an  answer,  the  demand  will  be  good.  While  it  may  be  dif- 
ficult to  reconcile  these  cases  with  the  case  of  Elford  v.  Teed,  1  M.  & 
S.  28,  when  the  bill  or  note  is  not  payable  at  a  place  where  there  are 
established  business  hours,  a  presentment  for  payment  may  be  made  at 
any  reasonable  hour  of  the  day.  Leftley  v.  Mills,  4  T.  R.  174  ;  Bar- 
clay V.  Bailey,  2  Campb.  527 ;  Triggs  v.  Newnham,  10  Moore,  240  ; 
Wilkins  v.  Jadis,  2  B.  &  Ad.  188.     What  hour  may  be  a  reasonable 

30  The  maker  of  a  note  payable  at  a  bank  has  until  the  close  of  banking 
hours  to  provide  funds  at  the  I'tink  for  payment  ((Ternian-Aiueiican  iJaiik  v. 
Milliman.  31  Misc.  Rep.  87.  0.5  N.  T.  Supp.  342  [WOO]):  and  an  action  may 
not  be  brought  against  either  him  or  the  indorsers  until  the  day  after  the 
day  of  maturity  (Kennedy  v.  Thomas,  [1S94]  2  Q.  B.  759  [C.  A.]j. 
31  The  statement  of  the  case  is  abridged- 


586  LIABILITY  OP  PARTIES.  (Part  3 

one  has  come  under  consideration  in  those  cases.  In  the  first  of  them 
Mr.  Justice  Duller  observes  that  "to  say  that  the  demand  should  be 
postponed  till  midnight  would  be  to  establish  a  rule  attended  with  mis- 
chievous consequences."  In  the  second  Lord  Ellenborough  said:  "If 
the  presentment  had  been  during  the  hours  of  rest,  it  would  have  been 
altogether  unavailing."  In  the  third  this  remark,  among  others,  is 
quoted  and  approved  by  Chief  Justice  Best.  In  the  fourth,  Lord  Ten- 
terden  remarked  that  "a  presentment  at  12  o'clock  at  night,  when  a 
person  has  retired  to  rest,  would  be  unreasonable."  These  observa- 
tions, so  just  and  so  applicable  to  this  case,  authorize  the  conclusion 
that  the  demand  was  not  made  at  a  reasonable  hour,  unless  the  fact 
that  the  maker  was  seen  and  actually  called  upon  at  that  time  should 
make  a  difference.  Perhaps,  in  analogy  to  the  exception  already  no- 
ticed, it  might  be  proper  to  admit  of  one  in  this  and  the  like  cases,  if 
it  should  appear  from  the  answer  made  to  the  demand  that  there  was 
a  waiver  of  any  objection  as  to  the  time,  or  that  payment  would  not 
have  been  made  upon  a  demand  at  a  reasonable  hour.  But  there  is 
nothing  in  this  agreed  statement  to  show  that  payment  might  not  have 
been  refused  because  the  demand  was  made  at  such  an  hour  that  the 
maker  did  not  choose  to  be  disturbed,  or  because  he  could  not  then 
have  access  to  funds  prepared  and  deposited  elsewhere  for  safety. 
Plaintiff  nonsuit. 


BANK  OF  SYRACUSE  v.  HOLLISTER. 
(Court  of  Appeals  of  New  York,  1858.     17  N.  Y.  46,  72  Am.  Dec.  416.) 

Appeal  from  the  Supreme  Court.  The  action  was  against  John 
Hollister  as  indorser  of  a  promissory  note,  made  by  F.  Hollister,  April 
6,  1851,  for  the  payment  of  $2,750,  one  year  after  date,  at  the  Bank  of 
Utica. 

The  trial  was  had  at  the  Onondaga  circuit,  before  Mr.  Justice  Allen, 
without  a  jury.  It  was  proved  that  on  the  9th  of  April,  1852,  when  the 
note  became  due,  it  was  brought  by  a  clerk  of  the  plaintiff  to  the  pay- 
ing and  receiving  teller  of  the  Bank  of  Utica,  who  was  also  a  notary 
public,  at  his  boarding  house  in  that  city,  at  half  past  6  in  the  even- 
ing, and  delivered  to  him  for  collection  or  protest.  He  went  to  the 
bank,  found  the  outer  door  locked,  and  could  not  obtain  admission. 
The  notary  and  teller  testified  that  thereupon  "I  made  a  demand  of 
payment  of  the  note  of  myself,  standing  on  the  steps  before  the  outer 
door  of  the  bank,  and  then  went  to  my  boarding  house  and  made  out 
the  notice  of  protest,  and  deposited  it  in  the  post  office  before  7  o'clock, 
the  mail  leaving  at  8,  directed  to  John  Hollister,  Buffalo,  Erie  County, 
his  place  of  residence."  He  further  proved  that  F,  Hollister,  the  mak- 
er of  the  note,  had  no  funds  in  the  bank,  and  that  no  one  called  at  the 
bank  to  pay  the  note,  or  inquired  for  it,  during  business  hours,  which 
closed  at  4  o'clock  p.  m. 


Ch.  2)  DRAWER    AND    IXDOKSER.  5S7 

The  judge  held  that  there  had  been  no  sufficient  demand  of  pay- 
ment, and  ordered  judg-ment  for  the  defendant,  which  having  been  af- 
firmed by  the  Supreme  Court  at  General  Term  in  the  Fifth  District, 
the  plaintiff  appealed  to  this  court. 

Harris,  J.  Two  questions  are  involved  in  the  decision  of  this  case : 
First,  relating  to  the  time  of  presenting  the  note  for  payment ;  second, 
the  manner  of  presentment. 

As  to  the  time:  The  note  was  payable  at  the  Bank  of  Utica.  By 
making  it  thus  payable,  the  maker  agreed  that  the  note  should  be  paid 
during  the  usual  business  hours  of  the  day  upon  which  it  matured. 
The  holder  also  agreed  that  the  note  should  be  presented  for  payment 
within  the  same  time.  In  giving  effect  to  the  contract  the  law  pre- 
sumes that  the  parties  intended  to  conform  to  the  known  and  establish- 
ed course  of  business  at  the  place  where  their  contract  was  to  be  per- 
formed. The  general  rule,  therefore,  is  that,  where  the  note  is  payable 
at  a  bank,  it  must  be  presented  for  payment  before  the  usual  hour  of 
closing  the  banking  house. 

Thus,  in  Parker  v.  Gordon,  7  East,  385,  a  bill  was  payable  at  a  bank- 
er's, whose  usual  time  for  closing  his  shop  was  6  o'clock.  The  bill 
was  presented  after  that  hour.  The  shop  was  closed  and  the  clerks 
gone.  In  an  action  against  the  drawer  of  the  bill,  it  was  held  that  the 
presentment  was  not  sufficient. 

But  though  the  presentment  is  made  after  business  hours,  it  will  be 
sufficient,  if  a  proper  person  be  found  at  the  place  to  give  an  answer. 
In  Garnett  v.  Woodcock,  1  Starkie,  475,  the  bill  was  payable  at  a  bank- 
er's in  London.  It  was  presented  for  payment  in  the  evening  of  the 
day  when  it  became  due.  A  boy  returned  for  answer,  "No  orders." 
Lord  Ellenborough  said,  upon  the  trial:  "I  think  it  perfectly  clear 
that  if  a  banker  appoint  a  person  to  attend  in  order  to  give  an  answer, 
a  presentment  would  be  sufficient,  if  made  before  12  at  night."  So, 
where  a  draft,  payable  at  the  bank,  "was  presented  for  payment  in  the 
afternoon  of  the  last  day  of  grace,  after  regular  banking  hours,  and 
the  cashier  of  the  bank,  being  there,  refused  payment,  because  there 
were  no  funds  there  belonging  to  the  acceptor,  it  was  held  that  the 
cashier,  whose  duty  it  was  to  attend  to  business  of  this  sort,  being  at 
the  bank,  and  having  returned  a  negative  answer,  and  it  appearing 
that  the  acceptors  had  provided  no  funds,  the  demand  was  sufficient. 
Flint  V.  Rogers,  15  Me.  67;  Bank  of  Utica  v.  Smith.  18  Johns.  230; 
Henry  v.  Lee,  2  Chit,  124.  In  the  latter  case,  Lord  Ellenborough  said, 
in  answer  to  the  objection  that  a  bill  had  been  presented  after  business 
hours:  "In  general,  it  is  not  sufficient.  It  will  not  do,  if  nobody  is 
there  to  receive ;  but  if  somebody  is  there,  and  the  person  presenting 
the  bill  gets  an  answer,  it  is  sufficient."  Bayley,  J.,  also  said :  "If  it 
is  presented  after  the  usual  hours,  it  is  at  the  peril  of  the  person  pre- 
senting it ;  for  if  nobody  is  there,  it  will  not  do,  but  if  there  is,  then 
it  is  immaterial  at  what  time  it  is  presented."  The  latter  judge,  in  his 
Treatise  on  Bills,  also  says :    "A  presentment  at  a  banker's,  out  of  the 


588  LIABILITY  OF  TAUTiES.  (Part  3 

usual  hours,  will  be  unobjectionable,  if  the  banker,  or  any  agent  on  his 
behalf,  were  there  at  the  time  of  such  presentment."  Bayl.  on  Bills 
(Am.  Ed.  1S3G)  212.  So,  also,  Chitty  says:  "A  presentment  at  any 
time  in  the  day  or  evening  is  sufficient,  if  an  answer  be  given  by  an 
authorized  person."  Chit,  on  Bills,  278.  It  was  not  too  late,  there- 
fore, to  present  the  note  for  payment  at  half  past  6  o'clock,  if  an  au- 
thorized person  could  be  found  at  the  bank  to  give  an  answer. 

We  are  therefore  next  to  consider  the  manner  in  which  the  note  was 
presented.  It  had  been  delivered  to  the  teller  of  the  bank,  he  being  a 
notary,  for  the  purpose  of  demanding  payment  and  giving  notice  to 
the  indorser.  He  was  the  very  officer  to  whom  the  note  should  prop- 
erly have  been  presented  for  payment.  He  was  the  person  of  whom 
the  maker  of  the  note  should  have  inquired  for  the  note,  if  he  had 
come  to  pay  it.  If  the  money  had  been  deposited  to  meet  the  note, 
he  would  have  received  it.  He  had  been  at  the  counter  of  the  bank 
during  the  business  hours  of  the  day.  He  knew,  and  testified,  that  no 
person  had  inquired  for  the  note,  and  that  the  maker  had  no  funds  in 
the  bank.  What,  under  such  circumstances,  was  it  necessary  for  the 
teller  to  do,  in  order  to  charge  the  indorser?  He  was  the  agent  of  the 
holder  of  the  note  to  demand  payment,  and  was  at  the  same  time  the 
proper  officer  of  the  bank  to  answer  the  demand,  either  by  paying  the 
note  or  refusing  to  pay.  Had  funds  been  provided  to  meet  the  note, 
he  would  have  paid  it.  Knowing  the  fact  that  there  were  no  funds, 
the  teller,  nevertheless,  went  to  the  banking  house,  and,  finding  the 
outer  door  locked,  made  a  demand  of  payment  of  himself  as  the  pay- 
ing officer  of  the  bank.  Had  he  unlocked  the  door  and  entered  the 
building,  he  being  the  person  authorized  to  pay  or  refuse  payment,  it 
could  not  have  been  doubted  that  the  demand  was  sufficient.  This,  of 
course,  would  have  been  an  idle  ceremony.  The  teller  knew  this,  and 
therefore  abandoned  his  attempt  to  enter  the  bank.  I  think,  however, 
he  did  enough  to  satisfy  the  condition  upon  which  the  indorser  was  to 
become  liable.  Suppose  the  note  had  been  delivered  to  the  teller  be- 
fore the  close  of  banking  hours,  he  would  have  had  nothing  to  do  but 
to  give  notice  of  nonpayment.  No  formal  demand  would  have  been 
required.  It  would  have  been  enough  for  him  to  be  satisfied,  either 
from  his  own  knowledge  of  the  fact,  or  an  examination  of  the  books 
of  the  bank,  that  there  were  no  funds  there  to  pay  the  note.  Suppose 
that,  when  he  went  there,  the  teller  had  gained  admission,  he  would 
then  have  had  nothing  to  do  but  return  back  and  give  the  appropriate 
notice  to  the  indorser.  No  proclamation,  no  clamorous  demand,  was 
required. 

This  view  of  the  question  is,  I  think,  abundantly  sustained  by  au- 
thority. In  Saunderson  v.  Judge,  2  H.  Bl.  509,  the  action  was  against 
the  indorser  of  a  note  payable  at  the  house  of  Saunderson  &  Co.,  into 
whose  hands  the  note  had  come  by  indorsement.  On  the  day  upon 
which  the  note  fell  due,  they  wrote  to  Judge,  the  indorser,  giving  him 
notice  of  the  nonpayment.     It  was  held  that,  as  they,  at  whose  house 


Ch.  2)  DRAWER   AND    INDORSER.  589 

the  note  was  to  be  paid,  were  themselves  the  holders  of  it,  it  was  suf- 
ficient demand  for  them  to  turn  to  their  books  and  see  the  maker's 
account  with  them,  and  a  sufficient  refusal  to  find  that  he  had  no  ef- 
fects in  their  hands. 

In  Bank  of  the  United  States  v.  Carneal,  2  Pet.  543,  7  L.  Ed.  513, 
the  action  was  upon  a  note  held  by  the  bank  and  payable  there,  and 
which  was  in  the  bank  on  the  day  it  became  due.  After  the  usual 
banking  hours  were  over,  the  note  was  dehvered  to  the  notary  for 
protest;  the  officers  of  the  bank  at  the  same  time  informing  him  that 
there  were  no  funds  there  for  the  payment  of  the  note.  This  was  held 
to  be  sufficient  proof  of  a  due  demand  of  payment.  Story,  J.,  said : 
"Where  the  bank  is  itself  the  holder  of  the  note,  no  formal  demand 
is  necessary,"  Fullerton  v.  Bank  of  the  United  States,  1  Pet.  60i,  7 
L.  Ed.  280,  is  to  the  same  effect.  In  the  latter  case  it  was  said  :  "Mod- 
ern decisions  go  to  establish  that,  if  the  note  be  at  the  place  on  the  day 
it  is  payable,  this  throv/s  the  onus  of  proof  of  payment  upon  the  de- 
fendant." 

In  Gillet  v.  Averill,  5  Denio,  85,  the  teller  of  the  bank  where  the 
note  was  payable  testified  that  on  the  day  the  note  fell  due  he  drew 
the  note  from  the  package  where  it  was  kept,  and,  knowing  that  the 
maker  had  no  funds  there,  he  gave  notice  of  nonpayment  to  the  en- 
dorsers, witho-iit  any  formal  demand  of  payment  or  actual  examination 
of  the  maker's  account.  This  was  held  to  be  a  sufficient  presentment. 
Ogden  V.  Dobbin,  2  Hall,  129  ;  Berkshire  Bank  v.  Jones,  6  Mass.  524, 
4  Am.  Dec.  175.  I  am  of  opinion  that  enough  was  done  by  the  notary, 
to  constitute  a  legal  presentment  and  demand  of  payment.^^ 

Judgment  reversed.^* 


COLUMBIAN  BANKING  CO.  v.  BOWEN. 
(Supreme  Court  of  Wisconsin,  1908.     134  Wis.  218,  114  N.  W.  451.) 
See  ante,  p.  576,  for  a  report  of  the  case. 


III.  Placb 

BOOT  &  BENTLEY  v.  FRANKLIN. 

(Supreme  Court  of  New  York,  ISOS.     3  Johns.  207.) 

This  was  an  action  of  assumpsit  by  the  indorsee  against  the  drawer 
of  a  bill  of  exchange.  The  bill  was  drawn  in  favor  of  Franklin,  Rob- 
inson &  Co.  on  Messrs.  Rathbone,  Hughes  &  Duncan,  of  Liverpool, 

3  2  Compare  Chicopee  Bank  v.  Bank,  75  U.  S.  641.  19  L.  Ed.  422  HSnO) 

3  3  See  Salt  Springs  Bank  v.  Burton,  58  N.  Y.  430,  17  Am.  Rep.  265  (1874). 


590  LIABILITY  OF  PARTIES.  (Part  3 

payable  in  London,  being  similar  to  the  one  mentioned  in  the  preced- 
ing case. 

The  declaration,  after  stating  a  presentment  to  the  drawees  at  Liv- 
erpool, their  refusal  to  accept  and  the  consequent  protest,  proceeded 
as  follows:  "That  afterwards,  to  wit,  on  the  5th  of  November,  1807, 
being  the  day  on  which  the  said  bill  became  payable,  according  to  the 
custom  of  merchants  at  London,  the  plaintiffs  not  having  received  pay- 
ment of  the  said  bill  or  any  part  thereof,  and  not  knowing  where  to 
present  the  same  for  payment  in  London  aforesaid,  where  the  same 
is  made  payable,  they  caused  the  said  bill  to  be  protested  for  nonpay- 
ment at  London,  according  to  the  said  custom  of  merchants ;  of  all 
which  said  premises  the  said  defendants  afterwards,  to  wit,  on  the 
30th  of  December,  1807,  at  the  city  of  New  York,  had  notice.  By  rea- 
son whereof,"  etc. 

There  was  a  special  demurrer  to  the  declaration,  and  joinder  in  de- 
murrer.^* 

Kent,  C.  J.,  delivered  the  opinion  of  the  court.  The  declaration 
in  this  suit  varies  from  the  one  in  the  former  cause  in  these  particu- 
lars only,  viz. :  It  states  that,  after  the  bill  was  protested  at  Liverpool 
^"  for  nonacceptance,  it  was,  when  payable,  protested  at  London  for  non- 
payment, with  an  averment  that  the  holders  did  not  know  where  to 
present  the  same  for  payment  in  London ;  and  it  then  avers  that  of  all 
the  premises  the  defendant  had  notice. 

The  special  demurrer  to  this  declaration  states  that  the  plaintiffs 
have  not  alleged  that  the  bill  was  presented  to  the  drawees  for  pay- 
■^       ment,  nor  that  the  plaintiffs  endeavored  to  find  the  drawees,  or  made 
v^       inquiry,  or  search  for  them. 
,  Upon  the  argument,  the  declaration  was  objected  to  as  bad,  in  mat-- 

C        ter  of  substance,  for  the  want  of  a  distinct  averment  that  the  defend- 
^.        ant  had  notice  of  the  nonacceptance.     The  answer  to  this  objection  is 
that  the  general  averment  of  notice  of  all  the  antecedent  premises  was 
-         sufficient,  and  is  conformable  to  approved  precedents.    The  reasonable- 
ness of  the  notice,  either  of  the  nonacceptance  or  nonpayment,  is  a 
^         question  that  cannot  arise  upon  the  pleadings.     It  depends  upon  the 
^         testimony  to  be  disclosed  at  the  trial.    The  other  objection  stated  as  a 
^         cause  of  demurrer  has  been  anticipated,  in  a  great  measure,  by  what 
V  was  observed  in  the   former  case.     It  was  not  incumbent  upon  the 

^  plaintiffs  to  state  that  inquiry  was  made  in  London  for  the  drawees : 

^p*.''      "Lex  neminem  cogit  ad  vana  seu  inutilia."    No  place  in  London  being 
R.  pointed  out  to  which  the  holders  might  resort,  and  the  drawees  resid- 

^  ing  at  Liverpool,  an  attempt  to  search  for  them  in  such  a  citv  as  Lon- 

don would  have  been  without  any  object  or  effect.    Nor  were  the  hold- 
V^^  ers  bound  to  go  elsewhere  to  seek  the  drawees,  as  the  bill  had  directed 

V  the  payment  to  be  in  London.     They  conformed  their  conduct  to  the 

^V  tenor  of  the  bill.    They  were  in  London  on  the  day  of  payment,  ready 

8*  The  arguments  of  counsel   are  omitted. 


^ 


<^- 


Ch.  2)  DRAWER   AND    INDORSEB.  591 

to  receive  payment,  and  they  did  all  that  they  were  enabled  to  do. 
They  caused  the  bill  to  be  there  protested.    The  declaration  in  this  case 
also  states  sufficient  to  entitle  the  plaintiffs  to  recover. 
Judgment  for  the  plaintiffs,^* 


BANK  OF  ORLEANS  v.  WHITTEMORE  et  al. 

(Supreme  Judicial  Court  of  Massachusetts,  Suffolk  and  Nantucket,  1859.    12 
Gray,  469,  74  Am.  Dec.  605.) 

Action  on  contract  by  an  incorporated  banking  company  in  Ver- 
mont against  the  firm  of  W.  &  F.  H.  Whittemore  &  Co.,  as  second 
indorsers  of  the  following  promissory  note: 

"$1,000.  Boston,  May  1,  1855. 

"Twelve  months  after  date  I  promise  to  pay  the  Commercial  Mu- 
tual Marine  Insurance  Company,  or  order,  for  value  received,  one 
thousand  dollars.  Wm.  P.  Moore." 

The  case  was  submitted  to  the  superior  court  of  Suffolk,  and,  on 
appeal,  to  this  court,  upon  certain  depositions  which  showed  the  facts 
to  be  as  follows : 

The  note  was  made  in  Boston  on  the  day  of  its  date,  but  the  maker's 
home  and  place  of  business  then  and  ever  since  were  at  Newbern  in 
the  state  of  North  Carolina.  In  March,  1856,  the  plaintiffs,  through 
the  agency  of  Ezra  C.  Hutchins,  of  Boston,  who  was  employed  by 
their  president,  and  by  him  furnished  with  money  for  that  purpose, 
bought  the  note  after  it  had  been  indorsed  by  the  payees  and  by  the 
defendants.  It  did  not  appear  that  the  plaintiffs  knew  where  the  maker 
resided,  except  that  he  lived  out  of  the  city.  On  the  24th  of  March, 
1856,  the  plaintiffs'  cashier  sent  the  note  to  Hutchins,  with  no  instruc- 
tions or  explanation  besides  these  words :  *T  enclose  for  collection 
and  deposit  in  Suffolk  Bank:  Wm.  P.  Moore,  due  May  1-4."  Hut- 
chins then  knew  the  maker's  residence  and  place  of  business.  On  the 
24th  of  April  following  the  cashier  sent  the  note  to  the  Merchants" 
Bank  of  Newbern,  whose  cashier  returned  it,  not  protested,  to  Hut- 
chins, in  a  letter  dated  April  30th,  saying:    "Your  letter  of  the  21th 

8  5  "The  note  is  by  its  terms  payable  at  the  place  where  It  Is  dated.  But 
it  is  payable  there  generally,  with  no  designation  of  a  particular  place  there- 
in at  which  payment  shall  be  made  or  sought.  In  such  case  the  note  must 
be  presented  and  payment  asked  for  at  the  place  of  business  therein  of  the 
maker  if  he  has  one ;  and,  if  he  has  no  place  of  business,  tiien  at  his  plate 
of  residence.  Woodworth  v.  Bank  of  America,  19  Johns.  391,  10  Am.  Dec. 
239;  King  v.  Holmes,  11  Pa.  456.  And  if  he  have  neither  place  of  business 
nor  of  residence,  then  if  the  holder  of  the  note  is  at  the  place  where  it  is 
in  general  made  payable,  on  the  day  of  payment,  with  the  note,  ready  to  re- 
ceive payment,  it  is  sufficient  to  constitute  a  presentment  and  demand."  Fol- 
ger  J.,  in  Meyer  v.  Hibsher,  47  N.  Y.  265,  270  (1S72). 

An  instrument  payable  at  a  particular  place— e.  g.,  a  bank — must  be  there 
presented.  Nelson  v.  Grondahl,  13  N.  D.  363,  100  N.  W.  1003  (1904) ;  Schleis- 
inger  v.  Schultz,  110  App.  Div.  356,  96  N.  Y.  Supp.  383  (1905). 


592  LIABILITY  OF  PARTIES.  (Part  3 

instant  with  one  enclosure  as  stated  is  received,  and  which  enclosure 
I  return  herein  as  below.  Note  of  ^^'m.  P.  Moore,  $1,000.  Exchange 
is  so  scarce  that  I  could  not  remit,  if  paid."  The  4th  of  May  was 
Sunday.  Hutchins  received  this  letter  and  the  enclosed  note  on  the 
5th  of  May,  and  immediately  informed  the  defendants,  and  asked 
them  to  waive  demand  and  pay  it ;  but  they  declined  to  do  so,  and 
Hutchins  on  the  same  day  sent  the  note  back  to  Newbern,  where,  on 
the  12th  of  May,  it  was  presented  by  a  notary  public  to  Moore  for 
payment,  which  he  refused,  and  the  note  was  duly  protested  and  no- 
tice thereof  sent  to  the  defendants,  who  received  it  on  the  17th  of 
May.*" 

Metcalf,  J.  (after  stating  the  facts  as  above).  On  these  facts,  the 
question  is  whether  the  defendants  are  liable  as  indorsers.  If  they 
are,  it  is  not  because  seasonable  demand  was  made  on  the  promisor 
and  seasonable  notice  of  nonpayment  given  to  them.  The  note  fell 
due  on  Saturday,  May  3d — the  last  day  of  grace  being  Sunday — and 
no  demand  was  made  on  the  promisor  until  nine  days  afterwards. 
This  delay  discharged  the  defendants  from  their  liability  to  the  plain- 
tiffs, unless  the  fact  that  the  promisor  always  resided  in  North  Caro- 
lina excused  the  holders  from  making  personal  demand  on  him,  or 
from  using  due  efforts  to  make  such  demand.  The  plaintififs  rely  on 
this  fact  to  sustain  their  action,  and  cite  the  decision  in  Smith  v.  Phil- 
brick,  10  Gray,  252,  69  Am.  Dec.  315,  as  conclusive  in  their  favor. 
That  was  an  action  by  an  indorser  against  a  prior  indorser  of  a  note 
made  in  Boston  by  one  whose  only  residence  and  place  of  business 
were  in  Texas,  and  on  whom  no  demand  was  made ;  and  it  was  de- 
cided that  no  demand  on  him  was  necessary  to  charge  the  defendant. 
The  court  said  there  was  no  evidence  to  show  whether  the  plaintifif, 
or  any  subsequent  holders  of  the  note,  knew  where  the  promisor's 
residence  was ;  that  if  his  residence  had  been  known  to  the  holder, 
at  the  maturity  of  the  note,  it  might  perhaps  have  been  incumbent  on 
him  to  forward  it  to  Texas  for  presentment,  as  was  held  in  Taylor 
V.  Snyder,  3  Denio  (N.  Y.)  145,  45  Am.  Dec.  457. 

In  the  case  before  us,  the  plaintiffs'  agent,  whom  they  employed  to 
purchase  and  also  to  collect  the  note,  knew  where  Moore's  residence 
was ;  and  the  legal  effect  of  his  knowledge  of  that  fact  is  the  same  as 
would  have  been  the  eft'ect  of  their  knowledge  of  it.  Notice  to  an 
agent,  whilst  he  is  concerned  for  the  principal,  is  notice  to  the  princi- 
pal himself.  And  we  are  of  opinion,  as  intimated  in  Smith  v.  Phil- 
brick,  that,  by  reason  of  the  plaintiffs'  knowledge  (through  their 
agent)  of  the  place  of  Moore's  residence,  a  demand  on  him  there,  and 
seasonable  notice  of  his  default,  were  prerequisites  to  the  defendants' 
liability  as  indorsers.  We  think  this  case  is  within  the  general  and 
familiar  rule  which  applies  to  the  holders  of  indorsed  notes,  and  not 
An  exception  to  that  rule. 

«8The  arguments  of  counsel  are  omitted- 


t!h.  2)  DRAWER    AND    INDORSER.  593 

When  a  resident  in  the  state,  after  giving  a  note,  removes  from  the 
state  and  takes  up  a  residence  out  of  the  state,  it  has  been  repeatedly 
decided  that  it  is  not  necessary,  in  order  to  charge  an  indorser  of  the 
note,  to  demand  payment  of  the  promisor  at  his  new  residence.  This 
exception  to  the  general  rule  which  requires  demand  on  the  promisor, 
and  notice  to  the  indorser,  seems  to  be  established.  But  we  see  no 
sufficient  reason  for  taking  the  present  case  out  of  that  rule.  And  we 
hold  that  where  the  maker  of  a  note,  when  it  is  made  and  indorsed, 
has  a  known  residence  out  of  the  state,  which  residence  remains  un- 
changed at  the  maturity  of  the  note,  demand  must  be  made  on  him, 
or  due  diligence  used  for  that  purpose,  and  notice  of  nonpayment 
given  to  the  indorser  before  the  indorser  can  be  charged.  So  it  was 
decided  by  the  Court  of  Appeals  in  New  York,  in  Taylor  v.  Snyder, 
before  referred  to,  and  in  Spies  v.  Gilmore,  1  Comst.  (N.  Y.)  321.  In 
this  last  case,  Bronson,  J.,  said:  "The  only  excuse  which  has  been 
offered  for  not  making  demand  is  that  it  would  have  been  inconven- 
ient to  go  or  send  to  Matamoras  for  the  purpose.  It  is  often  incon- 
venient to  present  the  note  for  payment,  when  the  maker  and  holder 
both  reside  in  the  same  state ;  and  yet,  when  the  maker  has  a  known 
place  of  residence,  and  there  has  been  no  change  of  circumstances 
after  the  giving  of  the  note,  mere  trouble  or  inconvenience  to  the  hold- 
er has  never  been  held  a  good  excuse  for  omitting  demand.  And  this 
is  so,  however  wide  asunder  the  maker  and  holder  may  live.  If  the 
plaintiff  wished  to  avoid  the  inconvenience  of  sending  to  Matamoras, 
he  should  have  made  the  note  payable  in  New  York,  or  got  an  indorse- 
ment with  a  waiver  of  demand.  He  has  no  right  to  change  the  con- 
tract which  the  indorser  made,  for  the  purpose  of  promoting  his  own 
convenience." 

Judgment  for  the  defendants. 


HOLTZ  v.  BOPPE. 

(Coiu-t  of  Appeals  of  New  York,  ISOS.    37  N.  Y.  634.) 

Bacon,  J.  The  only  question  presented  by  this  case  is  whether  the 
defendant  was  properly  charged,  as  indorser  of  the  note  in  suit,  by  a 
due  presentment  and  demand  of  payment  of  the  same  of  the  makers. 
The  note  was  made  by  Hartman  &  Ilch,  who  were  partners  in  busi- 
ness, and  was  payable  six  months  after  date,  but  specifying  no  place 
of  payment.  The  demand  of  payment  was  consequently  required  to 
be  made  of  the  makers  personally,  or  at  their  dwelling  place  or  place 
of  business.  Story  on  Bills  of  Exchange,  §  362;  Taylor  v.  Snyder. 
3  Denio,  145,  45  Am.  Dec.  457. 

On  the  subject  of  the  demand,  the  referee  finds  the  following  facts. 
We  assume  the  facts  as  settled  by  the  report — do  not  look  out  of  it 
Sm.&  M.B.&  N.— 38 


594  LIABILITY  OF  PARTIES.  (Part  3 

to  find  any  other  state  of  facts  than  sucl?  as  are  found  by  him :  Prior 
to  the  26t'h  of  October,  1S60,  the  makers  resided  and  carried  on  busi- 
ness at  No.  622  and  624  Broadway,  in  the  city  of  New  York;  and 
on  or  about  that  day  they  hired  the  basement  of  the  building  at  the 
corner  of  Bowery  and  Division  street,  in  said  city,  for  the  purpose  of 
carrying  on  business  there,  removed  a  portion  of  their  furniture  and 
property  to  that  place,  and  occupied  it  for  a  month,  and  partially 
fitted  up  the  premises  for  their  business.  Before  the  3d  of  November, 
on  which  day  the  note  fell  due.  they  informed  the  plaintiff  they  were 
about  to  remove  to  said  basement,  and  they  were  seen  there  by  the 
plaintiff  before  that  day.  A  few  days  only  before  the  note  fell  due. 
both  the  makers  changed  their  private  residences,  one  of  them  moving 
twice  between  the  23d  of  October  and  the  5th  of  November.  The 
plaintiff  lived  at  Hoboken,  in  New  Jersey,  and  it  did  not  appear  that 
he  had  any  knowledge  of  these  changes  of  residence,  or  that  he  was 
apprised  of  anything  but  the  fact  communicated  to  him  by  the  maker, 
in  the  presence  of  the  defendant,  that  they  had  removed  their  place 
of  business  to  the  basement  aforesaid. 

The  person  who  made  the  demand,  having  received  instructions  to 
that  effect,  went  with  the  note,  on  the  day  it  fell  due.  to  the  basement 
on  the  corner  of  Bowery  and  Division  street,  and  found  it  closed  and 
no  person  therein.  He  then  made  inquiry  in  the  vicinity  for  the  mak- 
ers, but  was  unable  to  find  them,  or  either  of  them.  From  there  he 
went  immediately  to  No.  622  and  624  Broadway,  where  the  sign  of 
the  firm  was  still  up,  and  made  inquiry  there  and  in  the  vicinity,  but 
could  not  find  them,  or  either  of  them,  or  any  person  to  answer  for 
them  or  obtain  any  information  in  respect  to  their  residence,  or  the 
place  to  which  they  had  removed.  He  then  protested  the  note,  stat- 
ing that  after  diligent  search  he  was  unable  to  find  the  makers,  and 
sent  due  notice  to  the  defendant,  by  mail,  at  his  place  of  residence. 
On  the  facts,  the  referee  found  as  a  conclusion  of  law  that  the  note 
was  duly  presented  for  payment  and  notice  given,  and  judgment  was 
rendered  thereupon  against  the  defendant  for  the  amount  of  the  note 
and  interest. 

Assuming  these  facts,  as  we  do.  from  the  findings  of  the  referee 
(and  they  are  amply  sustained  by  the  evidence),  I  think  his  conclusion 
was  entirely  right.  The  rule  that  requires  a  demand  in  such  a  case  to 
be  made  personally,  or  at  the  residence  or  place  of  business  of  the 
makers,  is  satisfied  if  due  and  reasonable  diligence  is  used  to  ascer- 
tain such  residence  or  place  of  business.  In  this  case,  such  diligence 
seems  to  me  to  have  been  employed.  The  makers  of  the  note,  by 
their  own  statement  to  the  holder  of  the  note,  located  themselves  at 
the  basement  designated  by  them.  They,  in  fact,  vacated  the  premises 
theretofore  occupied  by  them,  and  were,  on  the  3d  of  November,  so 
far  as  they  were  carrying  on  business  at  all,  in  the  use  and  occupation 
of  the  basement  at  the  corner  of  Bowery  and  Division  street.  In 
addition  to  a  demand  at  this  place,  the  notary  also  called  at  the  former 


Ch.  2)  DRAWER    AND    INDORSER.  595 

place  of  business  and  residence  of  the  makers,  and  at  both  places  and 
in  the  vicinity  of  each  made  inquiries  for  the  parties,  from  which  he 
could  derive  no  information  as  to  the  whereabouts  of  either  of  them. 
I  do  not  well  see  what  greater  diligence  he  could  have  employed.  A 
search  in  the  directory  would  have  been  of  no  avail,  since  the  change 
of  residence  had  been  so  recent  that  it  would  have  afforded  no  aid; 
and  if  the  inquiry  and  search  had  been  limited  to  the  directory,  it 
would  clearly  have  been  insufficient.  Packard  v.  Lyon,  5  Duer,  82. 
I  am  unable  to  perceive  any  track  of  inquiry  or  investigation  that 
could  have  been  pursued  that  would  have  been  rewarded  by  a  dis- 
covery of  the  then  actual  residences  of  these  parties,  and  am  of  the 
opinion  that  all  the  diligence  the  case  called  for,  or  the  law  exacts, 
was  employed  by  the  notary  in  making  the  demand  of  payment. 
The  judgment  should  be  affirmed. 


BROOKS  v.  BLANEY. 
(Supreme  Judicial  Court  of  Maine,  1873.    62  Me.  4.56.) 

Assumpsit  upon  a  note  dated  May  1,  1869,  for  $250,  signed  by 
Cyrus  Smith,  payable  in  six  months  from  date  to  the  order  of  Arnold 
Blaney,  which  came  to  the  plaintiff  as  indorsee  thereof.  The  defend- 
ant pleaded  the  general  issue,  and  the  case  was  then  submitted  to  the 
full  court  upon  the  note,  notarial  protest,  and  the  deposition  of  the 
notary,  to  enter  such  judgment  as  the  case  required.  The  protest 
alleges  a  presentment  of  the  note  on  the  last  day  of  grace,  at  "the 
late  place  of  business  of  the  signer  of  the  note."  In  his  deposition 
the  notary  says  he  inquired  for  Smith  at  his  last  place  of  business  in 
Boston,  but  could  not  find  him  there,  nor  learn  his 'whereabouts,  but 
that  he  presented  the  note  for  payment  at  that  place.  He  says  he 
then  looked  in  the  directory,  "and  found  where  he  [Smith]  resided," 
went  to  the  house  indicated,  and  "did  not  find  the  promisor  in.  I  pre- 
sented the  note  and  asked  if  the  promisor  was  in,  and  if  any  money 
was  left  for  the  note.  The  answer  was  that  he  was  not  in,  'don't 
know  where  he  is,'  and  that  there  was  no  money  left.  That  is  all  the 
information  I  got  there."  He  then  sent  the  defendant  a  notice  of 
dishonor.^  ^ 

Barrows,  J.  A  protest  setting  forth  a  presentment  "at  the  late 
place  of  business"  of  the  promisor  "to  the  person  there  in  charge," 
who  answers  the  demand  of  payment  by  saying,  "The  promisor  is 
not  here  now,  nor  have  we  any  funds  for  the  note,"  is  not  sufficient 
proof  of  presentment  and  demand  to  charge  an  indorser. 

Failing  to  find  the  present  place  of  business  or  residence  of  the 
maker  of  the  note,  the  notary  should  seek  him  elsewhere.  Freeman 
V.  Boynton,  7  Mass.  483. 

8  7  Part  of  the  opinion  is  omitted. 


596  LIABILITY  OF  PARTIES.  (Part  3 

In  the  present  case  the  notary  testifies  that,  after  making  further 
and  diligent  search  and  inquiry  for  him  at  several  places  mentioned,  in 
Boston,  where  the  note  was  dated,  and  after  visiting  another  person 
of  the  same  name  whose  place  of  business  was  near  by,  he  ascertained 
by  the  directory  where  the  maker  of  the  note  resided,  and  went  to 
his  residence  as  there  indicated  and  inquired  if  the  promisor  "was  in," 
and  received  an  answer  in  the  negative,  and,  to  further  inquiry,  that 
the  person  answering  did  not  know  where  he  was ;  that  he  presented 
the  note,  but  was  informed  that  no  money  was  left  to  pay  it.  He 
further  testifies  that  he  notified  the  indorser,  and  states  the  contents 
of  the  notice  which  he  sent.  No  testimony  is  offered  by  the  defend- 
ant; but  his  counsel  suggests  that  the  testimony  of  the  notary  fails 
to  prove  a  proper  presentment  and  demand  of  payment ;  that  it  does 
not  appear  that  the  place  indicated  in  the  directory  was  the  actual 
place  of  residence  of  the  promisor  at  the  time  the  note  fell  due.  But 
we  think,  in  the  absence  of  any  testimony  tending  to  repel  the  infer- 
ences to  be  drawn  from  the  acts  of  the  notary  and  the  replies  which 
he  received  at  the  place  which  he  speaks  of  as  the  promisor's  resi- 
dence, it  may  be  fairly  concluded  that  the  demand  was  made  at  the 
place  where  the  promisor  then  resided,  and  that  sufficient  effort  to 
find  his  place  of  business,  and  present  the  note  to  him  personally,  was 
previously  made. 

Where  no  place  of  payment  is  specified  on  the  note,  a  presentment 
at  the  residence  of  the  maker  will  suffice,  even  though  he  be  out  of 
town  at  the  time.  Moodie  v.  Morrall,  1  J\Iill.  Const.  (S.  C.)  367. 
See,  also  Whittier  v.  Graffam,  3  Ale.  82.     *     *     * 

Defendant  defaulted. 


KING  V.  CROWELL. 
(Supreme  Judicial  Court  of  Maine.  1ST3.     61  Me.  244,  14  Am.  Rep.  .560.) 

Assumpsit  against  the  defendant  as  indorser  of  the  following  prom- 
issory note,  his  signature  admitted  to  be  genuine : 
"'$150.00.  April  8,  1871. 

"Four  months  after  date  I  promise  to  pay  to  the  order  of  A.  J. 
Crowell  one  hundred  and  fifty  dollars.     Value  received. 

"H.  E.  Morton." 

Indorsed:    "A.  J.  Crowell.    Jeremiah  GHdden.     C.  H.  Glidden." 

Writ  dated  February  17,  1872.    Plea,  general  issue. 

This  note  was  negotiated  to  the  plaintiff  for  a  full  consideration  a 
short  time  after  its  date. 

The  n^.aker  and  the  indorsers  resided  in  Winthrop  village,  and  the 
plaintiff  in  Monmouth.  H.  E.  Morton,  at  the  time  of  the  making  of 
the  note  in  question,  was  a  manufacturer  of  boots  and  shoes,  and  a 
dealer  in  boots,  shoes,  hats,  and  caps,  and  had  a  store  and  place  of 
business  in  said  Winthrop  village.     On  the  3d  day  of  July,  1871,  the 


Ch.  2)  DRAWER    AND    I-NDORSER.  597 

maker  failed  in  business.  His  real  estate  and  goods  were  attached  on 
that  day,  and  his  place  of  business  closed;  the  attaching  officer  taking 
possession  of  the  keys  and  the  goods.  On  Friday,  the  morning  of 
August  11,  1871,  the  plaintiff  went  to  Wintlirop  for  the  purpose  of 
collecting  this  note,  or  of  taking  the  necessary  steps  to  hold  the  in- 
dorsers.  He  went  to  the  store  recently  occupied  by  the  maker  of  the 
note,  and,  finding  it  closed,  he  went  directly  to  Morton's  house,  with 
the  note  in  his  possession,  for  the  purpose  of  making  a  demand  of 
payment.  Morton  was  not  at  the  house ;  but  the  plaintiff  was  informed 
he  was  on  the  street,  where  the  plaintiff  found  him  about  10  o'clock 
a.  m.,  and  then  and  there  requested  payment  of  the  note  of  said  Mor- 
ton, which  was  refused.  About  two  hours  afterwards,  on  the  same 
day,  the  plaintiff  sought  the  defendant,  told  him  he  had  demanded 
payment  of  the  note  of  Morton,  that  he  refused  to  pay  it,  and  informed 
him  (defendant)  that  he  should  look  to  him,  as  indorser,  for  the  pay- 
ment of  the  note.  The  defendant  replied  that  he  would  look  into  the 
matter,  and,  if  he  found  that  he  was  holden,  would  see  the  note  paid 
in  two  or  three  weeks.  In  two  or  three  weeks  the  plaintiff  called  on 
the  defendant  again  for  payment,  when  the  defendant  refused  to  pay, 
saying  that  he  had  inquired  carefully  into  his  liability  as  indorser  of 
this  note,  and  was  advised  that  he  was  not  liable,  and  should  not  pay 
the  same. 

It  was  agreed  that  upon  the  above  facts  the  full  courts  should  enter 
such  judgment  as  the  law  required. 

If  the  action  could  be  maintained,  defendant  to  be  defaulted;  other- 
wise, plaintiff  to  become  nonsuit.^ ^ 

Virgin,  J.  When  the  defendant  indorsed  and  put  into  circulation 
the  note  in  suit,  he  thereby  ordered  the  maker  to  pay  the  amount  there- 
in specified  to  the  plaintiff;  and  he  also  thereby  promised  that  if  the 
note  were  duly  demanded  of  the  maker,  and  not  paid,  then  he  himself 
would,  upon  receiving  due  notice  of  the  demand  and  nonpayment, 
pay  it  to  the  plaintiff. 

And  now,  in  this  suit  upon  his  promise,  the  defendant  declines  to 
pay  the  note  on  the  following  alleged  grounds : 

1.  That  the  demand  was  not  lawful,  inasmuch  as  it  was  made  on 
the  street. 

The  general  rule  of  law  is  that  the  holder  must  use  diligence  to 
find  the  maker  and  demand  payment  of  him ;  and  the  inquiry  will  be 
whether,  under  the  circumstances  of  the  case,  due  diligence  has  been 
used.    3  Kent,  Comm.  129. 

It  is  familiar  law  that  when  a  promissory  note  payable  generally, 
and  not  at  a  specified  place,  is  seasonably  demanded  at  the  maker's 
known  and  settled  place  of  business  for  the  transaction  of  his  moneyed 
concerns,  it  is  sufficient  to  hold  the  indorser.  And  the  same  may  be 
said  of  a  like  demand  made  at  his  place  of  residence.     Neither  does 

38  The  arguments  of  counsel  and  part  of  the  opinion  are  omitted. 


598  LIABILITY  OF  PARTIES.  (Part  3 

it  make  any  difference  whether  the  maker  be  personally  present  or 
temporarily  absent  at  the  time  of  the  demand.  In  either  case,  the  law 
has  for  many  years  been  constant  in  declaring  that  the  evidence  af- 
forded by  such  a  demand  constitutes  full  proof  of  due  dilig-ence  on 
the  part  of  the  holder. 

But  in  the  case  at  bar  the  plaintiff  went  still  further  than  the  tech- 
nical exactions  of  the  law  required.  He  was  a  resident  of  Monmouth. 
On  the  day  the  note  became  due  he  went  to  Winthrop  village,  where 
both  the  maker  and  the  defendant  resided,  "for  the  purpose  of  col- 
lecting this  note,  or  of  taking  the  necessary  steps  to  hold  the  indorser.'' 
On  going  to  the  store  which  had  been  occupied  by  the  maker  as  his 
place  of  business,  he  found  it  had  been  closed  and  in  the  possession 
of  an  officer  more  than  30  days ;  that  the  maker  had  failed  in  his  busi- 
ness, and  that  all  his  property  was  under  attachment.  Thereupon 
the  plaintiff  went  to  the  maker's  place  of  residence,  where  he  was  in- 
formed that  the  maker  was  not  at  the  house,  but  had  gone  out  on  the 
street.  Had  he  gone  through  the  ceremony  of  demanding  payment  of 
the  note  at  the  house,  while  the  maker  was  out  on  the  street,  the  law 
would  pronounce  the  plaintiff's  diligence  ample.  But,  not  finding 
the  maker  at  home,  the  plaintiff  trebled  his  diligence,  sought  and  found 
him  on  the  street  in  that  country  village,  and  then  and  there  requested 
payment  of  the  maker  personally,  which  was  refused. 

It  does  not  appear  (as  it  would  be  likely  to,  if  true)  that  any  ob- 
jection to  the  place  of  demand  was  made  by  the  maker.  If  he  hr.d 
had  funds  with  which  to  pay,  not  with  him,  but  at  his  house,  he  would 
at  once  have  said  so.  If  he  had  objected  to  the  place,  and  requested 
the  plaintiff  to  accompany  him  to  his  house,  and  receive  the  money 
due  on  the  note,  and  the  plaintiff  had  declined  so  reasonable  a  request, 
the  legal  aspect  of  this  branch  of  the  case  might  thereby  have  been 
materially  changed.  But  no  such  facts  exist.  He  simply  refused 
payment,  and,  in  all  human  probability,  for  the  real,  though  to  him, 
perhaps,  unpleasant,  reason  that  all  his  property  was  in  the  custody 
of  the  law,  and  he  had  in  fact  nothing  wherewith  he  could  pay.  It 
would  seem  that  such  a  demand  would  be  more  satisfactory  to  all 
concerned  than  a  mere  formal  ceremony  of  a  demand  gone  through 
at  his  place  of  residence  during  the  maker's  absence.  And  we  have 
no  hesitation  in  declaring  the  demand  sufficient  under  the  circum- 
stances, so  far  as  the  place  is  concerned,  to  charge  the  defendant. 

We  are  aware  that  Byles  on  Bills.  196.  declares  that  a  demand  made 
on  the  street  is  not  sufficient.  Such  is  the  doctrine  expressed,  too,  in 
the  author's  notes  in  Leading  Cases  on  Bills.  327,  328.  And  there  are 
several  cases  containing  the  dictum  in  general  terms  that  a  demand 
must  be  made  either  at  the  maker's  place  of  business  or  place  of  resi- 
dence. But  our  attention  has  been  called  to  no  case,  neither  have  we, 
after  considerable  research,  been  able  to  find  any,  wherein  the  court 
having  the  question  before  it  decided  adversely  to  a  demand  made  on 
the  street,  under  circumstances  similar  to  those  in  this  case. 


Oh.  2)  DRAWER    AND    INDORSEB.  599 

On  the  other  hand,  Judge  Story,  in  discussing  the  law  applicable  to 
notes  like  this,  uses  the  following-  language:  "The  general  rule  is 
that  the  presentment  for  payment  may  be  made  to  the  maker  person- 
ally, or  at  his  dwelling  house  or  other  place  of  abode,  or  at  his  counting 
house  or  place  of  business.  It  seems  a  presentment  may  always  be 
made  personally  to  the  maker,  wherever  he  may  be  found,  although 
he  may  not  be  either  at  his  domicile  or  at  his  place  of  business."  And 
he  cites  quite  a  large  number  of  cases,  in  a  note,  as  authority.  Story, 
Prom.  Notes,  §  235.  In  Edw.  Bills  (2d  Ed.)  150,  is  found  the  follow- 
ing :  "Being  made  payable  at  large,  it  is  due  at  any  and  every  place ; 
but,  for  the  purpose  of  charging  the  indorser,  it  must  be  presented  to 
the  maker  personally,  or  at  his  residence  or  place  of  business.  If  it  be 
made  payable  at  a  particular  place  in  the  city,  it  is  necessary  to  pre- 
sent the  note  there  for  payment,  for  the  purpose  of  charging  the  in- 
dorser. But,  even  in  this  case,  if  a  personal  demand  is  made  upon  the 
maker,  and  no  objection  is  made  by  him  as  to  the  place,  it  is  sufficient." 
So  in  3  Kent's  Comm.  128 :  "Demand  of  payment  must  be  made  by 
the  holder  or  his  agent  upon  the  acceptor  at  the  place  appointed  for 
payment,  or  at  his  house  or  residence,  or  regular  known  place  of  his 
moneyed  business,  or  upon  him  personally  if  no  particular  place  is  ap- 
pointed." And  again,  on  page  96:  "If  demand  be  made  upon  the 
maker  elsewhere  than  the  place  appointed,  and  no  objection  be  made 
at  the  time,  it  will  be  deemed  a  waiver  of  any  future  demand." 

And  Prof.  Parsons  says :  "In  general,  a  personal  demand  would  be 
sufficient,  if  made  at  any  place  where  the  maker  may  reasonably  be 
expected  to  be  in  condition  to  pay ;  and  if  made  in  any  other  place — 
such,  for  instance,  as  in  the  street — it  would  usually  be  good,  unless 
objection  were  made  to  payment  because  the  place  was  an  improper 
one,  or  some  similar  reason  were  given  for  the  refusal."  1  Pars.  Notes 
&  B.  421.     And  he  uses  somewhat  similar  language  on  page  372. 

The  doctrine,  as  stated  above  by  Judge  Story,  is  approved  in  Taylor 
v.  Snyder,  3  Denio  (N.  Y.)  145,  45  Am.  Dec.  457,  published  as  a  lead- 
ing case  in  Leading  Cases  on  Bills,  313,  316. 

Finally,  our  own  court  held  that  where  a  note  signed  by  two,  made 
payable  at  their  dwelling  houses,  was  demanded  of  them,  together,  at 
the  barnyard  of  one  of  them,  and  no  objection  was  made  as  to  the 
place  of  the  demand,  the  demand  was  sufficient.  Baldwin  v.  Farns- 
worth,  10  Me.  414,  25  Am.  Dec.  252. 

2.  But  the  defendant,  further  objecting  to  the  sufficiency  of  the  de- 
mand says:  "As  the  payer  has  a  right  to  require  its  delivery  up  to 
him  before  he  pays,  and  may  insist  that  the  holder  produce  it,  the  note 
should  have  been  exhibited." 

It  is  true  that  the  rule  requiring  the  person  making  the  demand  to 
exhibit  the  evidence  of  debt  is  well  settled,  and  well  grounded  in  rea- 
son ;  and,  although  applicable  to  all  written  contracts  on  which  a  de- 
mand is  necessary,  it  is,  as  has  been  well  said,  especially  applicable  to 
negotiable  securities,  which  may  be  legally  transferred  to  another  at 


600  LIABILITY  OF  PARTIES.  (Part  3 

^he  very  time  the  original  payee  makes  the  demand.  But  the  reasons 
applicable  to  cases  in  which  the  maker  offers  to  pay  cannot  apply  to 
cases  in  which  he  not  only  does  not  offer,  but  absolutely  refuses,  to  pay, 
and  does  not  even  express  any  desire  to  see  the  note. 

The  idle  ceremony  of  producing-  the  note  when  the  maker  unquali- 
fiedly refuses  to  pay  is  well  illustrated  by  Shaw,  C.  J.,  in  Gilbert  v.  Den- 
nis. 3  Mete.  (Mass.)  497,  38  Am.  Dec.  329,  where  he  says:  "Even 
under  the  law  of  tender,  which  is  extremely  strict,  it  is  held  that,  where 
a  party  to  whom  a  tender  is  to  be  made  declares  that  he  will  not  accept 
it,  an  actual  production  and  offer  of  the  money  is  not  necessary." 

The  case  finds  expressly  that  the  maker  had  the  note  in  his  possession 
when  he  made  the  demand.  We  think  the  objection  cannot  prevail. 
Arnold  v.  Dresser.  8  Allen.  435;  Freeman  v.  Boynton,  7  Mass.  485.; 
Etheridge  v.  Ladd,  44  Barb.  (N.  Y.)  69.3»  *  ♦  *  Defendant  de- 
faulted. 


SECTION  4.— PROTEST 


COMMERCIAL  BANK  OF  KENTUCKY  v.  \VIELIAM  H. 

BARKSDALE  &  CO. 

(Supreme  Court  of  Missouri,  1865.     36  Mo.  563.) 

This  was  a  suit  instituted  March  13,  1861,  on  a  bill  of  exchange, 
dated  at  St.  Louis,  Mo.,  September  4.  1860,  made  by  William  H.  Barks- 
dale  &  Co.,  in  favor  of  John  F.  Darby  (acceptance  waived),  on  the 
Park  Bank,  New  York  City,  for  $10,000  at  four  months,  indorsed  by 
Darby.  The  petition  averred  due  protest  and  notice ;  also  that  William 
H.  Barksdale  &  Co.  had  no  funds  at  the  Park  Bank,  and  that  Darby 
knew  this  at  and  before  the  maturity  of  said  bill. 

Defendants,  William  H.  Barksdale  &  Co.,  denied  that  the  bill  was 
duly  presented  at  maturity  to  the  Park  Bank  for  payment,  or  that  such 
payment  was  refused,  or  that  the  bill  was  duly  protested  for  nonpay- 
ment, or  that  defendants  had  any  due  or  legal  notice  of  any  such 
facts. 

The  case  was  tried  before  the  court,  sitting  as  a  jury,  on  the  24th 
January,  1863,  and  judgment  was  given  for  the  defendants. 

By  the  bill  of  exceptions,  it  *  *  *  appeared  that  the  bill  was 
protested  on  the  5th  January,  1861 ;  that  payment  was  demanded  by 
Turney,  a  notary ;  that  the  protest  was  by  \'arnum,  notary  public,  and 
that  after  the  commencement  of  this  suit  Turney  made  out  a  notarial 

39  Qonipare  Gilpm  v.  Savage.  60  Misc.-Rep.  Wo,  112  N.  Y.  Supp.  802  (190S). 
affirmed  132  App.  Div.  tt-iS.  118  X.  Y.  Supp.  1108  (1909),  where  a  demand 
of  payment  made  over  tbe  telephone  was  held  sufficient,  in  the  absence  of 
objection  by  the  maker  of  the  note. 


Cll.  2)  DRAWER    AND    INDORSER.  GOl 

I 

act  of  protest,  dating  it  back  to  January  5,  1861 ;  *  *  *  that  Turney 
and  Varnum  were  partners.  The  court  refused  the  following  instruc- 
tion which  was  requested  by  the  plaintiff:  "(9)  It  is  not  necessary  to 
the  validity  of  a  certificate  of  protest  that  it  be  drawn  up  on  the  day 
of  demand  and  refusal  of  payment,  nor  is  it  necessary  that  such  cer- 
tificate, or  a  copy  thereof,  should  be  sent  with  the  notice.  It  may  be 
drawn  up  when  called  for,  or  at  any  time  before  trial,  provided  the 
bill  was  properly  presented  for  payment  by  a  notary  public  at  the  re- 
quest of  the  holder,  and  payment  demanded  and  refused,  and  a  proper 
notice  of  the  protest  is  given  and  in  due  time." 

The  court  gave  the  following  instructions  at  the  request  of  the  de- 
fendants: "(3)  To  make  a  valid  presentment  by  a  notary,  it  is  nec- 
essary that  such  notary  make  a  personal  presentment  and  demand ;  and 
a  protest  of  a  bill  by  a  notary  who  did  not  make  such  presentment  and 
demand  is  insufficient  to  hold  the  indorser."  •*" 

Holmes,  J.,  delivered  the  opinion  of  the  court. 

The  decision  of  the  case  turns  mainly  upon  the  validity  of  the  pro- 
test. The  bill  is  to  be  considered  as  a  foreign  bill.  St.  Bills,  §§ 
22,  23.  In  cases  of  foreign  bills  of  exchange,  the  rule  is  too  well 
settled  to  admit  of  question  that  there  must  be  a  protest  of  the  bill  by 
a  notary  public,  in  all  places  where  such  officer  is  at  hand.  Sto.  Bills. 
§  276.  The  notarial  protest  is  evidence  of  presentment,  demand,  and 
refusal  to  pay  the  bill,  at  the  time  and  in  the  manner  therein  stated. 
This  rule  of  the  law  merchant  is  recognized  by  statute  in  this  state 
(Rev.  St.  1855,  p.  298,  §  20);  and  so  essential  is  the  production  of  a 
protest  in  all  cases  of  foreign  bills  that  this  evidence  of  presentment, 
demand  and  refusal  cannot  be  dispensed  with,  nor  supplied  by  other 
evidence  of  the  same  facts,  as  may  be  done  in  cases  of  inland  bills. 
Sto.  Bills,  §  276.  It  is  equally  well  established  that  the  presentment 
and  demand  must  be  made  in  person  by  the  same  notary  who  protests 
the  bill.  It  cannot  be  done  by  a  clerk,  nor  by  any  other  person  as  his 
agent,  though  he  be  also  a  notary.  The  protest  is  to  be  evidence  of 
the  facts  stated  in  it,  of  which  the  notary  is  supposed  to  have  personal 
knowledge,  and  credit  is  given  to  his  official  statements  by  the  com- 
mercial world  on  the  faith  of  his  public  and  official  character. 

In  court,  the  instrument  speaks  as  a  witness.  Such  statements  made 
merely  upon  the  information  of  another  person  would  amount  to  hear- 
say only,  if  the  notary  were  himself  upon  the  stand  as  a  witness.  The 
notarial  protest  must  state  facts  known  to  the  person  who  makes  it, 
and  he  cannot  delegate  his  official  character  or  his  functions  to  another. 
Edw.  on  B.  466 ;  Leftley  v.  Mills,  4  T.  R.  174 ;  Carmichael  v.  Bank  of 
Penn.,  4  How.  (Miss.)  567,  35  Am.  Dec.  408;  Sacrider  v.  Brown,  3 
McLean,  481,  Fed.  Cas.  No.  12,205 ;  Onondaga  Co.  Bank  v.  Bates,  3 
Hill  (N.  Y.)  53;  Chenowith  v.  Chamberlin,  6  B.  Mon.  (Ky.)  60,  43 
Am.  Dec.  145.     The  presentment  and  protest  are  governed  by  the  law 

*oTlie  statement  of  the  case  is  abridged,  and  part  of  the  opinion  omitted. 


602  LIABILITY  OF  PARTIES.  (Part  3 

of  the  place  where  the  bill  is  payable,  and  on  this  principle,  it  has  been 
held  that  where  the  statute  law  of  the  state  (as  in  Louisiana)  authorizes 
notaries  to  appoint  deputies,  a  protest  made  by  such  deputy,  duly  ap- 
pointed, would  be  recognized  as  sufficient.  Carter  v.  Bank,  7  Humph. 
(Tenn.)  548,  46  Am.  Dec.  89.  But  no  case  seems  to  have  gone  far- 
ther than  this :  Such  deputy  may  be  considered  as  having  a  semi- 
official character,  and  sufficient  authority  by  force  of  the  statute ;  but 
without  some  change  in  the  general  rule  of  law,  one  notary  can  neither 
delegate  his  functions  nor  impart  his  own  official  character  to  another. 
Here,  two  notaries  were  in  partnership  in  general  business,  and  one  of 
them  undertook  to  present  the  bill  and  make  the  demand,  and  the  other 
to  draw  up  the  protest  and  give  the  notice.  They  were  both  notaries, 
but  as  such  they  were  distinct  public  officers,  and  there  can  be  no  part- 
nership in  such  matters.  No  law  or  custom  was  proved  to  have  existed 
in  the  state  or  city  of  New  York  which  changes  the  general  rule  of 
the  law  merchant  on  this  subject.*^  It  must  follow  that  the  protest 
made  by  Varnum  can  have  no  validity ;  nor  will  that  made  by  Turney 
any  more  avail.  It  seems  to  be  clearly  established  by  the  general  cur- 
rent of  authority  that  the  protest  must  be  made  on  the  same  day  with 
the  presentment  and  demand,  though  a  noting  of  the  protest  on  the 
bill  itself  may  be  regarded  as  an  incipient  protest,  or  preliminary  step 
towards  a  protest,  which  may  be  completed  afterwards,  at  any  time,  by 
drawing  up  the  protest  in  form.  Here  there  was  no  noting  of  the  bill 
for  protest,  nor  any  memorandum  marked  on  the  bill,  by  Turney ;  nor 
is  there  any  proof  of  any  distinct  note,  entry,  or  memorandum  of  pro- 
test, made  by  him  on  that  day,  in  any  other  way  than  upon  the  bill 
itself.     It  would  appear  that  he  did  not  make  the  demand  for  the  pur- 

*i  "In  the  absence  of  any  established  rule  of  law  in  this  state,  by  decision 
of  the  court  or  by  any  statute,  requiring  a  demand  to  be  made  by  the  notary 
in  person,  it  is  not  perceived  why  a  usage  such  as  was  approved  was  not  ad- 
missible as  proof  upon  the  subject.     ♦     ♦     * 

"The  practice  in  England  is  to  present  and  demand  by  a  clerk  of  the  notary, 
and  we  are  not  referred  to  an  English  authority  holding  such  presentment 
illegal  where  the  usage  so  to  present  was  established. 

"Chitty  on  Bills,  in  his  last  edition  (10th  Eng.  Ed.  355,  note  4).  sustains 
this  usage,  and  says  it  is  not  questioned  in  any  English  case,  and  'is  amply 
justified  by  the  law  of  principal  and  agent.'  I  take  this  from  1  Par.  on  Bills, 
360,  as  this  edition  of  Chitty  is  not  accessible  to  me.  This  is  said  after  cor- 
respondence ujwn  and  examination  and  discussion  of  the  subject,  and  is  free 
from  the  doubt  in  other  editions,  based  chiefly  upon  a  doctrine  of  Mr.  Justice 
Buller,  in  Leftley  v.  Mills,  4  T.  R.  175,  an  action  on  an  inland  bill. 

"In  Brookes'  Notary  of  England  (3d  Ed.)  71,  published  in  1867,  it  is  stated: 
'Before  the  protest  is  made  it  is  the  custom  in  England  to  cause  the  bill  to 
be  presented  either  by  a  notary  or  by  his  clerk  (in  general  his  clerk  presents 
it),  and  acceptance  to  be  demanded.'  As  to  the  admission  of  usage,  see  Nelson 
V.  Fotterall,  7  Leigh  (Va.)  179;  Miltenberger  v.  Spaulding,  33  Mo.  421;  Com- 
mercial Bank  of  Kentucky  v.  Barksdale,  36  Mo.  .573. 

"It  is  said  that  this  usage  was  not  known  to  the  plaintiff,  and  hence  could 
not  be  obligatory  upon  it. 


121  Am.  St.  Rep.  858  (1907) 


<^h.  2)  DRAWER    AND    INDORSER.  G03 

pose  of  profesting  the  bill  himself,  but  as  the  agent  of  his  partner,  the 
other  notary.  He  neither  protested  the  bill,  nor  noted  it  for  protest, 
at  the  time ;  and  his  drawing  up  of  the  protest,  long  afterwards,  must 
be  regarded  as  having  no  basis  of  contemporaneous  fact  or  present 
authority,  and  as  being  entirely  void.  Bvles,  Bills,  201-203;  Sto.  Bills, 
§  283  ;  Leftley  v.  Mills,  4  T.  R.  17-i.  *  '*  * 
Judgment  affirmed. 


SECTION  5.— NOTICE  OF  DISHONOR 


SMITH  V.  MULLETT. 

(Nisi  Prius,  1809.     2  Camp.  208.) 

Action  against  the  indorser  of  a  bill  of  exchange  drawn  by  one  Mills, 
payable  to  his  own  order,  and  indorsed  by  him  to  the  defendant,  by  the 
defendant  to  one  Hefford,  by  Hefford  to  one  Aylett,  by  Aylett  to  the 
plaintilf,  and  by  the  plaintiff  to  one  Lowe. 

The  bill  became  due  on  Saturday,  May  19th,  when  it  was  in  Lowe's 
hands.  He  and  all  the  parties  to  it  reside  in  the  metropolis.  On  Mon- 
day, the  20tli,-  Lowe  gave  notice  to  the  plaintiff  that  the  bill  had  been 
dishonored.  On  Tuesday  afternoon,  a  few  minutes  past  5,  the  plain- 
tiff's clerk  put  a  letter  into  the  two-penny  post  office,  giving  notice  to 
Aylett.  This  letter  having  been  put  in  so  late,  according  to  the  course 
of  the  two-penny  post,  was  not  delivered  out  till  Wednesday  morning. 
On  Wednesday  Aylett  gave  notice  to  Hefford,  and  Hefford  to  the 
defendant.  The  question  was,  whether  the  defendant  had  received  due  e(^ 
notice  of  the  dishonor  of  the  bill.*- 

Lord  EllEnborqugh.     It  is  of  great  importance  that  there  should  / 

be  an  established  rule  upon  this  subject,  and  I  think  there  can  be  none      ^^^^ 
more  convenient  than  that  where  the  parties  reside  in  London,  each  y 

party  should  have  a  day  to  give  notice.    I  have  before  said,  the  holder  '^'^ x. 

of  a  bill  of  exchange  is  not,  omissis  omnibus  aliis  negotiis,  to  devote 
himself  to  giving  notice  of  its  dishonor.  It  is  enough  if  this  be  done 
with  reasonable  expedition.  If  you  limit  a  man  to  the  fractional  part 
of  a  day,  it  will  come  to  a  question  how  swiftly  the  notice  can  be  con- 
veyed. A  man  and  horse  must  be  employed,  and  you  will  have  a  race 
against  time.  But  here  a  day  has  been  lost.  The  plaintiff  had  notice 
himself  on  the  Monday,  and  does  not  give  notice  to  his  indorser  till 
the  Wednesday.  If  a  party  has  an  entire  day,  he  must  send  off  his  let- 
ter conveying  the  notice,  within  post  time  of  that  day.  The  plaintiff 
only  wrote  the  letter  to  Aylett  on  the  Tuesday.    It  might  as  well  have 

*2  The  arguments  of  counsel  are  omitted. 


>. 


^ 


604  LIABILITY  OF  PARTIES.  (Part  3 

continued  in  his  writing  desk  on  the  Tuesday  night,  as  lie  at  the  post 
office.  He  has  clearly  been  guilty  of  laches,  by  which  the  defendant  is 
discharged. 

Plaintiit  nonsuited.*' 


BURBRIDGE  v.  MANNERS. 

(Nisi  Prius,  1812.    3  Camp.  193.) 
See  post,  p.  651,  for  a  report  of  the  case. 


BRAY  et  al.  v.  HADWEN. 

(Court  of  King's  Bench,  1816.     5  Maule  &  S.  (58.) 

At  the  trial  of  this  cause  before  Graham,  B.,  at  the  last  Devon  as- 
sizes, the  action  being  by  the  plaintiffs  as  indorsees  against  the  defend- 
ant as  indorser  of  a  bill  of  exchange,  the  question  was,  if  sufficient  no- 
tice of  the  dishonor  of  the  bill  had  been  given  to  the  defendant.  The 
bill  was  payable  at  a  banker's  in  London,  and  became  due  on  the  14th 
of  July,  1814,  and  was  presented  on  that  day  about  12  o'clock,  and 
dishonored.  The  bill  was  returned  with  notice  of  its  dishonor  by  the 
post  on  the  loth  to  Glyn  &  Co.,  bankers  at  Launceston,  with  whom  the 
plaintiffs  had  deposited  the  bill  as  their  bankers.  The  letter  reached 
Launceston  on  Sunday  morning,  the  17th.  And  on  Monday,  the  18th, 
Glyn  &  Co.  sent  notice  by  the  post  to  the  plaintiffs  at  Tavistock,  where 
they  resided,  and  the  plaintiffs  afterwards  forwarded  notice  to  another 
indorser,  who  gave  notice  to  the  defendant.  The  post  from  London 
to  Launceston  arrives  at  Launceston  at  8  o'clock  in  the  morning,  and 
letters  are  delivered  in  about  half  an  hour,  and  the  post  from  Launces- 
ton to  Tavistock  leaves  Launceston  at  12  at  noon,  allowing  an  interval 
of  about  four  hours.  The  letter  which  the  bankers  at  Launceston  put 
into  the  post  on  the  Monday,  to  the  plaintiffs  at  Tavistock,  was  not 
put  in  until  after  12  o'clock,  after  the  departure  of  the  post,  in  conse- 
quence of  which  it  did  not  go  from  Launceston  till  the  next  post,  nor 
reach  Tavistock  before  the  morning  of  the  20th ;  whereas,  if  it  had 
been  sent  to  the  post  before  12  o'clock  on  the  Monday  it  would  have 
reached  Tavistock  on  the  morning  of  the  19th.  And  the  question  was 
whether  the  Launceston  bankers  should  not  have  apprised  the  plain- 
tiffs by  the  earliest  possible  post,  that  is,  by  sending  the  letter  to  the 
post  on  Monday  before  12  o'clock,  or  whether  they  had  the  whole  of 
Monday  to  do  it.  There  was  also  another  question,  whether  the  plain- 
tiffs should  not  have  given  notice  immediately  to  the  defendant,  in- 
stead of  giving  it  to  another  indorser,  and  through  the  medium  of  that 

*3  Accord:    Siegel  v.  Dubiusky,  56  Misc.  Rep.  681,  107  N.  Y.  Supp.  678  (1907). 


Ch.  2)  DRAWER    AND    INDORSER.  605 

indorser  to  the  defendant.  The  learned  judge  ruled  in  favor  of  the 
plaintiffs  upon  both  points,  and  there  was  a  verdict  for  the  plaintiffs. 

Lens,  Serjt.,  moved  for  a  new  trial.** 

Lord  ElIvEnborough,  C.  J.  It  has  been  laid  down,  I  believe,  since 
the  case  of  Darbyshire  v.  Parker,  6  East,  3,  as  a  rule  of  practice,  that 
each  party,  into  whose  hands  a  dishonored  bill  may  pass,  should  be 
allowed  one  entire  day  for  the  purpose  of  giving  notice.  See  Scott  v. 
Lifford,  9  East,  347,  and  Langdale  v.  Trimmer,  15  East,  291.  A  dif- 
ferent rule  would  subject  every  party  to  the  inconvenience  of  giving 
an  account  of  all  his  other  engagements,  in  order  to  prove  that  he  could 
not  reasonably  be  expected  to  send  notice  by  the  same  day's  post  which 
brought  it.  This  rule  is,  I  believe,  in  conformity  with  what  Marius 
states  upon  the  subject  of  notice,  and  it  has  been  uniformly  acted  up- 
on at  Guildhall,  by  this  Court,  for  some  time.  It  has,  moreover,  this 
advantage :  That  it  excludes  all  discussion  as  to  the  particular  occu- 
pations of  the  party  on  the  day.  As  to  the  objection  that  notice  was 
not  given  by  the  holders  immediately  to  the  defendant,  it  was  given 
by  one  who  was  an  indorser,  and  not  by  a  stranger,  which  is  enough  to 
satisfy  the  allegation  that  the  defendant  had  notice. 

Rule  refused. 


HEWITT  V.  THOMSON. 

(Court  of  Exchequer,  1S36.     1  Moody  &  R.  543.) 

Assumpsit  against  the  drawer  of  a  bill  of  exchange. 

The  bill  was  dated,  "3  Wilton  Street,  30  November,  1835,"  and  pur- 
ported to  be  drawn  by  "Chas.  Thomson,"  and  to  have  been  accepted 
by  one  John  Johnson,  payable  to  the  drawer's  order,  by  him  indorsed 
to  I.  R.  Nicolls,  who  indorsed  it  to  the  plaintiff'. 

Plea,  that  the  defendant  had  not  notice  of  the  dishonor,  and  issue 
thereon. 

It  appeared  in  evidence  that  when  the  bill  was  returned  unpaid  to 
the  plaintiff  as  indorser,  on  the  7th  March,  1836,  his  attorneys  wrote 
a  letter  containing  notice  of  the  dishonor,  and  put  the  same  into  the 
twopenny  post;  but,  misreading  the  drawer's  surname  for  "Thorn- 
ton," instead  of  "Thomson,"  they  directed  their  letter  "to  C.  Thorn- 
ton, Esq.,  No.  3  Wilton  Street."  The  defendant  had  ceased  to  reside 
at  that  place  before  the  bill  became  due,  and  the  letter  was  returned  to 
the  attorneys  of  the  plaintiff  on  the  10th  of  March,  from  the  Dead  Let- 
ter Office,  with  an  intimation  that  no  such  person  as  Mr.  Thornton 
was  known  at  No.  3  Wilton  street,  whereupon  the  attorneys  on  the 
same  day,  having  made  inquiries  who  the  defendant  was,  and  having 
ascertained  his  present  residence,  addressed  a  notice  to  him  in  his  right 
name  at  that  residence.     The  postman  who  had  the  delivery  of  letters 

*4  The  argutueuts  of  counsel  are  omitted. 


<>06  LIABILITY    OF    PARTIES.  (Part    3 

in  Wilton  street  on  the  7th  was  called  and  said  that,  being  informed 
there  was  no  such  person  as  Mr.  Thornton  living  at  No.  3,  he  returned 
the  letter  to  the  head  office,  without  making  any  further  inquiry.  It 
was  contended  for  the  defendant  that  no  notice  of  dishonor  had  been 
given  to  him  until  the  10th  of  March,  which  was  clearly  too  late. 

P.ARKii:,  B.,  told  the  jury,  that  it  was  clear  the  defendant  had  not  re- 
ceived notice  within  the  time  limited  by  the  ordinary  rule,  and  that  it 
was  fit  they  should  watch  very  closely  any  evidence  adduced  for  the 
purpose  of  taking  any  particular  case  out  of  that  rule.  The  notice 
ought  to  have  been  given  on  the  7th.  In  fact  it  did  not  reach  the  de- 
fendant until  the  10th;  and  the  question  for  the  jury  was  whether 
sending  the  letter  on  the  7th  to  the  residence  occupied  by  the  defend- 
ant when  the  bill  was  drawn  by  him,  and  with  the  error  that  had  been 
proved  to  exist  in  the  defendant's  name  upon  the  address  of  the  letter, 
was  a  sufficient  notice?  They  would  look  at  the  bill,  and  examine  the 
defendant's  signature  thereto,  and  then  say  whether  the  mistake  in 
the  address  was  attributable  to  the  want  of  proper  care  on  the  part 
of  the  plaintiff  or  his  attorneys,  or  whether  it  might  more  reasonably 
be  said  to  result  from  the  defendant's  own  manner  of  writing  his  name 
in  the  bill.  If  they  were  of  the  latter  opinion,  their  verdict  would  be 
for  the  plaintiff. 

Verdict  for  the  plaintiff.*" 


HARRISON  V.  RUSCOE. 
(CJourt  of  Exchequer.  1.S46.     15  Mees.  &  W.  231.) 

Assumpsit  on  a  bill  of  exchange  for  £210.  10s.,  dated  21st  Decem- 
ber, 1822,  drawn  by  the  defendant  on,  and  accepted  by,  Daniel  Ruscoe, 
payable  to  the  order  of  the  defendant  in  London  four  months  after 
date,  indorsed  by  the  defendant  to  W.  H.  Vaughan,  and  by  him  to 
the  plaintiff.  Plea,  that  the  defendant  had  not  due  notice  of  the  non- 
payment of  the  bill.    Issue  thereon. 

At  the  trial,  before  the  recorder  of  Chester,  it  appeared  that,  the 
bill  having  become  due  on  the  24th  of  April,  1845,  and  being  dishon- 
ored, the  plaintiff's  attorney,  a  Mr.  Roberts  of  Chester,  wrote  and 
sent  to  the  defendant,  on  the  2Gth,  the  following  notice  of  dishonor: 

"Sir:  I  am  requested  by  Mr.  W.  H.  Vaughan,  of  this  city,  to  ap- 
ply to  you  for  the  payment  of  the  amount  due  on  you  and  your  brother 
Daniel  Ruscoe's  dishonored  bill  to  him ;  and  as  Mr.  Vaughan  is  very 
pressing  for  the  amount,  I  trust  you  will  immediately  oblige  me  with 
the  same,  together  with  my  charge  as  under. 

"I  am,  sir,  your  obedient  servant,  S.  J.  Roberts." 

*is  Accord:  The  Elmville,  [1904]  Prob.  Div.  319,  329  (delay  caused  by  ig- 
norance of  sea  captain's  address) ;  Citizens"  Bank  v.  Pugh.  19  La.  Auu.  43, 
(1S67),  delay  caused  by  war,  senible.  But  notice  must  be"  given  when  cause 
of  delay  ceases  to  exist.  Studdy  v.  Beesty,  60  L.  T.  (N.  S.)  647  (1SS9.)  See 
Feck  V.  Eastou,  74  Conn.  456,  51  Atl.  134  (1902), 


Ch.  2)  DRAWER    AND    INDOUSER.  607 

Mr.  Roberts,  being  called  as  a  witness  for  the  plaintiff,  stated  that 
he  had  no  authority  from  Vaughan  to  give  any  notice  of  dishonor,  and 
that  Vaughan's  name  was  inserted  in  the  letter  by  a  clerk  of  his.,  in 
mistake,  instead  of  the  plaintiff's.  The  bill  having  fallen  due  in  the 
hands  of  a  banker  in  London,  a  notice  of  dishonor  given  on  the  2Gth 
of  April  would  be  good  either  for  the  plaintiff'  or  for  Vaughan. 

It  was  contended  for  the  defendant,  first,  that  under  these  circum- 
stances the  notice  of  dishonor,  being  given  in  the  name  of  Vaughan, 
from  whom  Mr.  Roberts  had  no  authority  to  give  it,  was  of  no  avail : 
and,  secondly,  that  it  was  bad  in  form,  as  it  improperly  described  the 
bill  as  being  the  bill  of  the  defendant  and  his  brother.  The  learned 
recorder  thought  the  notice  was  good,  and  directed  a  verdict  for  the 
plaintiff'  for  the  amount  of  the  bill  and  interest,  giving  the  defendant 
leave  to  move  to  enter  a  nonsuit.  The  plaintiff  obtained  a  rule  nisi  ac- 
cordingly.*^ 

Parke,  B.  *  *  *  The  only  question  is  whether  this  notice  was 
sufffcient ;  for  we  have  already  intimated  our  opinion  that  the  notice 
was  in  sufficient  time,  whether  it  be  considered  as  given  by  the  plain- 
tiff or  Vaughan,  and  that  it  sufficiently  referred  to  the  bill  in  question, 
and  notified  its  due  presentment  and  nonpayment. 

Since  the  case  of  Chapman  v.  Keane,  3  Ad.  &  E.  193,  it  must  be 
considered  as  perfectly  settled  that  a  notice  of  dishonor  need  not  be 
given  by  the  holder,  but  that  he  may  avail  himself  of  notice,  given  in 
due  time  by  any  party  to  the  bill.  The  decision  in  that  case  is  referred 
to  and  adopted  by  Chancellor  Kent,  Commentaries,  vol.  3,  p.  108,  and 
Mr.  Justice  Story  on  Bills  of  Exchange,  §  304.  The  former  states  the 
rule  to  be  that  the  notice  may  be  given  by  any  one  who  is  a  party  to 
the  bill ;  the  latter  states  it  more  fully,  and  says  that  the  notice  will 
be  sufficient,  although  not  given  by  the  holder  or  his  agent,  if  it  comes 
from  some  person  who  holds  the  bill  when  it  is  dishonored,  or  is  a 
party  to  the  bill,  or  who  would,  on  the  same  being  returned  to  him,, 
and  after  payment,  be  entitled  to  require  reimbursement  thereof. 

The  notice,  by  the  terms  of  the  rule  as  laid  down  by  the  Court  of 
Queen's  Bench,  must  be  given  in  due  time  by  the  party  to  the  bill,  that 
is,  in  due  time,  if  he  himself  were  suing;  and,  consequently,  the  case 
of  notice  by  a  party  who  had  himself  been  already  discharged  bv  the 
laches  of  the  holder,  is  excluded.  So  the  terms  of  the  rule  as  laid  down 
by  Mr.  Justice  Story  seem  to  exclude  the  case  of  a  party  to  the  bill, 
who  could  not  himself  sue  upon  it  on  paying  the  amount  of  the  bill  ; 
at  least  they  must  be  so  understood,  otherwise  the  mischief  would  hap- 
pen which  was  pointed  out  by  Mr.  Jervis,  that  there  might  be  a  bih 
with  20  indorsements,  which  the  holder  mipht  retain  20  days  after  its 
dishonor,  and  then  recover  against  the  drawer  on  a  notice  then  given 
to  him  by  the  first  indorsee,  which  that  indorsee  himself  could  not  do. 
Such  a  notice  would  not  be  in  good  time  if  given  by  the  first  indorsee, 

*6  The  arguments  of  counsel  and  part  of  the  opinion  are  omitted. 


€08  LIABILITY   OF    PARTIES.  (Part   3 

and  would  therefore  be  bad,  and  not  support  an  action  by  the  last. 
The  rule  equally  excludes  the  case  of  notice  by  an  acceptor,  who  nev- 
er could  sue  himself  upon  the  bill  after  taking  it  up;  and  the  instances 
in  which  a  notice  by  an  acceptor  has  been  held  good  at  nisi  prius  (Thor- 
old  V.  Smith,  1  Chit.  R.  227 ;  Rosher  v.  Kieran,  4  Campb.  87)  are  ex- 
plained by  Mr.  Justice  Bayley  (Bayley,  Bills  [Ed.  183UJ,  c.  7,  §  2,  p. 
254,  et  seq.)  on  the  supposition  that  in  these  the  acceptor  had  a  special 
authority  to  do  so.*^  But  in  the  present  case  Vaughan,  in  whose  name 
the  notice  was  given,  was  not  discharged  by  the  laches  of  the  holder 
at  the  time  it  was  given,  and  a  notice  by  him  on  the  26th  would  have 
been  in  sufficient  time  to  support  an  action  by  him,  and,  consequently, 
an  action  by  the  plaintiff.  There  is  therefore  no  objection  to  the  no- 
tice on  that  ground ;  nor  would  there  have  been  any,  if  the  attorney 
had  omitted  to  state  on  whose  behalf  he  applied.  It  was  so  held  in 
Woodthorpe  v.  Lawes,  2  M.  &  W.  109,  and  had  been  previously  laid 
down  in  Chancellor  Kent's  Commentaries  (volume  3,  p.  108),  who  says 
that  any  agent  in  possession  of  the  bill  may  give  the  notice,  and  it  need 
not  state  at  whose  request  it  was  given,  nor  who  was  the  owner  of 
the  bill. 

It  remains,  therefore,  to  consider  what  is  the  effect  of  giving  an  un- 
true description  of  the  party  on  whose  behalf  it  was  given.  This  point 
has  never  been  decided  ;  for  in  Chapman  v.  Keane,  the  only  case  which 
bears  upon  it,  the  plaintiff's  clerk,  who  gave  the  notice,  must  have  been 
authorized,  by  the  nature  of  his  employment,  to  give  it  on  behalf  of 
the  plaintiff,  as  he  was,  by  the  express  authority  of  the  holder,  to  give 
it  for  him ;  and  the  notice  stated  no  untruth.  Here  there  is  an  untrue 
statement,  but  made  unintentionally,  and  by  a  mere  mistake. 

There  is,  no  doubt,  a  difference  between  the  two  cases,  where  a  no- 
tice is  given  by  an  authorized  person,  without  stating  on  whose  behalf 
it  is  given,  and  where  untrue  information  is  afforded.  In  one  case, 
the  party  is  put  on  inquiry,  if  he  thinks  fit  to  make  it;  in  the  other, 
he  is  misinformed.  What,  then,  ought  to  be  the  result  of  that  mis- 
information? It  is  to  be  recollected  that,  whether  the  party  is  misled 
or  not  as  to  the  person  giving  the  notice,  the  great  object  of  a  notice 
is  answered  by  the  information  of  the  dishonor  of  the  bill,  and  the 
person  to  whom  notice  is  given  is  thereby  enabled  to  withdraw  his  ef- 
fects from,  or  take  his  remedy  against,  the  prior  parties.  And  we 
think  it  reasonable  to  hold  that  the  misrepresentation  of  the  name  of 
the  person  on  whose  behalf  notice  is  given  ought  not  wholly  to  avoid 
the  notice,  but  only  to  place  the  party  giving  it  in  the  same  situation, 
as  to  the  party  to  whom  it  was  given,  as  if  the.  representation  had  been 
true;  and,  therefore,  the  defendant  ought  to  have  every  defense  against 
the  plaintiff  that  he  would  have  had  if  the  notice  had  been  really  given 
by  the  party  named.     And  this  is  in  analogy  with  the  law  as  to  con- 

4  7  See  Trader's  Nat.  Bank  v.  Jones,  104  App.  Div.  436.  93  N.  Y.  Snpp.  768 
{IdO'i).  where  the  maker  as  agent  for  the  holder,  notified  his  accommodation 
mdorser. 


Ch.  2)  DRAWEp    AND    INDORSER.  609 

tracts  with  factors  acting  for  concealed  principals,  and  similar  cases, 
where  the  contract  is  not  avoided  by  the  misstatement,  but  the  other 
party  has  all  the  equities  against  the  real  as  he  would  have  had  against 
the  apparent  contractor.  If,  therefore,  in  the  present  instance,  the 
notice  by  Vaughan  would  have  been  bad  (as  it  would  have  been  had  he 
been  discharged  by  laches,  or  had  no  right  of  action  on  the  bill  against 
the  defendant  if  he  had  taken  it  up),  the  defendant  would  have  had  a 
defense;  if  good,  as  upon  the  evidence  it  appears  that  it  would  have 
been,  the  defendant  has  not  been  injured,  and  has  no  right  to  complain 
of  the  misrepresentation. 

We  think,  therefore,  the  ruling  of  the  learned  recorder  was  right, 
and  the  rule  ought  to  be  discharged. 


ROWE  V.  TIPPER. 
(Court  of  Common  Pleas,  1S.j3.     13  C.  B.  249.) 

Assumpsit  by  indorsee  against  indorser  of  a  bill  of  exchange. 

The  declaration  stated  that  one  Green,  theretofore,  to  wit,  on  the 
12th  of  July,  1851,  made  his  bill  of  exchange  in  writing,  and  directed 
the  same  to  Messrs.  Knight  &  Co.,  and  thereby  required  them  to  pay 
to  his  order  the  sum  of  i52.  9s.,  four  months  after  the  date  thereof, 
for  value  received,  which  period  had  elapsed  before  the  commencement 
of  the  suit ;  that  Green  indorsed  the  bill  to  the  defendant ;  that  the  de- 
fendant indorsed  it  to  one  Abley ;  and  that  Abley  indorsed  it  to  the 
plaintiff,  before  it  became  due ;  and  that  Knight  &  Co.  did  not  pay  the 
said  bill,  although  the  same  was  duly  presented  to  them  for  payment, 
on  the  day  when  it  became  due — of  all  which  the  defendant  then  had 
due  notice,  and  then,  in  consideration  of  the  premises,  promised  the 
plaintiff  to  pay  him  the  amount  of  the  said  bill,  on  request. 

By  his  sixth  plea,  the  defendant  traversed  the  notice  of  dishonor. 

The  cause  was  tried  before  Cresswell,  J.,  at  the  second  sitting  in 
London,  in  Michaelmas  term  last.  It  appeared  that  the  bill  was  duly 
presented  when  it  became  due,  viz.  on  Saturday,  the  loth  of  November, 
1851,  at  the  place  where  it  was  made  payable,  and  was  dishonored ;  that 
the  plaintiff,  on  the  17th  of  November,  gave  notice  of  dishonor  to  Ab- 
ley, and  on  the  18th  (through  the  agency  of  one  Delane)  gave  notice 
to  the  defendant. 

On  the  part  of  the  defendant,  it  was  insisted  that  the  notice  to  him 
was  too  late,  and  that  there  was  no  evidence  that  the  notice  given  by 
Delane  was  given  with  the  authority  of  the  plaintiff ;  all  that  was  proved 
being  that  the  bill  had  been  placed  in  Delane's  hands  to  obtain  payment. 

For  the  plaintiff,  it  was  insisted  that,  inasmuch  as  the  notice  reached 
the  defendant  in  the  same  time  as  it  would  have  done  if  Abley  had  given 
it,  it  was  a  sufficient  notice,  and  that  Delane  was  duly  authorized  to  give 
SM.&  M.B.&.N.— 39 


610  LIABILITY    OF    PARTIES.  (Part   3 

the  notice  ;  and  the  case  of  Turner  v.  Leech,  4  B.  &  Aid.  451,  was  re- 
ferred to. 

The  learned  judge  directed  the  jury  to  find  for  the  defendant  on  the 
sixth  issue,  reserving  leave  to  the  plaintiff  to  enter  the  verdict  for  him, 
for  the  amount  of  principal  and  interest,  if  the  court  should  be  of 
opinion  that  the  notice  was  sufficient.  The  plaintiff  obtained  a  rule 
nisi  accordingly."  ** 

Jer\"is,  C.  J.  It  seems  to  me  that  the  rule  laid  down  in  Chitty  and 
Hulme  is  the  correct  rule,  and  that,  if  the  holder  of  a  bill  of  exchange 
wishes  to  avail  himself  of  a  notice  of  dishonor  given  by  him  to  a  re- 
mote indorser,  he  must  give  it  within  the  time  within  which  he  is  by  law 
required  to  give  it  to  his  immediate  indorser ;  and  he  cannot  avail  him- 
self of  his  laches,  to  gain  another  day.  If  he  could,  the  consequence 
which  has  been  pointed  out  would  follow,  viz.  that,  if  there  were  20 
indorsers,  he  would  have  20  days  within  which  to  give  notice  to  the 
first  of  them.  The  rule  is  correctly  laid  down  by  Burrough,  J.,  in  Do- 
bree  v.  Eastwood,  3  C.  &  P.  250,  that  the  holder  has  his  day  to  give 
notice  to  any  party  he  may  seek  to  charge,  and  that  each  of  the  prior 
indorsers  in  turn  has  his  day.  Each  has  one  day  to  give  notice  to  all 
the  parties  against  whom  he  intends  to  enforce  his  remedy.  That  is 
the  result  of  all  the  decisions.  No  doubt  it  is  settled  that  the  holder 
need  not  himself  have  given  all  the  notices;  he  may  avail  himself  of  a 
notice  duly  given  by  any  other  party  to  the  bill.  That  was  decided  in 
Chapman  v.  Keane,  3  Ad.  &  E.  193,  4  N.  &  M.  607.  And  in  Harrison 
v.  Ruscoe,  15  M.  &  W.  231,  Parke,  B.,  commenting  upon  that  case, 
says :  "The  notice,  by  the  terms  of  the  rule,  as  laid  down  by  the  Court 
of  Queen's  Bench,  must  be  given  in  due  time  by  the  party  to  the  bill, 
tiiat  is,  in  due  time  if  he  himself  were  suing."  That,  in  fact,  is  rec- 
ognizing the  rule  as  stated  in  Chitty  and  Hulme.  The  notice  upon 
which  the  plaintiff  relies  in  this  case  is  his  own  notice;  and  he  must 
show  that  that  was  given  in  due  time.  He  gave  notice  in  due  time  to 
.A.bley,  his  immediate  indorser;  but  he  did  not  give  due  notice  to  the 
defendant.  I  am,  therefore,  of  opinion  that  he  has  by  his  laches  re- 
leased the  defendant;  and  consequently  the  rule  which  has  been  ob- 
tained to  enter  the  verdict  for  the  plaintiff  on  the  sixth  issue,  must  be 
discharged. 


LINN  V.  HORTON. 

(Supreme  Court  of  Wisconsin,  1863.     17  Wis.  151.) 

Yates  and  Gray,  for  value,  gave  their  note,  indorsed  for  them  by 
Horton  before  delivery,  and  payable  to  the  plaintiffs  or  order  at  the 
Rock  County  Bank,  at  Janesville,  in  this  state.  Before  the  note  be- 
came due,  the  plaintiffs,  who  were  merchants  in  the  city  of  New  York, 
indorsed  it  for  collection  to  Kissam  &  Taylor,  bankers  in  the  same  city, 

*8The  arguments  of  counsel  and  the  opinion  of  Maule,  J.,  are  omitted. 


Ch.  2)  DRAWER    AND    INDORSER.  Gil 

who  indorsed  it  and  sent  it  for  collection  to  the  Central  Bank  of  Wis- 
consin, at  Janesville.  Default  having  been  made  in  its  payment  when 
due,  to  wit,  November  22,  1861,  it  was  duly  protested,  and  on  the  same 
day  the  note  and  notice  of  protest  for  Horton,  and  like  notices  for 
Kissam  &  Taylor  and  the  plaintiffs  respectively,  were  inclosed  in  an 
envelope  and  deposited  in  the  post  office  at  Janesville,  post  paid,  di- 
rected to  Kissam  &  Taylor,  who  received  the  same  November  27th. 
On  the  same  day  Kissam  &  Taylor  delivered  to  the  plaintiffs  the  notices 
addressed  to  them  and  to  Horton  respectively;  and  the  plaintiffs,  on 
the  same  day,  inclosed  the  notice  for  Horton  in  an  envelope  directed  to 
him  at  Janesville,  and  deposited  the  same  post  paid,  in  the  post  office 
at  New  York;  but  the  notice  was  never,  in  fact,  received  by  Horton. 
This  action  was  brought  against  Horton  together  with  the  makers ;  but 
the  circuit  court  found  that  "the  notary,  who  protested  the  note,  did 
not  use  due  diligence  to  ascertain  the  residence  of  Horton,"  and  there- 
upon held  that  proper  steps  had  not  been  taken  to  charge  him,  and  ren- 
dered judgment  in  his  favor;  from  which  the  plaintiffs  appealed.*® 

Dixon,  C.  J.  It  is  an  established  principle  of  mercantile  law  that, 
if  the  holder  of  a  bill  or  note  chooses  to  rely  upon  the  responsibility  of 
his  immediate  indorser,  there  is  no  necessity  for  his  giving  notice  to 
any  previous  party ;  and  if  such  notice  be  properly  given,  in  due  time, 
by  the  other  parties,  it  will  inure  to  the  benefit  of  the  holder,  and  he 
may  recover  thereon  against  any  of  them.  Thus,  if  the  holder  notifies 
the  sixth  indorser,  and'  he  the  fifth,  and  so  on  to  the  first,  the  latter 
will  be  liable  to  all  the  parties.  1  Parsons  on  Bills  and  Notes,  503, 
504;  and  Edwards  on  Bills  and  Notes,  473,  474,  and  the  cases  cited. 
And  it  is  no  objection  to  such  notice  that  it  is  not  in  fact  received  so 
soon  by  the  first  or  any  prior  indorser,  as  if  it  had  been  transmitted 
directly  by  the  holder  or  notary,  provided  it  has  been  seasonably  sent 
by  each  indorser  as  he  receives  it.  Colt  v.  Noble,  5  Mass.  167 ;  Mead 
V.  Engs,  5  Cow.  (N.  Y.)  303;  Howard  v.  Ives,  1  Hill  (N.  Y.)  263. 
And  the  same  degree  of  diligence  must  be  exercised  on  the  part  of  the 
indorser  in  forwarding  notice  as  is  required  of  the  holder.  Ordinary 
diligence  must  be  used  in  both  cases.  He  is  not  bound  to  forward  no- 
tice on  the  very  day  upon  which  he  receives  it,  but  may  wait  until  the 
next.     Howard  v.  Ives,  and  the  authorities  cited. 

For  the  purpose  of  receiving  and  transmitting  notices,  those  who 
hold  at  the  time  of  protest,  and  those  who  indorse  as  mere  agents  to 
collect,  are  regarded  as  real  parties  to  the  bill  or  note ;  the  former  as 
holders  in  fact,  and  the  latter  as  actual  indorsers  for  value.  Mead  v. 
Engs  ;  Howard  v.  Ives. 

It  follows,  from  these  principles,  that  the  proper  steps  were  taken  to 
charge  the  defendant  Horton  as  indorser.  Notice  for  him  was  for- 
warded by  mail,  post  paid,  on  the  day  of  the  protest,  to  the  agents  and 
last  indorsers  in  New  York,  and  delivered  by  them,  on  the  day  it,  was 

*»  The  arguments  of  counsel  and  part  of  the  opinion  are  omitted. 


612  LIABILITY    OF    PARTIES,  (Part    3 

received,  to  the  plaintiffs,  their  immediate  indorsers,  who,  on  the  same 
day,  deposited  it.  inclosed  in  an  envelope,  post  paid,  in  the  post  office 
at  Xew  York,  directed  to  the  defendant  at  Janesville,  Wis.,  his  proper 
post  office. 

Under  these  circumstances  the  only  question  which  can  possibly  arise 
is  whether  the  defendant  ought  to  be  discharged  by  reason  of  the  notice 
not  having  been  in  fact  received  by  him.  He  testifies  that  it  was  not. 
Professor  Parsons  observes  that  in  all  the  cases  of  constructive  notices, 
where  notice  given  by  a  subsequent  to  a  prior  indorser  has  been  held 
to  inure  to  the  benefit  of  the  immediate  indorser,  it  has  appeared  that 
the  notice  was  actually  received ;  and  he  raises  a  question  whether  this 
would  be  so  if  the  notice  was  sent  to  the  wrong  place.  1  Pars,  on 
Notes  and  Bills,  504,  note,  and  G27.  But  here  the  notice  was  sent  to 
the  right  place.  Besides,  the  plaintiffs,  who  seek  to  avail  themselves 
of  the  notice,  are  the  indorsers  who  sent  it  to  the  defendant  as  the  in- 
dorser next  immediately  preceding  them.  We  have  already  seen  that 
the  rule  of  diligence  as  to  them  is  the  same  as  in  the  case  of  the 
holder.    *  ^  *    * 

Judgment  reversed. 


REQUA  V.  COLLINS. 

(Court  of  Appeals  of  New  York,  1872.     53  N.  T.  144.) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme  Court 
in  the  Eighth  Judicial  District,  affirming  a  judgment  in  favor  of  plain- 
tiff, entered  upon  the  decision  of  the  court  upon  trial  at  circuit  without 
a  jury. 

This  action  was  upon  a  promissory  note  dated  June  2,  1864,  payable 
one  year  after  date,  made  by  one  Miller  for  the  accommodation  of  one 
Brown,  and  indorsed  by  the  latter  and  by  the  defendant,  payable  at 
the  Flour  City  Bank,  Rochester.  The  answer  denied  notice  of  pro- 
test ;  and  the  only  question  litigated  at  the  trial  was  whether  notice  had 
been  properly  served  so  as  to  charge  defendant. 

The  material  facts  were  as  follows:  Brown  delivered  the  note  to 
W.  R.  Townsend  to  sell  for  him,  and  he  sold  it  to  the  plaintiff,  who 
resided  at  Kendall,  Orleans  county,  about  25  miles  from  Rochester. 
The  plaintiff  held  it  until  it  was  about  due.  and  then  he  sent  it  by  one 
Jewett  to  the  Flour  City  Bank,  at  Rochester,  for  the  purpose  of  having 
it  protested  if  not  paid.  It  was  not  paid  and  was  protested,  and  notice 
of  protest  was  mailed  to  the  defendant,  addressed  to  her  at  Rochester. 
She  had,  about  six  months  before,  moved  from  Rochester  to  the  city 
of  New  York,  and  then  resided  there,  having,  before  her  removal,  re- 
sided ten  years  in  the  city  of  Rochester.  Before  the  note  was  sent  to 
the  bank,  said  Townsend,  acting  for  the  plaintiff,  made  inquiry  as  to 
the  place  of  residence  of  the  defendant  of  various  persons,  among 
whom  was  one  Plumley,  a  relation  of  the  defendant,  residing  in  the 


Ch.  2)  DRAWER    AND    INDOUSER.  613 

same  town  with  the  plaintiff.  These  inquiries  were  made  at  different 
times  within  six  months  before  the  note  fell  due,  and  he  was  informed 
that  she  resided  at  Rochester.  Jewett,  who  took  the  note  to  the  bank 
for  the  plaintiff  for  the  purpose  of  having  it  protested,  had  been  in- 
formed by  various  persons  that  defendant  lived  in  Rochester.  He  was 
so  informed  by  said  Townsend  in  the  winter  or  spring  before  the  note 
fell  due.  He  was  also  so  informed  by  said  Plumley  in  the  fall  of 
1864.  When  Jewett  left  the  note  at  the  bank  he  told  the  teller  that  all 
the  parties  resided  in  Rochester,  and  the  teller  so  informed  the  cashier, 
who  was  the  notary  who  protested  the  note.  No  inquiry  was  made  at 
Rochester  on  the  day  the  note  fell  due  as  to  the  residence  of  defendant. 

The  court  held  that  due  diligence  had  been  used  to  charge  the  de- 
fendant, and  that  she  was  liable  upon  the  note.^*' 

Earl,  C.  The  defendant,  at  the  date  of  the  indorsement,  had  for 
ten  years  resided  in  Rochester,  and  she  continued  to  reside  there  for 
six  months  thereafter,  when  she  moved  to  the  city  of  New  York, 
where,  during  the  last  six  months  the  note  had  to  run,  she  resided. 
Neither  the  plaintiff  nor  his  agents  knew  of  this  change  of  residence. 
They  believed,  in  good  faith,  from  information  which  they  had  re- 
ceived, that  she  continued  to  reside  in  Rochester.  There  is  evidence 
tending  to  show  that  their  inquiries  as  to  her  residence  were  made  in  the 
fall,  winter  and  spring  before  the  note  fell  due.  They  were  made  of 
persons  likely  to  know  defendant's  residence.  The  information  re- 
ceived was,  therefore,  such  as  the  plaintiff  could  rely  on,  and,  in  pur- 
suance of  this  information,  the  notary  was  directed  to  serve  notice  of 
protest  upon  the  defendant  at  Rochester.  She  claims  that  she  did  not 
receive  the  notice,  and  hence  that  she  was  not  charged  as  indorser. 

In  order  to  charge  an  indorser,  it  is  not  necessary  that  he  should 
actually  receive  notice  of  protest.  It  is  sufficient  that  such  notice  ha'? 
been  properly  served.  If  the  service  be  by  mail,  and  the  indorser  has 
■  not  indicated  where  notice  may  be  served  upon  him  by  writing  the  place 
under  his  signature  on  the  back  of  the  note,  the  notice  must  be  ad- 
dressed to  him  at  his  place  of  residence.  But  in  case  the  holder  does 
not  actually  know  the  indorser's  place  of  residence,  the  notice  may  be 
addressed  to  the  place  where,  after  diligent  inquiry,  he  is  informed  and 
believes  he  resides.  What  is  due  diligence  in  such  a  case,  the  facts 
being  undisputed  or  ascertained,  is  a  question  of  law. 

In  Bank  of  Utica  v.  Phillips,  3  Wend.  408,  the  defendant  was  the 
second  indorser  upon  a  promissory  note,  payable  in  90  days  from  date. 
At  the  time  of  the  indorsement,  he  resided  at  Geddes,  in  the  county  of 
Onondaga,  but  in  a  few  days  thereafter  removed  to  Fulton,  Oswego 
county,  where  he  continued  to  reside.  At  the  time  the"  note  was  dis- 
counted, it  was  known  to  the  officers  of  the  bank  that  the  defendant 
resided  at  Geddes ;  but  thereafter  they  made  no  inquiry  as  to  his  place 

60  The  arguments  of  counsel  are  omitted. 


G14  LiAiuLiTY  OF  PARTIES.  (Part  3 

of  residence,  and  they  received  no  information  of  its  change.  It  was 
held  that  a  notice  of  protest  sent  to  Geddes  was  sufficient  to  charge 
the  indorser.  Judge  Marcy,  writing  the  opinion  of  the  court,  says: 
"It  appears  to  me  that  the  question  of  dihgence  cannot  arise,  except 
in  cases  where  the  party  knows  or  ought  to  know  that  there  is  occa- 
sion for  its  exercise.  Ought  the  holders  of  this  note  when  it  fell  due 
to  have  known  that,  intermediate  its  discount  and  maturity,  the  in- 
dorser had  changed  his  residence  ?  They  had  no  reason  to  expect  such 
an  event,  and  of  course  no  considerations  of  diligence  could  have 
prompted  them  to  institute  any  inquiry  in  relation  to  it."  I  think  it 
would  not  be  unreasonable  to  hold  that  in  all  cases,  no  matter  how  long 
the  paper  has  to  run,  a  notice  of  protest,  addressed  to  the  indorser  at 
the  place  where  he  resided  when  he  made  the  indorsement,  should  be 
sufficient  to  charge  him,  although  he  may  have  changed  his  residence. 
The  holder  should  be  permitted  to  act  in  good  faith  upon  the  presump- 
tion of  his  continued  residence,  unless  he  has  received  information  of 
his  change  of  residence.  Such  a  rule  will  not  be  unfair  or  unjust  to 
the  indorser,  as  he  can  either  notify  the  holder  of  the  change  of  resi- 
dence or  make  arrangements  to  have  the  notice  forwarded  to  his  new 
place  of  residence.  But  Jvidge  iNIarcy,  in  his  opinion,  seems  to  limi^- 
the  rule  to  paper  having  the  usual  time  of  bankable  paper  to  run. 

Here  the  evidence  tends  to  show  that  the  plaintiff,  through  his  agents, 
was  informed  by  several  persons,  at  several  times  within  six  months 
before  the  note  fell  due,  that  the  defendant  resided  at  Rochester.  He 
lived  24  miles  from  Rochester,  and  had  no  reason  whatever  to  doubt 
that  his  information  was  true,  and  that  she  continued  to  reside  there. 
No  man  of  ordinary  prudence  would,  under  the  circumstances,  have 
acted  upon  the  theory  that  she  might  have  changed  her  residence.  He 
used  all  the  diligence  the  circumstances  required  of  a  prudent  man, 
and  he  and  his  agents  were  not  bound  to  make  inquiries  of  her  place 
of  residence  on  the  day  the  note  fell  due. 

In  Bank  of  Utica  v.  Davidson,  5  Wend.  588,  a  note  was  presented 
for  discount  by  the  agent  of  the  maker,  who  informed  the  clerk  of  the 
bank  that  the  indorsers  resided  in  Bainbridge,  and  the  clerk  made  a 
memorandum  of  this  fact.  When  the  note  became  due  it  was  pro- 
tested, and  a  notice  of  protest  was  directed  to  the  defendant,  one  of  the 
indorsers,  at  Bainbridge,  no  further  inquiries  as  to  his  residence  having 
been  made.  It  turned  out  that  the  defendant  had,  a  short  time  before 
he  indorsed  the  note,  removed  from  Bainbridge,  a  distance  of  12  or  14: 
miles,  to  Masonville,  in  another  county.  The  notice  was  held  suffi- 
cient to  charge  the  defendant,  upon  the  ground  that  due  diligence  had 
been  used.  In  Bank  of  Utica  v.  Bender,  21  Wend.  643,  34  Am.  Dec. 
281,  the  drawer  took  to  the  bank  a  bill  of  exchange,  indorsed  by  the  de- 
fendant, which  was  dated  at  Chittenango,  and  there  wrote  under  the 
name  of  the  defendant  "Chittenango,"  to  indicate  his  place  of  resi- 
dence.    This  memorandum  by  the  drawer,  of  course,  had  no  greater 


Ch.  2)  DRAWER    AND    INDOUSER.  615 

effect  than  if  he  had  at  the  time  given  the  bank  parol  information  that 
the  indorser  resided  at  Chittenango.  He  in  fact  resided  at  Manhus, 
and  had  resided  there  for  20  years.  The  bill  was  protested  for  non- 
payment, and  notice  of  protest  mailed  to  Chittenango,  without  any 
further  inquiry  as  to  the  indorser's  residence.  It  was  held  that  the 
notice  was  sufficient,  and  that  the  defendant  was  charged.  In  Ward 
V.  Perrin,  54  Barb.  89,  the  action  was  against  the  indorser  of  a  note 
payable  four  months  from  date.  At  the  time  when  the  indorsement 
was  made,  and  for  about  two  months  thereafter,  the  indorser  resided 
in  Rochester.  About  two  months  before  the  note  fell  due  he  removed 
from  Rochester  to  Bergen.  The  note  was  protested,  and  notice  of  pro- 
test was  mailed  to  the  defendant  at  Rochester.  The  court  held  that 
the  holders  of  the  note  were  not  bound  to  make  any  further  inquiries, 
and  that  they  could  act  upon  the  information  as  to  the  indorser's  resi- 
dence which  they  received  when  they  discounted  the  note  ;  that  they  had 
the  right,  when  the  note  matured,  to  assume  that  the  indorser  continued 
to  reside  in  Rochester,  and  to  act  accordingly  in  taking  the  requisite 
steps  to  charge  him,  unless  they  knew  that  in  the  meantime  he  had 
changed  his  residence. 

These  authorities  are  sufficient  to  show  that  the  plaintiff,  upon  the 
facts  in  this  case,  used  due  diligence  as  to  the  residence  of  the  defend- 
ant, and  that  she  was  properly  charged. 

Service  by  mail  was  authorized  in  this  case  by  section  3  of  chapter 
416  of  the  Laws  of  1857,  and  Rochester  was,  within  the  meaning  of 
that  act,  the  city  where,  "from  the  best  information  obtained  by  dili- 
gent inquiry,"  the  defendant  was  reported  to  reside.  The  degree  of 
diligence  required  under  this  section  is  not  greater  or  other  than  that 
required  by  the  common  law  as  expounded  in  the  authorities  above 
cited,  in  cases  where  the  place  of  payment  differs  from  the  place  of 
residence  of  the  indorser. 

I  therefore  conclude  that  the  judgment  should  be  affirmed  with 
costs. ^^ 

51  Sufficient  diligence  not  appearing,  in  the  following  cases,  where  notice 
was  mailed  addressed  to  the  wrong  place,  the  indorsers  were  not  charged: 
Philip  &  William  Ebling  Brewing  Co.  v.  Reinheimer,  32  Misc.  Rep.  5M.  GC> 
X.  Y.  Supp.  458  (1900) ;  Fonseca  v.  Hartman  (Snp.)  M  N.  Y.  Snpp.  131  (1903) ; 
Albany  Trust  Co.  v.  Ftothingham,  50  Misc.  Rep.  .598,  99  N.  Y.  Supp.  .343  (190G). 
Sufficient  dUigence  appearing,  the  indorser  was  charged  in  Brewster  v. 
Shrader.  26  Misc.  Rep.  480,  57  N.  Y.  Supp.  606  (1899). 

A  fortiori,  a  notice  mailed  addressed  to  the  proper  place  is  sufficient, 
though  not. received.     State  Bank  v.  Soloman  (Sup.)  84  N.  Y.  Supp.  976  (1903). 

Compare  Studdy  v.  Beesty,  00  L.  T.  N.  S.  647  (1889). 


filfi  LIABILITY    OF    PARTIES.  (Part    3 

DICKEN  V.  HALL. 

(Supreme  Court  of  Penusylvania,  1S7S.     S7  Pa.  379.) 

Assumpsit  by  J.  G.  Hall,  as  indorser,  against  J.  C.  Dicken,  a  prior 
indorser,  on  the  following  promissory  note : 
"$525.05.  Pittsburgh,   October   12th,    1876. 

"Four  months  after  date  we  promise  to  pay  to  the  order  of  J.  Charles 
Dicken,  five  hundred  and  twenty-five,  and  five  one-hundredths  dol- 
lars, at  Workingman's  Bank,  Allegheny  City,  Pa.,  without  defalcation 
for  value  received.  Reed  Bros.,  Agents." 

Indorsed : 

"Pay  to  the  order  of  J.  G.  Hall.  J.  Chas.  Dicken." 

"Pay  to  the  order  of  C.  R.  Kline,  Cash.  Jno.  G.  Hall." 

"Pay  to  the  order  of  Jas.  A.  Hill,  Cash.         C.  R.  Kline,  Cashier." 

"Pay  to  the  order  of  F.  L.  Walther,  Cash.,  for  collection  for  account 
of  Union  Banking  Co.  of  Philadelphia.  Jas.  A.  Hill,  Cashier." 

At  the  trial  the  jury  found  the  following  facts,  subject  to  the  opin- 
ion of  the  court  whether,  upon  these  facts,  the  defendant  had  had  due 
legal  notice  of  protest  and  nonpayment :  The  note  fell  due  and  was 
duly  protested  on  the  15th  of  February,  1877,  in  Allegheny  City.  The 
notices  of  protest  were  duly  forwarded  to  the  Union  Banking  Com- 
pany of  Philadelphia,  the  last  indorser,  and  by  that  bank  duly  forward- 
ed to  the  Elk  County  Bank,  the  next  prior  indorser,  at  Ridg"way,  Pa., 
at  which  place  they  arrived  on  19th  of  February.  J.  G.  Hall,  the  next 
prior  indorser,  lived  in  Ridgway,  was  an  attorney,  had  a  law  office 
and  a  law  partner  there,  and  was  also  a  member  of  the  Elk  County 
Bank,  a  private  banking  company.  On  February  20th  Kline,  the  cash- 
ier of  the  bank,  mailed  the  notices  of  protest  to  J.  G.  Hall,  at  Louis- 
ville, Kentucky,  where  he  was  temporarily.  He  did  not  go  to  his  res- 
idence or  place  of  business  to  give  notice  or  make  inquiry ;  but,  know- 
ing of  the  absence  of  Plall  and  where  he  was,  and  Hall  having  no  one 
in  Ridgway  expressly  authorized  to  attend  to  his  private  business,  he 
mailed  the  notices  to  him  at  Louisville.  Hall  received  the  notices  on 
the  22d  day  of  February,  and  on  the  same  day  mailed  the  notices  to 
Pittsburgh  to  defendant,  who  was  the  next  prior  indorser.  U  these 
facts  constituted  due  and  legal  notice  to  defendant,  judq-ment  was  to 
be  entered  on  the  verdict  (which  was  for  plaintiff  for  $-367.11) ;  other- 
wise judgment  for  the  defendant  non  obstante  veredicto. 

The  court  in  banc  entered  judgment  on  the  reserved  question  for 
ihe  plaintiff;   White,  J-,  delivering  the  following  opinion: 

"li  the  bank  in  Ridgway  had  left  the  notice  of  protest  at  Hall's  res- 
idence in  Ridgway  or  his  place  of  business,  no  doubt  the  service  would 
have  been  good.  And  if  some  one  at  Ridgway  had  received  the  notice 
for  Hall  and  mailed  the  notice  to  Dicken,  Dicken  might  have  received 
the  notice  one  or  two  days  earlier  than  he  did.  The  bank  received 
notice  on  the  19th  and  had  the  20th  to  give  notice  to  Hall.     Hall  then 


Ch.  2)  DRAWER    AND    INDORSER.  617 

had  until  the  21st  to  mail  notice  to  Dicken.  Hall  received  notice  at 
Louisville  on  the  22d,  and  the  same  day  mailed  the  notice  to  Dicken. 

"The  principle  of  law  is  that  notice  of  dishonor  must  be  given  in  a 
reasonable  time.  What  is  reasonable  time  depends  upon  circumstances. 
But  the  general  rule  is  that  it  must  be  given  the  next  day  where  the 
parties  live  at  the  same  place,  or  by  the  next  practicable  mail  where 
they  live  at  different  post  offices.  Where  there  are  several  indorsers 
living  widely  apart,  or  where  the  mails  are  infrequent,  several  days, 
even  weeks,  may  intervene  between  the  day  of  dishonor  and  the  time 
when  some  indorsers  may  receive  notice. 

"Although  the  residence  or  place  of  business  is  the  usual  and  proper 
place  for  giving  notice,  it  will  be  good  if  actually  given  anywhere ; 
and  if  the  indorser  requests  it,  it  may  be  sent  to  him  at  any  place  he 
may  designate,  and  no  doubt,  when  sent  according  to  his  directions, 
it  would  bind  him,  although  he  might  never  receive  it. 

"In  this  case,  however,  Hall  gave  no  instructions  to  the  bank.  But 
the  bank  knew  he  was  absent  from  home,  and  knew  his  post  office  ad- 
dress, and  sent  the  notice  to  him  by  mail.  He  received  it  only  one  day 
later  than  he  would  have  been  entitled  to  receive  it  had  he  been  at 
home,  and  no  doubt  actually  received  it  sooner  than  he  would  have 
done,  had  it  been  left  at  his  residence  or  usual  place  of  business.  He 
had  no  person  expressly  authorized  to  attend  to  his  private  business 
in  his  absence,  and  if  the  notice  had  been  left  at  his  residence  or  place 
of  business  it  would  probably  have  been  neglected,  or  he  would  not 
have  received  it  in  time  to  give  notice  to  his  prior  indorser.  Hall  there- 
fore had  no  good  ground  of  complaint  against  the  bank.  It  was  rather 
a  favor  to  him  that  the  notice  was  sent  to  him  at  Louisville.  Other- 
wise he  might  have  lost  his  claim  upon  the  prior  indorser. 

"Has  Mr.  Dicken  any  good  ground  of  complaint?  He  says,  if  the 
notice  to  Hall  had  been  left  at  his  residence  in  Ridgway,  he  (Dicken) 
would  have  received,  or  at  least  been  entitled  to  receive,  it  one  or  two 
days  earlier.  There  might  be  something  in  this  if  the  delay  had  been 
to  his  injury  or  prejudice.  But  there  is  no  allegation  of  that  kind. 
Perhaps  if  the  notice  had  been  left  at  Hall's  residence  in  Ridgway  if 
would  have  been  neglected  until  too  late  to  notify  Dicken,  and  in  that 
way  he  might  have  escaped  entirely.  But  such  a  contingency  hardly 
constitutes  a  good  ground  of  defense,  at  least  in  foro  conscienti?e. 

"In  Byles  on  Bills,  272,  it  is  said :  Tf  a  party  whose  name  is  on  a 
bill  direct  notice  to  be  sent  to  him  when  absent  at  a  distance  from  his 
residence,  so  that  its  transmission  thither  and  thence  to  the  prior  par- 
ties will  occupy  more  time  than  if  the  notice  had  passed  through  the 
ordinary  place  of  residence,  a  notice  to  him  at  the  substituted  and  more 
distant  places  will  it  seems,  not  only  be  a  good  notice  as  against  him, 
but  also  a  good  notice  as  against  prior  parties.'  The  same  doctrine  is 
laid  down  in  1  Parsons  on  Notes  and  Bills,  493,  and  Mr.  Parsons  goes 
farther,  and  suggests  it  may  be  the  duty  of  the  holder  to  send  the  no- 
tice to  the  party  if  he  is  absent  from  home  and  he  knows  his  address. 


618  LIABILITY  OF  PARTIES.  (Part  3 

"The  right  of  an  indorser  to  direct  notice  to  be  sent  to  him  when 
absent  from  home  is  reasonable  and  proper,  and  is  sustained  by  au- 
thority. When  thus  sent  to  him  without  previous  direction,  and  he 
actually  receives  it,  and  receives  it  as  soon  or  sooner  than  if  left  at  his 
place  of  business,  and  he  is  not  in  any  way  prejudiced  thereby,  we 
think  it  is  a  good  notice,  and  binds  him.  And  we  think  it  is  good  also 
as  to  the  prior  indorser  who  is  not  injured  or  prejudiced  by  the  delay. 

"We,  therefore,  direct  judgment  to  be  entered  for  the  plaintiff  on 
the  reserved  question." 

The  defendant  assigned  this  entry  of  judgment  for  error.'^^ 

The  judgment  of  the  Supreme  Court  was  entered  October  21,  1878. 

Per  Curi.vm.  This  judgment  is  affirmed,  upon  the  opinion  of  the 
learned  judge  below  on  the  reserved  question.^^ 


AMERICAN  EXCH.  NAT.  BANK  v.  AMERICAN  HOTEL  VIC- 
TORIA CO.  et  al. 

(Supreme  Court  of  New  York,  Appellate  Division,  1905.     103  App.  Div.  372. 

92  N.  Y.  Supp.  1006.) 

Laughlin,  J.  The  action  is  against  Charles  M.  Reed,  the  maker, 
and  the  appellant,  as  the  indorser,  of  a  promissory  note  payable  to  the 
order  of  Costikan  Freres.     The  complaint  alleges  that  the  appellant 

62  The  arguments  of  counsel  are  omitted. 

53  "But  it  is  contended,  if  the  notice  was  left  at  the  Tremont  House,  as 
stated  by  the  notary,  it  cannot  avail  the  plaintiff,  because  it  is  admitted  that 
the  defendant's  place  of  dwelling  was  in  Bangor,  and  the  text-writers  upon 
bills  of  exchange  and  promissory  notes  are  quoted  as  laying  down  the  law 
that,  idf  the  person  entitled  to  notice  does  not  reside  in  or  near  the  same 
town  or  city,  the  notice  may  be  sent  by  mail  to  the  post  office,  addressed  to 
him  in  the  place  of  his  dwelling;  and  it  is  argued  that,  unless  the  holder  or 
his  agent  can  be  proved  to  have  delivered  the  notice  into  the  hands  of  the 
indorser.  the  sending  it  to  him  by  mail  or  by  some  special  messenger  at  his 
residence  will  be  indispensable.  We  think,  however,  that  the  rule  is  not 
so  contiued  in  its  operation ;  and  we  coincide  with  the  court,  in  Bank  of  U. 
S.  V.  Corcoran.  2  Pet.  121,  7  L.  Ed.  36S,  that,  'if  notice  of  the  nonpayment 
of  a  note,  though  left  at  an  improper  place,  was,  nevertheless  in  point  of  fact 
received  in  due  time  by  the  indorser.  and  so  proved,  or  could  from  the  evi- 
dence in  the  cause  be  properly  presumed  by  the  jury,  it  is  sufficient  in  point  of 
law  to  charge  the  indorser."    Bradley  v.  Davis,  20  Me.  4.5.  .51,  .52  (1S46). 

"The  legal  presumption  is  that,  where  there  is  a  regular  daily  mail,  it 
affords  an  early  conveyance  and  a  safe  one.  and  a  party  is  not  bound  to  use 
one  more  expeditious  or  certain,  but  he  may  do  so,  and  surely  it  would  be 
no  cause  of  exception  to  the  regularity  of  the  notice  that  it  was  received  in 
advjvnce  of  the  mail.  Neither  is  it  necessax-y.  however  it  may  be  prudent, 
that  the  notice,  if  sent  by  the  mail,  be  inclosed  to  the  address  of  the  person 
to  be  charged.  If  a  party  be  willing  to  hazard  the  receipt  of  notice  by  his 
correspondent  and  the  due  attention  of  the  correspondent  to  the  service  of 
the  notice,  he  must  abide  the  result.  But  if  the  party  to  be  charged  receive 
the  notice  in  due  time,  he  cannot  object  to  the  means  which  the  owner  or 
holder  of  the  bill  has  employed."  Whiteford  v.  Burck-Myer,  1  Gill  (Md ) 
127,  150.  39  Am.  Dec.  040  (1843). 

Accord:  Jurgens  v.  Wichman,  124  App.  Div.  531,  108  N.  Y.  Supp.  881 
(1908).     Compare  Fielding  v.  Corry  [1897]  1  Q.  B.  268  (C.  A.). 


Ch.  2)  DRAWER    AND    INDORSEB.  019 

duly  indorsed  the  note  prior  to  maturity,  having  received  full  value 
therefor,  and  delivered  the  same  to  the  payee  for  full  value;  that  the 
payee  subsequently  and  before  maturity,  for  full  value,  duly  indorsed 
and  delivered  the  note  to  the  plaintiff;  that  the  note  was  duly  present- 
ed for  payment  at  the  First  National  Bank  of  Erie,  Pa.,  where  it  was 
made  payable,  and  payment  thereof  duly  demanded  and  refused,  where- 
upon it  was  duly  protested  for  nonpayment,  and  that  notice  thereof 
was  forthwith  duly  given  to  all  of  the  indorsers.  The  answer  of  the 
appellant  put  in  issue,  among  other  things,  the  allegations  of  the  com- 
plaint concerning  notice  to  it  of  the  presentation  of  the  note  for  pay- 
ment, the  demand  and  refusal  of  payment,  and  of  the  protest.  The 
plaintiff  proved  the  making  and  indorsement  of  the  note,  the  dehvery 
to  it,  and  offered  the  note  in  evidence  with  the  notary's  certificate  show- 
ing that  he  protested  it  for  nonpayment  on  the  14th  day  of  October, 
1901,  the  day  it  fell  due. 

For  the  purpose  of  proving  the  service  of  the  notice  of  protest  on 
the  appellant,  the  plaintiff  called  one  Mairs,  who  testified  that  on  the 
16th  day  of  October,  1901,  he  served  an  original  notice  of  protest  made 
by  the  notary  at  Erie,  Pa.,  on  the  14th,  and  addressed :  "To  American 
Hotel  Victoria  Co.  S.  B.  A.  Price,  Prest." — upon  the  appellant  at  the 
Victoria  Hotel,  Broadway  and  Twenty-Seventh  street,  by  leaving  it 
"at  the  cashier's  window."  He  does  not  show  that  the  cashier  or  any 
one  else  was  present  or  that  he  drew  the  attention  of  any  one  thereto, 
or  that  he  made  any  effort  to  find  any  officer  of  the  defendant,  or  any 
one  in  charge  of  tl>e  hotel,  to  whom  to  deliver  it.  The  defendant  called 
Mr.  Sweeney,  who  testified  that  he  was  elected  president  of  the  de- 
fendant and  purchased  its  capital  stock  on  the  2d  of  January,  1901, 
and  continued  to  be  president  down  to  the  time  of  the  trial ;  that  he 
had  charge  of  the  management  of  the  business  of  the  appellant  and  of 
the  hotel  during  the  same  period,  and  on  the  ICth  day  of  October,  1901 ; 
that  he  did  not  see  or  receive  any  notice  of  the  protest  or  dishonor  of 
the  note,  and  the  first  he  knew  of  the  existence  of  the  note,  or  heard  of 
it,  was  when  he  received  a  letter  from  attorneys  stating  that  they  had 
the  note  for  collection ;  and  that,  unless  it  was  paid  within  a  certain 
time,  action  would  be  brought  thereon.  At  the  close  of  the  evidence, 
counsel  for  the  appellant  moved  to  dismiss  the  complaint  upon  the 
ground,  among  others,  that  the  plaintiff  had  failed  to  prove  notice  to 
it  of  the  dishonor  of  the  note.  The  motion  was  denied,  and  an  ex- 
ception taken. 

We  are  of  opinion  that  the  judgment  must  be  reversed.  The  ap- 
pellant is  sued  solely  as  indorser  of  this  note.  The  evidence  is  wholly 
insufficient  to  show  the  service  of  the  notice  of  protest  upon  it.  Nego- 
tiable Instruments  Law  (Laws  1897,  p.  704,  c.  612)  §§  160,  167,  168, 
provide  that  notice  of  dishonor,  to  charge  an  indorser,  may  be  given 
by  delivering  it  personally  or  through  the  mail  either  to  the  party  him- 
self, or  "to  his  agent  in  that  behalf."  This  doubtless  was  not  intended 
to  change  the  rule  as  it  theretofore  existed.     Eaton  &  Gilbert  on  Com. 


ti20  LIABILITY    OF    TAKTIES.  (Part    3 

Paper,  489.  Where  personal  service  is  relied  upon,  the  evidence  must 
show  either  actual  personal  service,  or  an  ordinarily  intelligent,  dili- 
gent effort  to  make  personal  service,  upon  the  indorser,  either  at  his 
place  of  business  during  business  hours,  or  at  his  residence  if  he  have 
no  place  of  business;  but,  if  he  be  absent,  it  is  not  necessary  to  call  a 
second  time,  and  the  notice  may  in  that  event  be  left  with  any  one 
found  in  charge,  or,  if  there  be  no  one  in  charge,  or  no  one  there,  then 
the  giving  of  notice  is  deemed  to  be  waived.  Stewart  v.  Eden,  2 
Caines,  121,  2  Am.  Dec.  222 ;  Bank  of  Commonwealth  v.  Mudgett,  45 
Barb.  GG3 ;  Id.,  44  N.  Y.  514 ;  New  York  &  Alabama  Contracting  Co. 
V.  Selma  Savings  Bank,  51  Ala.  305,  306,  23  Am.  Rep.  552 ;  Allen  v. 
Edmondson,  2  Exch.  Rep.  719 ;  Williams  v.  Bank  of  U.  S.,  2  Pet.  96, 
7  L.  Ed.  360 ;  Huffcut's  Negotiable  Instruments,  p.  47.  The  evidence 
in  this  case  shows  that  personal  service  was  not  made  upon  any  officer 
of  the  corporation,  and  there  is  no  evidence  that  the  notice  was  left 
with  any  agent  of  the  corporation,  or  even  where  it  might  be  reason- 
ably inferred  that  an  officer  or  agent  of  the  corporation  would  receive 
it.  It  does  not  even  appear  upon  what  floor  or  in  what  part  of  the 
hotel  the  cashier's  window  was,  at  which  the  notice  was  left.  There 
can  be  no  inference  from  such  evidence  that  the  notice  was  received 
by  the  corporation ;  and  the  president  and  manager  of  the  hotel,  who 
was  in  charge,  testifies  that  it  was  not  brought  to  his  attention. 
Judgment  reversed. 


PINKHAM  V.  MACY. 

(Supreme  Judicial  Court  of  Massachusetts.   Suffolk  and  Nantucket.   1845.     9 

Mete.  174.) 

Assumpsit  on  the  following  note,  held  by  the  plaintiff,  as  executrix 
of  the  last  will  of  Seth  Pinkham,  to  whom  it  was  indorsed  by  the 
payee : 

"Nantucket,  April  1,  1837. 

'At  the  termination  of  the  ship  Obed  Mitchell's  present  voyage,  for 
value  received,  I  promise  to  pay  to  the  order  of  Josiah  Macy  eight 
hundred  and  fourteen  dollars  and  forty  one  cents,  with  interest  till  paid. 

"James  Mitchell." 

At  the  trial  in  the  court  of  common  pleas,  at  Nantucket,  before 
Ward,  J.,  the  signatures  of  the  maker  and  indorser  were  admitted: 
and  the  plaintiff',  to  prove  demand  on  the  maker,  and  notice  to  the  de- 
fendant as  indorser,  called  J.  M.  Bunker,  a  notary  public,  who  testi- 
fied that  the  defendant  had  always  resided  in  Nantucket ;  that  Mitchell, 
the  maker,  resided  there  at  the  date  of  the  note,  but  that  he  removed 
his  business  and  family  to  the  city  of  New  York  before  the  arrival 
of  the  ship  Obed  Mitchell;  that  said  ship  arrived  at  the  bar  of  Nan- 
tucket, on  Sunday  27,  1841 ;  that  the  witness,  on  the  next  day,  took 
said  note,  as  notary  public,  and  went  to  the  place  of  business  formerly 


Gh.  2)  DRAWER   AND    INDORSER.  621 

occupied  by  the  maker,  in  Nantucket,  and  found  it  closed;  that  he 
then  went  to  the  house  formerly  occupied  by  the  maker,  in  Nantucket, 
and  found  another  family  residing  there,  but  then  presented  the  note 
and  demanded  payment  thereof,  which  was  refused ;  and  that  he  there- 
upon made  and  gave  to  the  defendant  this  notice : 

"Nantucket,  June  28,  1841. 

"Please  to  take  notice  that  a  promissory  note  for  $814.41,  with  in- 
terest, dated  October  1,  1837,  payable  at  the  termination  of  ship  Obed 
Mitchell's  voyage,  now  completed,  signed  by  James  Mitchell,  and  in- 
dorsed by  you,  remains  this  day  unpaid,  and  that  the  holders  look  to 
you  for  payment  thereof.  Done  at  the  request  of  Seth  Pinkham. 
"James  M.  Bunker,  Notary  Public.     [Seal.] 

"To  Josiah  Macy." 

The  judge  ruled  that  said  notice  was  not  sufficient  to  charge  the  in- 
dorser;  and  the  jury  found  a  verdict  for  the  defendant.  The  plain- 
tiff alleged  exceptions  to  said  ruling. 

Shaw,  C.  J.  The  question  is  whether  due  notice  was  given  to  charge 
the  indorser.  This  subject  was  so  fully  discussed  in  the  recent  case  of 
Gilbert  v.  Dennis,  3  Mete.  495,  38  Am.  Dec.  329,  that  it  seems  only 
necessary  to  inquire  whether  this  case  falls  within  the  principles  laid 
down  in  that  case.  The  rule  there  laid  down  was  that  the  notice  must 
be  such  as  to  inform  the  indorser,  either  in  terms  or  by  reasonable 
implication,  that  the  note  was  dishonored;  that  is,  that  it  had  been 
presented  for  payment,  and  payment  refused,  or  other  act  done,  which 
by  law  is  deemed  equivalent.  It  is  not  necessary  to  state  what  has 
been  done ;  whether  an  actual  demand  was  made,  or  that  the  note  lies 
over  at  a  bank  where,  by  contract  or  by  usage,  it  was  payable,  or  that 
the  maker  has  absconded.  All  this  is  matter  of  proof  afterwards,  to 
show  the  fact  of  dishonor.  But  the  notice  must  be  such  as  to  assert  or 
imply  that  the  note  has  been  presented  and  payment  refused,  or  other- 
wise dishonored.  It  was  also  stated  that  a  notice  simply  that  the  note 
is  unpaid  is  sufficient,  where,  from  the  terms  of  the  note,  nonpayment 
and  lapse  of  time  constitute  such  dishonor.  So,  when  a  note  is  pay.ible 
at  a  bank,  it  is  the  duty  of  the  maker  to  pay  it  at  the  bank,  on  the  last 
day  of  grace.  Then  a  notice  dated  after  bank  hours,  on  that  day  or  the 
next  day,  simply  informing  the  indorser,  who  is  presumed  to  know  the 
terms  and  purport  of  the  note,  that  it  is,  at  that  time,  unpaid,  is  notice 
of  dishonor.  But  in  case  of  a  note  not  payable  at  a  place  certain,  where 
presentment  or  inquiry  is  necessary,  in  order  to  make  a  demand,  such 
a  notice,  either  on  or  after  the  day  of  payment,  is  not,  in  terms,  or  by 
intendment  or  implication,  notice  that  it  has  been  demanded,  or  that 
it  is  dishonored. 

In  the  present  case,  all  that  was  stated  in  the  notice  might  be  strictly 
true,  though  no  presentment  and  demand  had  been  made,  and  though 
the  maker  had  not  left  the  island,  and  no  inquiry  for  him  had  been 
made.  It  is,  therefore,  exactly  within  the  case  of  Gilbert  v.  Dennis. 
It  was  suggested,  in  the  argument,  that  there  is  a  difference,  because. 


022  LIABILITY  OF  PARTIES.  (Part  3 

in  the  present  case,  the  notice  was  given  by  a  notary  pubHc.  But  this 
can  make  no  dift'erence  in  principle ;  and  we  think  it  would  not  be  ex- 
pedient for  the  community  that  a  rule  of  law  so  universally  important 
should  depend  on  new  or  slight  distinctions.  A  notary  public,  in  such 
case,  is  the  mere  agent  of  the  holder.  His  service  is  not  required,  as 
in  case  of  a  foreign  bill  of  exchange,  to  make  a  protest.  City  Bank  v. 
Cutter,  3  Pick.  41-i. 

A  case  may  happen,  where  a  reference  to  a  protest  by  a  notary  pub- 
lic, which  term  implies  a  demand  and  refusal,  may  be  important,  be- 
cause it  intimates,  by  implication,  that  the  note  has  been  dishonored : 
As  where  the  notice  of  nonpayment  is  accompanied  with  notice  that 
the  holder  looks  to  the  indorser  for  payment,  with  costs,  or  fees,  or 
charges  of  protest.  This  may  be  sufficient  to  show,  by  reasonable  in- 
tendment, that  it  has  been  protested  for  nonpayment,  which  is  notice 
of  dishonor.  But  the  present  notice  carries  no  such  implication,  but 
is  a  simple  notice  of  nonpayment,  without  intimation  of  dishonor. 

There  seems  to  be  another  good  ground  of  defense,  namely,  that  the 
demand  and  notice  were  too  soon.  If  the  arrival  of  the  ship  at  Nan- 
tucket was  not  the  termination  of  the  voyage,  then  they  were  too  soon. 
If  it  was  such  termination,  then  it  became  a  day  certain,  and  the  note 
was  entitled  to  grace. 

Exceptions  overruled."** 


MARSHALL  v.  SONNEMAN. 
(Supreme  Court  of  Pennsylvania,  190G.    216  Pa.  65,  64  Atl.  S74.) 

Assumpsit  on  a  promissory  note.     Judgment  for  plaintiff.     Defend- 
ant appealed. 

Mestrezat,  J."  This  is  an  action  by  an  indorsee  against  an  in- 
dorser to  recover  the  balance  due  on  a  promissory  note.  One  of  the 
defenses  interposed  at  the  trial  was  an  alleged  failure  to  give  the  de- 
fendant notice  of  the  dishonor  of  the  note.  The  plaintiff  proved  the 
execution  of  the  note  by  the  maker,  and  introduced  testimony  to  show 
that  the  defendant  had  indorsed  it.  A  notary  public  was  then  called 
and  he  testified  that  he  had  protested  the  note  at  maturity  for  nonpay- 
ment, and  that  on  the  same  day  he  had  delivered  notices  of  protest  per- 
sonally to  both  the  plaintiff  and  the  defendant,  who  were  the  indorsers. 
He  said  he  gave  but  one  notice  to  the  defendant.  The  certificate  of 
protest  was  offered  in  evidence  by  which  it  appears  that  the  note  was 
protested  on  the  day  it  became  due,  and  that  the  notary  had  notified 
the  indorsers  "by  notices  of  protest  personally  delivered  to"  the  plain- 
's* Contra:  Reed  v.  Spear.  107  App.  Div.  144,  148.  M  N.  Y.  .«;upp.  1007  (1905) 
See  Second  Bank  v.  Smith.  118  Wis.  IS,  27,  94  N.  W.  664  (190;]). 
66  The  statement  of  the  case  and  the  arguments  of  counsel  are  omitted. 


Ch.  2)  DRAWER    AND    INDORSER.  G23 

tiff  and  defendant.     A  copy  of  the  notice  was  not  produced  at  the  trial 
by  the  plaintiff. 

The  defendant  denied  that  he  had  received  notice  of  the  dishonor 
of  the  note.  He  testified  that  the  notary  delivered  to  him  an  envelope 
addressed  to  L.  A.  Marshall,  the  plaintiff,  which  contained  the  follow- 
ing notice; 

"Notice  of  Protest. 

"York,  Pa.,  March  1,  1904. 

"L.  A.  Marshall :  Please  take  notice  that  the  note  of  M.  Fink  for 
four  thousand  dollars  in  favor  of  A.  Sonaman  dated  York,  Pa.  Nov. 
2,  1903,  payable  March  1,  at  L.  A.  Marshall  &  Co.,  Bankers,  York, 
Penna.  and  by  you  endorsed,  (being  due  this  day,  payment  having  been 
demanded  and  refused,)  is  protested  for  nonpayment,  and  that  the 
holders  look  to  you  for  the  payment  thereof. 

"Respectfully  yours,  Henry  K.  Kraber,  Notary  Public." 

The  defendant  further  testified  that  the  notary  gave  him  no  other 
notice,  paper,  or  envelope.  He  then  offered  in  evidence  the  notice 
which,  on  objection  by  the  plaintiff,  the  trial  judge  excluded,  stating 
the  reason  for  his  ruling  as  follows:  "I  think  there  is  sufficient  no- 
tice there  to  hold  him  under  the  law.  If  this  was  addressed  through 
the  post  office,  it  would  not  be  evidence  because  he  would  not  have 
received  it ;  but  it  was  delivered  to  him  at  his  place  of  business  and  he 
could  not  help  but  have  notice.  We  do  not  think  it  shows  want  of  no- 
tice, but,  on  the  other  hand,  it  shows  sufficient  notice,  although  it  was 
improperly  addressed."  This  is  the  subject  of  the  second  assignment 
of  error. 

The  correctness  of  the  ruling  of  the  learned  court  depends  upon  the 
sufficiency  of  this  notice.  H  it  was  sufficient  notice  to  the  defendant  of 
the  dishonor  of  the  note,  he  was  not  injured  by  the  exclusion  of  the 
offer.  He  admits  he  received  the  notice  from  the  notary  on  the  day  the 
note  was  protested.  If,  however,  the  notice  was  insufficient  to  charge 
the  defendant  with  hability  on  the  note,  it  was  error  to  exclude  the 
offer.  In  that  view  it  became  a  question  for  the  jury  to  determine 
under  the  evidence  whether  legal  notice  of  dishonor  had  been  given, 
and,  as  bearing  on  that  question,  it  is  apparent  that  this  notice  was  com- 
petent evidence.  The  notary  testified  that  he  delivered  only  one  notice 
to  the  defendant,  but  he  denied  that  the  notice  excluded  was  the  one 
he  gave  the  defendant.  The  defendant  testified  that  he  received  but 
one  notice  from  the  plaintiff,  and  that  the  paper  in  question  was  that 
notice.  It  is  true  that  the  certificate  of  protest  showed  that  a  notice 
had  been  delivered  to  the  defendant,  but  that  was  only  prima  facie  evi- 
dence of  the  fact,  and  the  party  could  contradict  it  by  other  evidence. 
It  was  therefore  a  question  of  fact  for  the  jury  what,  if  any,  notice  of 
protest  was  given  the  defendant;  and,  if  they  had  found  that  the  only 
notice  given  him  was  the  paper  produced  by  him  on  the  trial,  it  would 


624  LIABILITY  OF  PARTIES.  (Part  3 

have  been  the  duty  of  the  court  to  determine  the  legal  effect  of  the  pa- 
per, and,  if  that  had  been  against  its  sufficiency  as  a  notice,  the  verdict 
should  have  been  for  the  defendant.  The  controlling  question  in  the 
case,  therefore,  was  the  sufficiency  of  the  notice. 

If  the  holder  of  negotiable  paper  desires  to  charge  antecedent  parties 
with  its  payment,  it  is  incumbent  on  him  to  give  them  notice  of  its  dis- 
honor. He  may  notify  either  or  all  of  the  prior  indorsers,  but  he  can 
compel  payment  only  from  those  who  have  received  notice  of  the 
maker's  default.  The  notice  may  be  either  written  or  verbal,  or  it 
may  be  partly  written  and  partly  verbal.  "All  that  is  necessary,"  says 
the  learned  author  of  Byles  on  Bills,  *276,  "is  to  apprise  the  party 
liable  of  the  dishonor  of  the  bill  in  question,  and  to  intimate  that  he  is 
expected  to  pay  it.  And  an  announcement  of  the  dishonor  will  (at 
least  if  it  come  from  the  holder)  amount  to  a  sufficient  intimation  to 
the  indorser  that  he  is  liable."  It  is  sufficient  if  under  all  the  circum- 
stances the  language  of  the  notice  imports  that  the  indorser  is  looked 
to  for  payment,  and  it  would  seem  not  unfair  to  imply  such  intention 
from  the  very  fact  of  sending  notice  of  dishonor.  7  Cyc.  1109.  The 
weight  of  authority  is  that  a  notice  of  dishonor  is  sufficient  to  charge 
an  indorser,  if  it  comes  from  the  holder  or  his  agent  and  notifies  the 
indorser  that  the  note  was  presented  and  payment  was  refused.  No- 
tice of  nonpayment,  however,  is  not  sufficient ;  nor  is  mere  knowledge 
of  protest  all  that  is  required  to  charge  the  indorser.  Says  the  author 
above  quoted  (page  276) :  "Notice  does  not  mean  mere  knowledge, 
but  an  actual  notification.  For  a  man  who  can  be  clearly  shown  to 
have  known  beforehand  that  the  bill  would  be  dishonored  is,  neverthe- 
less, entitled  to  notice." 

In  Tindal  v.  Brown,  1  Term  Rep.  167,  Ashhurst,  J.,  says :  "Notice 
means  something  more  than  knowledge,  because  it  is  competent  to  the 
holder  to  give  credit  to  the  maker.  It  is  not  enough  to  say  that  the 
maker  does  not  intend  to  pay,  but  that  the  holder  does  not  intend  to 
give  credit  to  such  maker.  The  party  ought  to  knov/  whether  the 
liolder  intends  to  give  credit  to  the  maker  or  to  resort  to  him."  And  in 
the  same  case  Buller,  J.,  observes :  "The  notice  ought  to  purport  that 
the  holder  looks  to  the  party  for  payment,  and  a  notice  from  another 
party  cannot  be  sufficient.  It  must  come  from  the  holder."  This  case 
and  many  other  English  authorities  are  cited  on  the  subject  in  the  opin- 
ion of  this  court  in  Juniata  Bank  v.  Hale,  IG  Serg.  &  R.  157,  160,  16 
Am.  Dec.  558,  where  it  is  said:  "That  knowledge  of  nonpayment  is 
not  notice  is  very  clear  for  the  notice  must  come  from  the  holder  him- 
self, or  some  one  who  is  a  party;  for  the  notice  must  assert  that  the 
holder  intends  to  stand  on  his  legal  right,  and  to  resort  to  the  indorser 
for  payment,  and  therefore,  where  the  drawer  had  notice  before  the 
bill  was  due  that  the  acceptor  had  failed,  and  gave  another  person 
money  to  pay  the  bill  and  the  holder  neglected  to  give  notice  of  its  dis- 
honor, it  was  held  that  the  drawer  was  discharged." 


Oh.  2)  DRAWER    AND    INDORSER.  625 

We  are  of  opinion  that  the  written  notice  which  the  defendant  al- 
leges was  delivered  to  him  was  not  sufficient  to  charge  him  with  the 
dishonor  of  the  note.  It  was  in  proper  form,  signed  by  a  notary,  and 
was  delivered  in  due  time.  But  on  its  face  it  clearly  discloses  the  fact 
that  it  was  not  intended  for  the  defendant.  It  was  directed  to  L.  A. 
Marshall,  the  plaintiff,  and  the  envelope  containing  it  bore  the  same 
address.  Marshall,  like  the  defendant,  was  also  an  indorser  of  the 
note,  and,  if  the  holder  intended  to  impose  liability  on  him,  it  was  nec- 
essary that  he  should  have  notice  of  dishonor.  It  is  therefore  apparent 
that  this  notice  was  intended  for  Marshall,  and  was,  of  course,  for  the 
purpose  of  apprising  him  of  the  dishonor  of  the  note,  and  was  prepared 
by  the  notary  with  that  intention.  The  notary  does  not  testify  that  at 
the  time  he  delivered  the  envelope  containing  the  notice  he  told  the  de- 
fendant what  it  contained  or  said  anything  to  him  concerning  its  con- 
tents. He  did  not  apprise  the  defendant  that  the  note  had  been  dis- 
honored or  that  the  notice  was  intended  for  him.  He  gave  the  de- 
fendant no  verbal  notice  whatever,  and  hence  all  the  information  the 
latter  had  of  the  dishonor  of  the  note  and  the  intention  of  the  holder 
to  guard  his  rights  and  to  avoid  responsibility  by  fixing  liability  on 
antecedent  parties  was  what  was  contained  in  the  envelope  addressed 
to  Marshall.  This,  as  we  have  observed,  was  a  notice  to  Marshall  that 
the  note  "by  you  indorsed"  was  protested  for  nonpayment,  "and  that 
the  holders  look  to  you  for  the  payment  thereof." 

Why  should  the  defendant  accept  this  as  a  notice  of  dishonor  to  him 
and  take  care  of  the  note?  There  is  no  intimation  in  the  paper  that 
the  holder  intended  to  look  to  him  for  payment.  On  the  contrary,  the 
notice  is  that  the  holder  will  look  to  Marshall,  his  immediate  prior 
indorser,  for  payment.  This  he  had  a  legal  right  to  do,  and  was  not 
compelled  to  notify  the  defendant  or  any  other  indorser  or  to  demand 
payment  of  him.  If  Marshall  desired  to  hold  the  defendant  responsible 
as  a  prior  indorser  it  was  incumbent  upon  him  to  give  the  latter  notice 
of  dishonor.  The  defendant  was  justified  in  treating  the  paper  deliv- 
ered to  him  by  the  notary  as  a  notice  to  Marshall,  as  the  address  on  the 
envelope  and  notice  disclosed,  and  that  the  purpose  was  to  notify  Mar- 
shall of  dishonor  for  the  purpose  of  charging  him  with  payment  of  the 
note.  If  either  the  envelope  or  the  notice  had  been  addressed  to  the 
defendant,  or  if  neither  had  been  addressed  to  him,  the  plaintiff's  con- 
tention that  the  notice  was  for  the  defendant  would  have  some  ground 
for  its  support.  If,  when  he  delivered  the  paper,  the  notary  had  noti- 
fied the  defendant  verbally  that  the  note  had  been  dishonored  or  that 
the  written  notice  was  for  him,  there  would  be  sufficient  to  charge  the 
defendant  with  notice  of  dishonor.  But  none  of  these  facts  can  be 
found  in  the  case.  Assuming  that  the  defendant  opened  the  envelope 
and  read  its  contents,  he  simply  obtained  the  knowledge  that  the  note 
was  dishonored  and  that  the  holder  would  look  to  Marshall,  the  last 
mdorser,  for  payment.  This,  as  we  have  seen,  is  not  sufficient  under 
Sm.&  M.B.&  N.— 40 


f.26  LIABILITY  OF  PARTIES.  (Part  3 

the  cases  to  fix  the  defendant,  as  an  indorser,  for  the  payment  of  the 
note. 

For  the  reasons  above  stated,  the  second  assignment  of  error  is  sus- 
tained, and  the  judgment  is  reversed,  with  a  venire  facias  de  novo. 


SECTION  6.— WHEN  PRESENTMENT  AND  NOTICE  OF 
DISHONOR  UNNECESSARY 


BARTON  V.  BAKER. 

(Supreme  Court  of  Penusylvauia,  1815.    1  Serg.  &  R.  334,  7  Am.  Dec.  020.) 

Assumpsit  by  the  plaintiff  as  indorsee  of  a  promissory  note,  against 
the  defendant  as  indorser. 

It  appeared  in  evidence  at  the  trial  that  the  note  was  drawn  on  the 
2d  June,  IfciUS,  by  James  Brown  &  Co.,  in  favor  of  John  Baker,  the 
defendant,  by  whom  it  was  indorsed,  and  that  it  was  payable  in  four 
years  after  date ;  that  the  house  of  James  Brown  &  Co.,  which  was 
composed  of  James  Brown  and  Armat  Brown,  was  insolvent  at  the 
time  the  note  was  drawn,  and  continued  to  be  so  until  it  became  due; 
that  it  was  given  for  a  debt  previously  contracted,  and  was  received 
on  the  credit  of  Baker  only;  that  several  months  before  it  was  pay- 
able Armat  Brown  executed  an  assignment  of  all  his  estate,  real  and 
personal,  to  the  defendant,  to  indemnify  him  for  certain  advances  of 
money,  and  for  indorsements  on  account  of  the  firm  of  James  Brown 
&  Co,  When  the  note  became  due,  which  was  on  the  2d  and  5th  June, 
1812,  James  Brown  was  in  Europe;  but  a  demand  for  payment  was 
made  on  Armat,  who  was  then  in  this  citv.  ivliich  not  being  complied 
with,  it  was  protested.  On  the  loth  of  the  same  month,  notice  of  non- 
payment was  given  to  the  defendant,  who  observed  that  it  was  out  of 
time,  but  did  not  deny  that  he  was  responsible,  and  said  that  his  abil- 
ity to  pay  would  depend  upon  the  arrival  of  a  vessel. 

Under  these  circumstances  the  defendant  contended  that  the  holder 
of  the  note  had  been  guilty  of  such  laches  as  to  discharge  the  indorser 
from  his  liability  to  pay  it. 

His  honor,  Judge  Yeates,  before  whom  the  cause  was  tried,  on  2d 
February,  1814,  charged  the  jury  that,  if  the  defendant  knew  of  the 
insolvency  of  James  Brown  &  Co,  at  the  time  he  indorsed  their  note, 
he  could  not  urge  the  want  of  due  notice  to  discharge  himself  from 
the  payment  of  it. 

The  jury  accordingly  found  for  the  plaintiff,  and  the  case  now  came 
I)efore  the  court  on  a  motion  by  the  defendant  for  a  new  trial, °® 

TiLGHMAN,  C,  J.  The  objection  to  the  verdict  in  this  case  is  that 
due  notice  of  nonpayment  by  the  maker  of  the  note  on  which  the  ac- 

se  The  arguments  of  counsel  and  the  concurring  opinion  of  Yeates,  J.,  are 
-omilted. 


Ch.  2)  DRAWER    AND    INDORSER.  627 

tion  is  founded  was  not  given  to  the  defendant,  who  was  the  indorser. 
It  is  confessed  that  due  notice  was  not  given;  but  the  planitift'  con- 
tends that,  under  the  circumstances  of  the  case,  notice  was  not  neces- 
sary. The  circumstance  principally  reHed  on  at  the  trial,  and  on  which 
the  plaintiff  had  the  charge  of  the  court  in  his  favor,  is  that  at  the 
time  when  the  note  was  made  and  indorsed,  and  also  at  the  time  when 
it  fell  due,  it  was  known  to  the  defendant  that  James  Brown  &  Co. 
were  insolvent.  If  the  case  rested  solely  on  this  objection,  I  should 
be  for  granting  a  new  trial,  because  the  cases  cited  by  the  plaintiff, 
of  De  Berdt  v.  Atkinson,  2  H.  Black.  336,  and  Cornay  v.  Da  Costa, 
1  Esp.  Rep.  302,  have  been  overruled  in  Nicholson  v.  Gouthit,  2  H. 
Black.  609,  and  Esdaile  v.  Sowerby,  11  East,  114.  The  case  of  Jack- 
son V.  Richards,  2  Caine's  T.  Rep.  343,  agrees  with  the  law  as  settled 
by  the  last  English  cases.  But  I  do  not  rest  my  opinion  solely  upon 
the  authority  of  these  cases.  The  reason  of  the  tiling  demonstrates 
that  the  insolvency  of  the  maker  of  a  note,  though  known  to  the  in- 
dorser, ought  not  to  discharge  the  holder  from  giving  notice.  There 
are  various  degrees  of  insolvency,  and  it  rarely  happens  that  a  man  is 
totally  insolvent.  So  that  there  is  a  chance  of  getting  something  by 
an  application  to  the  debtor.  Besides,  if  a  man  has  nothing  of  his  own, 
he  may  have  friends,  who,  to  relieve  him  from  pressure,  will  do  some- 
thing for  him.  The  indorser,  therefore,  has  a  chance  of  securing  him- 
self at  least  in  part.  The  only  reason  that  can  be  assigned  for  insol- 
vency taking  away  the  necessity  of  notice  is  that  notice  could  be  of 
no  use  to  the  indorser.  But  it  is  almost  impossible  to  prove  that  it 
might  not  have  been  of  use.     Therefore  it  is  necessary.®'^ 

There  is  another  circumstance  in  this  case,  however,  operating  pow- 
erfully in  favor  of  the  plaintiff.  The  house  of  James  Brown  &  Co. 
/  consisted  of  James  Brown  and  Armat  Brown.  When  the  note  fell 
due,  James  Brown  was  in  Europe,  and  Armat  Brown  in  this  city.  A 
few  months  before  it  was  due  the  defendant  received  from  Armat 
Brown  an  assignment  of  his  whole  estate,  for  the  purpose,  among  other 
things,  of  indemnifying  him  against  his  indorsements  on  account  of 
James  Brown  &  Co.  Now,  by  the  taking  of  this  assignment,  it  is  not 
unreasonable  to  presume  that  the  defendant  took  upon  himself  the 
payment  of  the  indorsed  notes,  especially  as  when  he  did  receive  no- 
tice (10  days  after  the  note  fell  due),  although  he  knew  and  remarked 
that  it  was  out  of  time,  he  did  not  deny  his  responsibiHty,  but  said  that 
his  ability  to  pay  would  depend  on  the  arrival  of  a  vessel.  I  agree, 
therefore,  with  Bond  v.  Farnham,  5  Mass.  170,  4  Am.  Dec.  47,  where 
it  was  held  that  in  such  a  case  the  indorser  dispenses  with  notice.  In- 
asmuch, then,  as  it  appears  upon  the  whole  of  this  case  that  notice  of 
nonpayment  was  not  necessary,  no  injustice  has  been  done  by  the  ver- 
dict, and  therefore  a  new  trial  ought  not  to  be  granted."*^ 

New  trial  refused. 

BT  But  see  West  Bank  v.  Haines,  135  Iowa,  313,  112  N.  W.  5.'52  (1907). 
5  8  Compare  Kramer  v.  Saudford,  4  Watts  &  S.  328,  39  Am.  Dec.  92  (1842). 


628  LiADiLiTY  OF  TARTiES.  (Part  3 


CREAMER  V.  PERRY  and  Trustee. 

(Supreme  Judicial  Court  of  Massachusetts,  Middlesex,  1835.     17   Pick.  332, 

28  Aiu.  Dec.  297.) 

Assumpsit  on  a  promissory  note  dated  January  27,  1834,  for  the 
sum  of  $(J97.68,  made  by  Isaac  Thayer,  of  Sherburne,  payable  to  the 
defendant  or  his  order  in  six  months  from  the  date,  and  indorsed  by 
the  defendant. 

It  was  agreed  by  the  parties  that  in  February,  1834,  Thayer  stopped 
payment,  and  assigned  all  his  property  for  the  benefit  of  his  creditors 
to  one  Choate  and  John  M.  Perry,  who  was  summoned  as  trustee  in 
the  present  action ;  that  in  the  assignment  the  defendant,  who  was 
the  father-in-law  of  Thayer,  was  a  preferred  creditor,  and  was  fully 
secured  for  all  his  demands  and  liabilities ;  that  shortly  after  the  as- 
signment all  the  creditors  of  Thayer,  excepting  the  plaintiff,  agreed 
to  give  Thayer  an  extension  of  the  time  of  payment  of  their  respective 
claims  for  four,  eight  and  twelve  months,  provided  all  the  creditors 
should  assent  to  it ;  aad  that  Thayer,  although  the  plaintiff  did  not 
agree  to  such  extension,  took  possession  of  the  property  so  assigned, 
proceeded  to  dispose  of  it  as  before  the  assignment,  and  continued  to 
transact  business  in  his  own  name,  until  after  the  note  became  due. 

A  witness  produced  by  the  plaintiff  testified  that  the  plaintiff  deliv- 
ered the  note  in  question  to  him  on  the  day  after  it  became  due,  with 
directions  to  collect  the  money  of  Thayer;  that  on  the  same  day  he 
called  upon  Thayer,  who  proposed  to  renew  the  note  for  the  sum  of 
$3.50,  and  to  pay  the  residue  in  cash  ;  that  this  proposal  was  declined ; 
that  a  few  days  after  the  note  became  due  the  witness  was  told  by 
Thayer  that  he  had  conveyed  away  all  the  property  in  his  shop;  that 
the  witness  then  called  on  the  defendant,  who  lived  in  Sherburne,  and 
informed  him  that  he  called,  by  the  request  of  the  plaintiff,  to  settle 
the  note,  it  not  having  been  paid  by  Thayer ;  that  the  defendant  said 
that  he  knew  that  the  note  was  unpaid ;  that  Thayer  had  endeavored 
to  induce  the  plaintiff  to  renew  the  note  for  the  sum  of  $350,  and  to 
receive  the  residue  in  cash ;  that  he,  the  defendant,  had  indorsed  a  note 
for  that  amount  for  the  purpose,  but  the  plaintiff  had  refused  it,  and 
that  Thayer's  ability  to  pay  it  would  depend  upon  his  getting  accom- 
modation at  the  Tremont  Bank ;  that  before  leaving  the  defendant  the 
witness  inquired  of  him  what  would  be  done  about  the  note,  and  the 
defendant  said  that  "the  note  will  be  paid" ;  that  the  defendant,  in  the 
course  of  the  above  conversation,  also  said  that  he  had  received  no 
letter  informing  him  of  a  demand  of  payment  and  of  nonpayment  of 
the  note  by  Thayer ;  that  the  witness  inquired  of  the  defendant  if  he 
had  the  benefit  of  the  property  assigned  by  Thayer  to  Choate  and  Per- 
ry for  his  indemnity,  and  the  defendant  replied,  either  "I  had  the  ben- 


Ch.  2)  DRAWER    AND    INDORSER.  629 

efit,"  or  "I  am  to  have  the  benefit  of  it" ;  that  he  asked  the  defendant 
if  he  knew  what  Thayer  had  done  with  his  goods  that  he  had  in  the 
store  the  last  week,  and  the  defendant  answered  that  he  did  not;  that 
the  witness  did  not  understand  from  the  defendant  that  he,  the  defend- 
ant, was  a  preferred  creditor,  or  that  he  was  to  have  any  benefit  under 
the  new  assignment  by  Thayer  to  his  brothers,  or  that  the  defendant 
knew  of  any  second  assignment. 

The  plaintiff  was  nonsuited. 

If,  in  the  opinion  of  the  court,  it  would  be  competent  for  the  jury 
to  find  a  verdict  for  the  plaintiff  on  the  foregoing  evidence,  the  non- 
suit was  to  be  taken  off,  and  a  new  trial  granted;  otherwise,  judg- 
ment was  to  be  rendered  for  the  defendant. 

Shaw,  C.  J.,  delivered  the  opinion  of  the  court.  It  was  conceded, 
that  no  seasonable  demand  had  been  made  on  the  promisor,  and  no  no- 
tice given  to  the  indorser.  The  plaintiff  relied  upon  a  waiver,  as  an 
excuse  for  want  of  demand  and  notice,  placing  it  on  two  grounds:  (1) 
That  the  promisor  had  placed  funds  in  the  hands  of  the  defendant  to 
meet  the  payment;  and  (2)  that,  with  notice  that  there  had  been  no 
demand  and  notice,  the  defendant  had  promised  to  pay  the  note. 

This  is  rather  matter  of  evidence  than  of  law ;  that  is,  whether  there 
is  proper  evidence  to  go  to  a  jury,  and  whether  it  would  be  sufficient 
to  warrant  them  in  finding  a  waiver  of  demand  and  notice. 

On  the  first  ground  we  think  that  the  most  which  could  be  made 
of  the  evidence  is  that  after  this  note  was  made,  but  several  months 
before  it  became  due,  the  promisor  made  an  assignment  to  trustees,  up- 
on trust  among  other  things  to  secure  the  defendant  for  all  debts  due 
to  him  from  the  promisor,  and  to  indemnify  him  against  all  his  liabil- 
ities. Without  stopping  to  consider  whether,  after  this  property  was 
surrendered  by  the  trustees,  the  defendant  could  have  availed  himself 
of  it,  we  think  the  effect  of  this  assignment  was  to  secure  and  indem- 
nify the  defendant  against  his  legal  liabihties;  and  as  his  liability  as 
indorser  on  this  note  was  conditional,  and  depended  upon  the  contin- 
gency of  his  having  seasonable  notice  of  its  dishonor,  his  claim  upon 
the  property  depended  upon  the  like  contingency.^" 

The  second  assignment  does  not  afifect  the  question.  It  does  not  ap- 
pear to  have  been  made  till  several  days  after  the  note  became  due. 

And  on  the  other  ground,  it  is  a  rule  of  law  that  if  an  indorser,  know- 
ing that  there  has  been  no  demand  and  notice  and  conversant  with  all 
the  circumstances,  will  promise  to  pay  the  note,  this  is  to  be  deemed  a 
v/aiver.®° 

5  0  But  compare  Bond  v.  Farnhara,  5  Mass.  170,  4  Am.  Dec.  47  (1809) ; 
Develing  v.  Ferris,  IS  Ohio,  170  (1S49). 

60  Accord:  Ross  v.  Hurd,  71  N.  Y.  14,  27  Am.  Rep.  1  (1877) ;  Glidden  v 
Chamberlain,  1G7  Mass.  4S(;,  46  N.  E.  103,  57  Am.  St.  Rep.  479  (1897).  Com- 
pare Aebi  V.  Bank.  124  Wis.  73,  102  N.  W.  329.  68  L.  R.  A.  964,  109  Am.  St 
Rep.  925  (1905) ;  First  Banli  v.  Gridley,  112  App.  Div.  398,  98  N.  Y  Supp. 
445    (1906). 


630  LIABILITY  OF  PARTIES.  (Part  3 

But  these  rules  in  regard  to  notice  and  waiver  are  to  be  held  with 
some  strictness,  in  order  to  insure  uniformity  of  practice  and  regular- 
ity in  their  application.  Though  questions  of  due  diligence  and  of 
waiver  were  originally  questions  of  fact,  yet,  having  been  reduced  to 
a  good  degree  of  certainty  by  mercantile  usage  and  a  long  course  of 
judicial  decisions,  they  assume  the  character  of  questions  of  law,  and 
it  is  highly  important  that  they  should  be  so  deemed  and  applied,  in 
order  that  rules  aftecting  so  extensive  and  important  a  department  in 
the  transactions  of  a  mercantile  community  may  be  certain,  practical 
and  uniform,  as  well  as  reasonable,  equitable  and  intelligible. 

In  the  present  case  we  are  of  opinion  that  the  evidence  falls  short 
of  proving  a  promise  by  the  defendant  either  to  pay  the  note  or  see  it 
paid.  The  agent  of  the  plaintiff  applied  to  the  defendant,  some  days 
after  the  note  had  become  due,  obviously  for  the  purpose  of  obtaining 
from  him  a  renewed  promise.  The  strongest  expression  used  by  the 
defendant  in  the  course  of  a  long  conversation  was,  "The  note  will 
be  paid."  This  is  quite  as  consistent  with  hypothesis  that  it  was  a  mere 
assertion  of  his  expectation  that  it  would  be  paid  by  the  promisor  as 
of  a  promise  on  his  own  part  to  pay  it ;  and  from  the  general  tenor 
of  the  conversation  we  think  it  cannot  be  inferred  that  it  was  his  in- 
tention, knowing  of  his  discharge,  to  waive  his  defense,  and  promise 
to  pay  the  note,  or  see  it  paid,  at  all  events.  This  view  of  the  evidence, 
considering  that  the  burden  of  proof  is  upon  the  plaintiff,  is  decisive, 
and  therefore  the  nonsuit  must  stand. 

Judgment  for  the  defendant. 


MISER  V.  TROVINGER'S  EX'RS. 
(Supreme  Court  of  Ohio,  1857.     7  Ohio  SL  281.) 

The  declaration  is  on  a  bill  of  exchange  for  $3,150,  drawn  at  Thorn- 
ville,  Ohio,  December  28,  1849,  by  Trovinger  (defendants'  testator), 
Culbertson,  Fisher,  and  Good,  on  Babcock  &  Co.,  New  York  City,  pay- 
able to  the  order  of  Culbertson,  five  months  after  date,  acceptance 
waived,  and  indorsed  by  Culbertson  to  Smith,  and  by  him  to  plaintiff. 
The  averments  are  of  demand  and  nonpayment  at  maturity,  and  that 
the  drawers  had  not,  either  jointly  or  severally,  at  any  time  before  or 
at  the  time  the  bill  became  due  and  was  presented  for  payment,  any 
effects  in  the  hands  of  the  drawee,  and  that  there  was  no  considera- 
tion for  drawing  the  bill,  or  for  accepting  or  paying  it,  or  any  part 
of  it,  by  the  drawee,  and  that  neither  have  the  defendants,  as  executors, 
nor  their  testator,  sustained  any  damage  by  reason  of  not  havino-  no- 
tice of  the  nonpayment  of  the  bill  by  the  drawee. 

Plea— That  the  bill  declared  on  was  an  accommodation  b'll,  made 
for  the  exclusive  accommodation  of  Culbertson ;  that  all  the  drawers, 
other  than  Culbertson,  were  his  sureties  and  accommodation  drawers ; 


^Jh..  2)  DRAWER    AND    INDOliSER.  631 

that,  at  the  time  of  their  so  drawing,  he  agreed  with  them  to  look  after 
the  bin  and  take  it  up  at  maturity ;  that  Smith  discounted  the  bill  with 
notice  of  these  facts;  that  Culbertson  at  the  maturity  of  the  bill  in- 
formed them  that  it  had  been  taken  up ;  that  Culbertson  was  solvent  un- 
til long  after  the  maturity  of  the  bill ;  that  they  supposed  it  had  been 
paid,  until  on  or  about  December  1,  1851,  when  Culbertson  became, 
and  has  ever  since  remained,  insolvent ;  and  that  Smith  was  the  holder 
of  the  bill  until  long  after  its  maturity,  when  it  was  indorsed  to  plain- 
tiff. 

To  this  plea  there  is  a  general  demurrer.®^ 

J.  R.  Swan,  J.  The  contract  of  a  drawer  is  that  he  will  pay  the  bill, 
provided  it  be  duly  presented  and  payment  duly  demanded  of  the 
drawee,  and,  in  the  event  of  nonpayment,  he  be  duly  notified  thereof. 
These  are,  in  general,  conditions  precedent  to  the  liability  of  the  drawer. 

This  general  rule  is  not  denied ;  but  the  plaintiff  claims  that  the 
drawers  in  the  case  at  bar  were  placed  beyond  the  operation  of  this 
rule,  and  were  not  entitled  to  notice  of  nonpayment  of  the  bill. 

It  is  conceded  on  both  sides  that  there  were  no  funds  in  the  hands 
of  the  drawee.  The  fact  of  drawing  without  funds,  in  the  absence  of 
other  proof  to  explain  it,  is  a  fraud;  for  the  bill  is  negotiated  under 
the  faith  that  the  drawer  has  or  will  place  eft'ects  in  the  hands  of  the 
drawee  to  meet  the  bill ;  and  if  he  had  no  effects  in  the  hands  of  the 
drawee,  and  knew  that  none  would  be  placed  there,  and  that  the  drawee 
would  not  meet  the  bill,  the  whole  transaction  is  deemed  fraudulent 
on  the  part  of  the  drawer.  Another,  but  subordinate,  reason  is  given 
for  this  exception,  that  the  drawer  cannot,  in  such  case,  be  in  any  way 
injured  for  want  of  notice  of  nonpayment.  But  it  is  the  fraud  in  draw- 
ing and  delivering  such  a  bill,  upon  which  the  exception  substantially 
rests ;  for  bankruptcy  or  notorious  insolvency  of  the  drawee,  or  proof 
that  in  fact  no  injury  resulted  from  want  of  notice,  will  not  excuse  the 
holder  from  giving  the  drawer  notice.  Notice,  therefore,  under  this 
exception,  is  to  be  dispensed  with  in  those  cases  where  the  drawer  had 
no  reason  to  expect,  when  he  drew  the  bill,  that  it  would  be  paid.  Thus, 
in  the  case  of  Rucker  v.  Hiller,  16  East,  43,  it  was  laid  down  that  the 
drawer  is  entitled  to  notice,  if  he  have  reasonable  ground  to  expect 
the  bill  will  be  paid,  although  he  have  no  assets  in  the  acceptor's  hands. 
So,  in  the  case  of  Lafitte  v.  Slatter,  6  Bing.  623,  19  Eng.  C.  L.  Rep. 
180,  in  which  the  defendant  drew  a  bill  on  one  Tebbs,  under  the  ex- 
pectation that  a  third  person,  not  a  party  to  the  bill,  who  owed  him, 
would  provide  funds  for  its  payment,  but  neglected  to  do  so,  it  was 
held  that  the  defendant  was  entitled  to  notice  of  nonpayment.  In- 
deed, the  rule  is  too  well  settled  both  by  English  and  American  cases 
to  admit  of  question,  that  if  the  drawer  has  reasonable  grounds  to  ex- 
pect that  the  drawee  will  receive,  through  the  transactions  of  the  draw- 
er, or  from  some  one  else,  funds  to  meet  the  bill,  although  the  drawer 

81  The  arguments  of  counsel  are  omitted. 


632  LIABILITY  OF  PARTIES.  (Part  3 

had  no  assets  in  the  hands  of  the  drawee,  the  drawer  is,  notwithstand- 
ing, entitled  to  notice  of  nonpayment.  2  Smith's  Lead.  Cas.  (Wallace 
&  Hare's  Notes)  55. 

The  bill  in  the  case  at  bar  was  an  accommodation  bill,  made  for  the 
exclusive  accommodation  of  Culbertson,  and  all  the  drawers  other  than 
Culbertson  were  his  accommodation  drawers ;  and  they  expected  Cul- 
bertson to  provide  funds  to  meet  the  bill. 

Now,  unless  there  be  something  in  the  fact  that  the  drawers  were 
joint  drawers  with  Culbertson,  we  can  perceive  no  difference  in  prin- 
ciple between  their  situation  than  any  other  drawers  who  in  good  faith 
draw  a  bill,  under  the  expectation  and  belief  that  the  same  will  be  met 
by  some  third  person,  as  in  the  case  of  Lafitte  v,  Slaiter,  above  cited. 
There  is  no  fraud ;  and  whether  Culbertson  had  made  himself  a  party 
to  the  bill  or  not,  if  it  was  in  fact  drawn  for  his  accommodation,  they 
had  a  right  to  look  to  him  as  the  person  who  would  see  that  funds  were 
placed  in  the  hands  of  the  drawee  to  meet  the  bill  at  maturity;  and  if 
not  met,  they  were  entitled  to  notice  so  as  to  have  had  an  opportunity 
immcJiately  to  take  up  the  bill  and  proceed  against  Culbertson. 

It  is  true  that  if  Culbertson  had  been  the  sole  drawer  of  this  bill, 
without  assets  in  hand  or  any  expected,  no  notice  to  him  would  have 
been  necessary."-  And  such  seems  to  have  been  his  position  and  rela- 
tion to  the  holder  of  this  bill,  so  that  no  notice  was  necessary  to  him, 
and  he  may  be  treated  as  having  notice  of  the  dishonor  of  this  bill. 
Such  being  the  situation  of  Culbertson,  it  is  claimed  that  inasmuch  as 
Culbertson  and  his  accommodation  drawers  form  but  one  party  to  the 
bill,  being  joint  drawers,  no  relation  or  rights  between  them,  not  grow- 
ing out  of  the  face  of  the  paper,  can  be  set  up  as  ground  for  requir- 
ing notice  of  nonpayment,  and,  all  being  but  one  party,  notice  to  one 
is  notice  to  all,  and,  if  notice  is  not  necessary  to  one,  it  is  not  to  the 
others. 

But  it  is  not  true  that  the  right  to  notice  uniformly  depends  upon  the 
fact  whether  the  party  is  entitled  to  a  remedy  over  on  the  bill  itself 
against  another  party  to  the  bill.  The  drawer  of  a  bill  never  has  any 
remedy  over  on  the  bill  itself,  unless  it  has  been  actually  accepted ; 
and  if  presented  for  payment  at  maturity,  he  is  entitled  to  notice  of  its 
dishonor.  An  accommodation  indorser  is,  in  general,  entitled  to  notice, 
although  the  bill  was  drawn  without  funds,  and  the  party  for  whose 
accommodation  he  indorsed  is  a  subsequent  indorser,  and  consequentlv 
not  liable  to  the  accommodation  indorser  on  the  face  of  the  bill.  Brown 
et  al.  v.  Mafifey,  15  East,  216. 

«2  similarly,  if  for  any  other  reason  the  drawer  has  no  risht  to  expect  or 
require  the  bill  to  be  i>aiil  by  the  drawee,  preseiitnieiit  and  notice  to  the  draw- 
er is  not  necessary.  Scanlon  v.  Wallach,  53  Misc.  Kep  104  lO"'  N  Y  Sunp 
1090  (1907).  See.  also.  West  Bank  v.  Haines.  1.3.j  Iowa,'  313,  \"l2  N  W 
552  (1907).  Presentment  and  notice  are  not  necessarv  to  charge  au  Endorser 
if  he  has  no  reason  to  expect  payment  by  the  maker  or  drawee  at  maturity' 
Baiimeister  v.  Kuntz,  53  Fla.  340,  42  South.  886  (1907) 


Ch.  2)  DRAWER    AND    INDORSER.  63o 

Notice  to  Culbertson,  the  drawers  not  being  partners,  would  not  be 
notice  to  the  other  joint  drawers.  3  Kent,  Com.  (8th  Ed.)  135,  notes 
b  and  3 ;  4  Smedes  &  Marsh.  749 ;  Story  on  Bills,  §  299.  Notice  to 
one  partner  is  notice  to  all,  because  each  is  the  agent  of  all;  and  no- 
tice to  an  agent  is  notice  to  the  principal.  Mere  joint  drawers  are  not 
agents  of  each  other  in  respect  to  notice. 

But  the  fraud  of  Culbertson,  in  drawing  without  the  expectation  of 
meeting  the  bill,  would  not,  we  think,  be  tantamount  to  notice  to  his 
co-drawers ;  they  drawing  for  his  accommodation,  under  the  belief 
that  he  would  meet  the  bill. 

In  the  case  of  Harris  v.  Clark,  10  Ohio,  5,  it  was  held  that  a  demand 
upon  one  of  two  or  more  makers  of  a  joint  and  several  note  was  suf- 
ficient to  charge  an  indorser.  The  presentation  of  a  note  for  payment 
to  two  or  more  makers  of  a  joint  and  several  note,  on  the  third  day 
of  grace,  especially  where  the  makers  reside  at  a  distance  from  each 
other,  is  attended  with  embarrassments  which  do  not  arise  on  the  giv- 
ing of  notice  of  nonpayment ;  and  in  holding  that  notice  to  one  of  two 
or  more  joint  drawers  or  indorsers,  not  partners,  cannot  be  deemed 
notice  to  all,  we  do  not  touch  the  question  decided  in  Harris  v.  Clark. 

Demurrer  overruled. 


HOLTZ  V.  BOPPE. 
(Court  of  Appeals  of  New  York,  1SG8.    37  N.  Y.  634.) 
See  ante,  p.  593,  for  a  report  of  the  case. 


RINDGE  V.  KIMBALL. 
(Supreme  Judicial  Court  of  Massachusetts,  Suffolk,  1878.     124  Mass.  209.) 

Contract  upon  a  promissory  note  for  $500,  payable  to  the  order  of 
the  defendant,  and  indorsed  by  him  to'the  plaintiff. 

At  the  trial  in  the  superior  court,  before  Pitman,  J.,  without  a  jury, 
it  appeared  that  no  demand  had  been  made  on  the  note  or  notice  of 
nonpayment  given  to  the  defendant;  but  it  was  admitted  that  the  de- 
fendant wrote  on  the  back  of  the  note  the  words.  "Waive  demand  and 
notice."  The  evidence  was  conflicting  upon  the  question  whether 
these  words  were  written  before  or  after  the  note  was  due. 

The  defendant  testified  that  he  wrote  these  words  upon  the  note 
intelligently  and  intentionally,  with  a  full  knowledge  of  all  the  material 
facts.  The  judge  ruled  that  such  a  waiver  of  demand  and  notice  was 
as  effectual  after  as  before  the  maturity  of  the  note,  and  ordered  judg- 
ment for  the  plaintiff.     The  defendant  alleged  exceptions. 

Per  Curiam.  This  point  has  been  repeatedly  determined  by  recent 
decisions  of  this  court,  and  should  not  have  been  brought  up  again 


634  LIABILITY  OF  PARTIES.  (Part  3 

Matthews  v.  Allen.  16  Gray,  594,  77  Am.  Dec.  430;  Harrison  v.  Bailey, 
99  Mass.  620,  97  Am.  Dec.  63 ;  Third  National  Bank  v.  Ashvvorth,  105 
Mass.  503. 

Exceptions  overruled." 


REED  V.  SPEAR. 

(Supreme  Court,   Appellate  Division,   Fourth    Department,    New   York,   1905. 
107  App.  Div.  144,  M  N.  Y.  Supp.  1007.) 

HiscocK,  J."  This  case  was  brought  on  for  trial  before  the  county 
judge  and  a  jury.  At  the  close  of  the  evidence  each  side  moved  for  a 
direction  of  a  verdict,  and  therefore  any  questions  of  fact  or  divergent 
inferences  from  the  evidence  are  to  be  regarded  as  having  been  settled 
in  favor  of  the  plaintiff. 

The  action  was  brought  against  the  defendant  as  indorser  of  a  prom- 
issory note  made  by  one  Harry  A.  Lamkin,  dated  at  Sinclairville,  Chau- 
tauqua county,  N.  Y.,  August  9,  1900,  whereby  said  maker,  for  value 
received,  promised  "to  pay  Emma  Reed,  or  bearer,  four  hundred  dol- 
lars and  annual  interest  in  the  following  manner  to  wit:  $100  of 
the  principal  August  9,  1903;  $100  August  9,  1903;  $100  August  9, 
1904.  and  $100  August  9th,  1905.  the  interest  to  be  paid  annually  on  the 
9th  day  of  August  of  each  year ;  the  undersigned  to  have  the  right 
to  pay  any  part  or  the  whole  of  said  principal  sum  before  the  same 
shall  becorhe  due." 

Recovery  was  sought  with  interest  on  the  three  installments  of  prin- 
cipal becoming  due  respectively  August  9,  1902,  August  9.  1903,  and 
August  9,  1904.  Upon  the  trial,  plaintiff  abandoned  his  claim  as  to  the 
first  installment,  but  recovered  upon  the  last  two.  It  is  insisted  by  the 
defendant  that  such  recovery  was  erroneous,  that  no  proper  or  neces- 
sary evidence  was  given  of  the  presentment  or  notice  of  dishonor  of 
said  note  as  to  said  installments,  and  that  the  evidence  given  by  plain- 
tiff tending  to  excuse  him  from  presentment  and  notice  of  dishonor 
was  incompetent  and  improperly  received  under  his  complaint. 

We  conclude  that  plaintiff  has  failed  to  establish  the  necessary  notice 
of  dishonor  of  said  note  as  to  said  first  installment,  and  cannot  recover 
therefor,  but  that  he  established  a  right  to  recover  as  to  the  second  in- 
stallment embraced  in  the  judgment. 

Plaintiff  having  abandoned  his  claim  to  the  installment  becoming  due 
August  9,  1902,  we  need  not  discuss  that. 

Lamkin,  the  maker  of  the  note,  died  a  few  days  before  the  install- 
ment of  August  9.  1903,  became  due.  A  few  days  after  the  same  be- 
came due,  one  Chessman  was  appointed  administrator  of  his  estate. 
Emma  J.  Reed,  the  payee  and  owner  of  the  note,  died  March  7,  1904, 

83  Accord:    Toole  v.  Crafts,  193  Mass.  110.  78  N.  E.  775,  118  Am.  St.  Rep.- 
455  (190G) ;    Id.,  196  Mass.  397,  82  N.  E.  22  (1907). 
«*  Parts  of  the  opinion  are  omitted. 


Ch.  2)  DRAWER   AND    INDORSER.  635 

and  subsequently  plaintiff  was  appointed  her  administrator.  No  place 
of  payment  being  specified  in  the  note,  and  the  person  primarily  liable 
thereon  being  dead;  and  no  personal  representative  having  been  ap- 
pointed, the  holder  of  the  note  was  excused  from  presenting  the  same 
for  payment  of  the  installment  becoming  due  in  August,  19,03,  under 
the  provisions  of  section  136  of  the  negotiable  instruments  law  (Laws 
1897,  p.  737,  c.  612),  which  reads  as  follows:  "Where  the  person 
primarily  liable  on  the  instrument  is  dead,  and  no  place  of  payment  is 
specified,  presentment  for  payment  must  be  made  to  his  personal  rep- 
resentative, if  such  there  be,  and  if  with  the  exercise  of  reasonable  dili- 
gence he  can  be  found." 

But  as  we  construe  the  statute,  the  holder  of  the  note,  although  ex- 
cused under  the  circumstances  from  presentment  for  payment,  was  not 
excused  from  giving  notice  of  dishonor  to  the  indorser.  Section  160 
(page  739)  of  the  statute  referred  to  provides:  "Except  as  herein 
otherwise  provided,  when  a  negotiable  instrument  has  been  dishonored 
by  nonacceptance  or  nonpayment,  notice  of  dishonor  must  be  given 
*  *  *  to  each  endorser  and  any  *  *  *  endorser  to  whom  such 
notice  is  not  given  is  discharged." 

Section  143  (page  738)  provides  that:  "The  instrument  is  dishon- 
ored by  nonpayment  when :  (1)  *  *  *  (2)  Presentment  is  excused 
and  the  instrument  is  overdue  and  unpaid." 

These  sections  seem  to  make  it  clear  that,  although  presentment  for 
nonpayment  may  be  excused  under  such  circumstances  as  existed  in 
this  case,  the  indorser  is  still  entitled  to  notice  of  dishonor  of  the  in- 
strument by  its  being  overdue  and  unpaid. 

No  proof  was  offered  of  notice  to  the  defendant  indorser  of  the  dis- 
honor of  the  note  as  to  this  installment,  except  as  the  plaintiff  seeks 
to  have  it  supplied  by  inferences  drawn  from  certain  conversations  with 
the  defendant,  but  which  we  feel  are  insufficient  for  that  pur- 
pose.    *     *     * 

We  pass  to  the  consideration  of  the  installment  becoming  due  in  Au- 
gust, 1904:.  At  this  time  an  administrator  had  been  appointed  of  the 
maker  of  the  note  and  also  of  the  holder.  The  latter  lived  at  Sinclair- 
ville,  in  Chautauqua  county.  The  former  resided  at  Fredonia,  in  said 
county,  som.e  distance  from  the  former  place,  and  connected  therewith 
by  railroad.  At  the  time  this  installment  became  due  he  was,  how- 
ever, a  member  of  a  banking  firm  which  had  its  place  of  business  in 
Sinclairville,  and  was  also  interested  in  other  business  industries  lo- 
cated in  the  same  place,  and  was  accustomed  to  spend  more  or  less  time 
in  looking  after  said  interests.  Upon  the  day  when  the  installment  be- 
came due,  plaintiff  went  two  or  three  times  to  the  banking  office  for  the 
purpose  of  presenting  the  note  to  the  maker's  said  administrator,  but 
was  unable  to  find  him.  He  also  sought  him  at  the  railroad  station 
near  the  seat  of  his  other  business  interests,  and  at  a  time  when  he 
might  be  expected  to  take  or  alight  from  a  train,  but  did  not  find  him. 


G36  LIABILITY    OF   PARTIES.  (Part   3 

Having  failed  to  find  him  at  about  9  o'clock  in  the  evening,  he  drew  a 
notice,  of  which  the  "following  is  a  copy : 

•'Sinclairville,  August  9,  "04. 

"To  W.  N.  Spear :  Take  notice  that  the  last  $100  installment  of  a 
note  given  to  Emma  J.  Reed  August  9th,  1900,  by  Harry  Lamkin  and 
endorsed  by  you  fell  due  this  day  and  remains  unpaid  at  this  hour  of 
9  p.  m.  and  that  I  shall  look  to  vou  for  payment. 

"C.  M.  Reed,  Admin.  E.  J.  Reed  Est." 

Upon  the  following  day  he  sought  to  serve  this  notice  upon  the  de- 
fendant at  his  store  in  Fredonia,  but  after  one  or  more  efforts,  having 
failed  to  find  him,  delivered  it,  sealed  and  addressed,  to  defendant's 
wife  in  the  store,  who  acted  as  his  clerk  and  assistant.  There  is  evi- 
dence that  the  notice  was  actually  received  by  the  defendant  upon  the 
date  of  service,  August  10,  1904. 

Upon  this  evidence  the  county  judge  was  entitled,  as  a  matter  of 
fact,  if  not  of  law,  to  find  a  sufficient  compliance  by  plaintiff  with  the 
provisions  of  the  negotiable  instruments  law  applicable  to  such  a  case. 
Under  section  136,  already  quoted,  the  obligation  existed  to  make  pre- 
sentment of  the  note  to  the  personal  representative  of  the  maker  if 
"with  the  exercise  of  reasonable  diligence  he  could  [can]  be  found." 
And.  conversely,  under  section  142  (page  738),  presentment  for  pay- 
ment was  dispensed  with  where  the  same  could  not  be  made  "after  the 
exercise  of  reasonable  diligence."  Section  167  (page  740)  provided 
that  the  notice  of  dishonor  "may  be  in  writing  or  merely  oral  and 
may  be  given  in  any  terms  which  sufficiently  identify  the  instrument, 
and  indicate  that  it  has  been  dishonored  by  nonacceptance  or  nonpay- 
ment." Sections  167  and  168  respectively  provide  that  such  notice  may 
be  given  by  delivering  it  personally  or  through  the  mails,  and  that  it 
may  be  given  either  to  a  party  himself  or  to  his  agent  in  that  behalf. 

The  evidence  fairly  warranted  a  finding  that  reasonable  diligence 
was  exercised  by  plaintiff  in  his  effort  to  present  for  payment  the  note 
to  Mr.  Chessman  as  administrator  of  the  maker  of  the  note.  No  ques- 
tion is  raised  but  that  the  notice  of  dishonor  was  served  in  due  time, 
and  we  think  no  question  can  be  successfully  made  but  that  said  notice 
was  sufficient  in  form  and  properly  served  upon  defendant's  wife  and 
agent,  especially  in  view  of  the  fact  that  it  actually  came  into  defend- 
ant's possession  within  the  time  allowed  by  laAv.    *    *    * 

Judgment  reversed,  in  so  far  as  it  allows  a  recovery  for  the  install- 
ment due  August  9,  1903  ;  otherwise,  affirmed.*' 

flfi  See  Merchants'  Bank  v.  Brown.  80  App.  Div.  599,  83  N.  Y.  Supp.  1037 
(1903),  as  to  notice  in  case  the  iudorser  is  dead. 


Ch.  2)  DRAWER    AND    INDORSER.  637 

TORBERT  V.  MONTAGUE. 

(Supreme  Court  of  Colorado,  190G.    38  Colo.  32o.  87  Pac.  1145.) 

Maxweli*,  J.^®  a  trial  to  the  court  below,  without  a  jury,  resulted 
in  a  judgment  against  appellant  as  indorser  upon  three  promissory 
notes.  It  is  conceded  that  there  was  no  presentment  of  the  notes  for 
payment,  as  required  by  section  70,  p.  235,  and  no  notice  of  dishonor, 
as  required  by  section  89,  c.  64,  p.  238,  of  the  Acts  of  1897,  "Nego- 
tiable Instruments"  (3  Mills'  Ann.  St.  Rev.  Supp.  §§  245m,  34Td). 
But  it  is  claimed  that  there  was  a  waiver  of  presentment  and  notice 
of  dishonor  under  sections  83  and  109  of  the  above  statute.    *    *    * 

Over  defendant's  objection  plaintiff's  husband,  who  was  acting  as 
her  agent  in  the  matter,  was  allowed  to  testify,  in  substance,  that  at 
the  time  the  notes  were  indorsed  and  delivered  to  witness  by  Mr.  Fow- 
ler, of  the  firm  of  Torbert  &  Fowler,  of  which  firm  appellant  was  a 
member,  Mr.  Fowler  said,  quoting  from  the  abstract  of  the  record : 
"That  they  [meaning  Torbert  &  Fowler]  would  be  responsible  for 
the  interest  and  the  principal  when  it  becomes  due ;  that  I  would  have 
nothing  to  do  whatever  with  the  collection  of  the  note,  or  the  principal 
of  it ;  that  they  would  look  after  the  collection  of  the  note  when  it 
became  due  and  pay  me  the  interest  when  it  became  due" ;  and  that  the 
same  statement  was  substantially  repeated  several  times  thereafter 
prior  to  the  maturity  of  the  notes.  A  motion  to  strike  out  all  of  this 
testimony  interposed  by  defendant's  counsel  was  overruled,  and  an  ex- 
ception saved. 

There  is  evidence  in  the  record  to  the  effect  that  Torbert  &  Fowler 
were  conducting  a  chattel  loan  and  business  chance  business  in  the 
city  of  Denver ;  that  the  notes  upon  which  this  suit  was  brought  were 
indorsed  by  Mr.  Fowler  in  the  name  of  Torbert  &  Fowler  at  the  time 
they  were  delivered  to  appellee's  agent ;  that  the  firm  of  Torbert  & 
Fowler  managed  and  conducted  the  entire  business  for  appellee,  col- 
lecting and  paying  over  to  her  the  installments  of  interest  as  they  fell 
due  and  a  portion  of  the  principal  of  one  of  the  notes,  which  seems 
to  have  been  realized  from  the  foreclosure  of  a  chattel  mortgage  given 
to  secure  the  note  upon  which  a  partial  payment  was  made.  In  short, 
the  evidence  tends  to  prove  that  Torbert  &  Fowler  were  acting  as  the 
agents  of  appellee  in  the  matter.  Appellant  did  not  introduce  any 
evidence. 

The  judgment  of  the  court,  set  forth  in  full  in  the  abstract,  con- 
clusively shows  that  it  was  based,  in  part  at  least,  upon  the  testimony 
of  the  witness  as  to  a  parol  agreement  made  contemporaneously  with 
the  indorsement  of  the  notes  to  appellee.  It  is  settled  in  this  state 
that  the  legal  effect  of  a  blank  indorsement,  which  was  the  indorse- 
ment upon  the  notes  sued  upon  in  this  action,  cannot  be  varied  by  parol. 
Martin  v.  Cole,  3  Colo.  113;   Dunn  v.  Ghost,  5  Colo.  134;    Doom  v. 

66  Part  of  the  opinion  is  omitted. 


638  LIABILITY  OF  PARTIES.  (Part  3 

Sherwin,  20  Colo.  231,  38  Pac.  56.  This  being  the  rule,  all  testimony 
as  to  a  parol  agreement  between  the  indorser  and  the  indorsee  con- 
temporaneous with  the  indorsement  of  the  note  sued  upon  was  incom- 
petent, and  should  have  been  rejected. 

It  is  insisted  by  appellee  that  there  is  sufficient  evidence  in  the  rec- 
ord, exclusive  of  the  mcompetent  testimony  above  referred  to,  to  sup- 
port the  finding  of  the  court  to  the  effect  that  there  was  a  waiver  of 
presentment  for  payment  and  notice  of  dishonor.  As  seen  above,  by 
sections  82  and  109  of  the  negotiable  instrument  statute  presentment 
for  payment  and  notice  of  dishonor  may  be  waived,  and  the  waiver 
may  be  express  or  implied. 

Appellant  concedes  this  to  be  the  law,  but  insists  that  the  testimony 
relied  upon,  which  is  quoted  from  the  abstract,  supra,  does  not  prove 
a  waiver.  The  findings  of  the  court  were  as  follows:  "I  am  compelled 
to  find,  from  the  evidence  in  the  case,  that  the  evidence  discloses  the 
fact  that  the  conduct  and  promises  and  manner  of  transacting  the  busi- 
ness by  the  firm,  on  the  part  of  ]Mr.  Fowler,  at  that  time  misled  and 
caused  the  plaintiff  to  rely  upon  those  promises  and  upon  that  course 
of  conduct,  to  the  extent  that  she  left  the  matter  entirely  to  the  firm  of 
Torbert  &:  Fowler  to  attend  to  the  collection  and  take  charge  of  the 
matter,  and  that  the  evidence  discloses  they  got  their  pay  for  it  and 
got  their  commission  on  this  matter,  and  undertook  the  responsibility 
of  doing  it,  and  that  was  the  cause,  under  the  evidence  at  least,  for 
the  failure  on  the  part  of  the  plaintiff  to  present  these  notes  and  give 
any  further  notice  of  dishonor."     *     *    * 

The  question  to  be  determined  is  whether,  upon  a  fair  construction 
of  the  language  used  by  Fowler,  his  conduct  in  relation  to  the  matters 
in  controversy,  and  his  acts  as  agent  of  appellee,  were  calculated  to  mis- 
lead appellee,  to  put  her  off  her  guard,  and  to  induce  her  to  forbear 
taking  the  necessary  steps  to  charge  appellant  as  indorser.  In  Union 
Bank  v.  Magruder,'?  Pet.  (U.  S.)  287,  8  L.  Ed.  687,  the  United  States 
Supreme  Court,  according  to  the  headnote,  held :  "Whether  certain 
declarations  by  the  indorser  of  a  note  amounted  to  a  waiver  of  de- 
mand on  the  maker  and  notice  to  the  defendant,  or  to  a  new  promise 
in  consideration  of  forbearance,  are  questions  of  fact  for  the  jury, 
under  instructions  from  the  court,  not  mere  questions  of  law."  Decla- 
rations intermixed  with  acts  and  conduct,  as  in  this  case,  seem  to  us 
to  raise  a  question  of  fact  to  be  determined  by  the  court  or  jury.  So 
the  rule  is  stated  by  Daniel,  §  1103,  and  Randolph,  §  1383,  quoted 
above.  The  court  below  found  this  fact  against  the  appellant,  and  we 
do  not  feel  at  liberty  to  disturb  it. 

In  view  of  all  the  circum-stances  surrounding  this  case,  as  disclosed 
by  the  transcript  of  the  evidence,  which  has  been  read  with  great  care, 
the  judgment  w^ill  be  affirmed. °^ 

87  See  In  re  Swift  (D.  C.)  106  Fed.  65  (1901). 


Gh.  3)  TRANSFERROR.  63& 

CHAPTER  III 

TRANSFERROR 


BICKNALL  &  SKINNER  v.  WATERMAN. 

(Supreme  Court  of  Rhode  Island,  1857.    5  li.  I.  4o.) 

Assumpsit  on  a  contract  for  the  sale  of  65  bales  of  cotton,  made  by 
the  defendant  with  the  plaintiffs.^ 

Ames,  C.  J.  This  is  a  mixed  contract  of  sale  and  exchange,  by  which 
the  defendant,  on  the  24th  day  of  November,  1856,  engaged  with  the 
plaintiffs,  through  a  broker,  to  sell  to  them  a  specified  lot  of  Augusta 
cotton,  being  65  bales  marked  "Hoppin,"  at  13%  cents  per  pound,  for 
the  note  of  one  John  E.  Weeden  for  about  $1,250,  having  then  some 
four  months  to  run;  the  balance  to  be  secured  by  the  note  of  the 
plaintiffs  at  six  months.  It  is  in  proof,  that  about  one-half  of  the  sales 
of  cotton  in  the  market  of  Providence  are  made  in  this  way  of  barter 
for  the  notes  of  third  persons,  in  which  it  is  understood,  as  sworn  by 
the  broker,  and  as  has  been  frequently  proved  before  us,  that  the  notes 
are  "put  off" — that  is,  exchanged — for  the  cotton ;  the  very  purpose 
of  the  transaction  on  the  part  of  the  purchaser  being  to  get  rid  of  the 
risk  of  the  solvency  of  the  paper,  even  though  he  pay  an  enhanced 
price  for  the  cotton.  The  testimony  of  the  broker  who  conducted  this 
bargain  shows  that,  so  far  as  the  note  of  Weeden  would  go  towards 
the  price  of  the  cotton  at  the  agreed  rate,  such  was  the  nature  of  this 
contract ;  time  being  expressly  given  to  and  taken  by  the  defendant  to 
make  inquiries  concerning  the  solvency  of  Weeden,  before  he  bound 
himself  to  it.  The  contract,  as  of  a  present  sale  and  exchange,  was 
concluded  by  the  assent  of  both  parties,  and  was  so  entered  in  the  bro- 
ker's book  on  the  evening  of  the  24th  of  November;  and  the  subjects 
of  the  contract  being  perfectly  identified  by  it,  and  nothing  remaining 
to  be  done  but  mutually  to  deliver  the  stipulated  cotton  and  notes,  the 
effect  of  the  transaction,  in  the  absence  of  fraud,  was  at  common  law 
— and  we  have  no  statute  which  touches  the  matter — to  vest  the  title 
to  the  cotton  in,  and  place  it  at  the  risk  of,  the  plaintiffs,  and  to  vest 
the  title  to  Weeden's  note  in,  and  place  it  at  the  risk  of,  the  defend- 
ant. Such  was  the  view  which  forced  itself  upon  my  own  mind  when 
the  case  was  first  tried  before  me  with  a  jury,  and  such  is  the  con- 
clusion to  which  we  have  all  arrived,  upon  the  maturest  considera- 
tion of  the  arguments  and  authorities  which  have  been  pressed  upon 
our  attention. 

A  well-known  common-law  principle,  applicable  alike  to  sales  and 
exchanges  of  personal  things,  is  that  fraud  or  warranty  is  necessary 

1  The  statement  of  the  case,  the  arguments  of  counsel,  and  part  of  the 
opinion  are  omitted. 


€40  LIABILITY    OF    PARTIES.  (Pai  t   3 

to  render  the  vendor  or  exchanger  Hable,  in  any  form,  for  a  defect 
in  the  quahty  of  the  thing  sold  or  exchanged.  Applying  this  principle 
to  the  sale  or  exchange  of  the  note  of  a  third  person,  transferred  by 
indorsement  without  recourse  or  by  delivery  merely,  the  vendee  or 
person  taking  it  in  exchange  takes  the  risk  of  the  past  or  future  in- 
solvency of  the  maker,  or  other  party  to  it,  unless  indeed,  in  case  of 
past  insolvency,  the  vendor  or  exclianger  is  guilty  of  the  fraud  of  pass- 
ing it  off  with  knowledge  of  that  fact.- 

The  case  of  a  sale  or  exchange  of  a  forged  note  is  equally  within 
the  above  principle :  since  the  parting  with  it  for  value  is  a  represen- 
tation, and  so  a  warranty,  that  it  is  the  note  of  the  persons  whose 
note  it  purports  to  be — that  is,  is  the  thing  as  which  it  is  sold  or  ex- 
changed. Although  decisions  may  undoubtedly  be  found  departing 
from  these  ancient  common-law  principles,  yet  this  is  the  settled  doc- 
trine of  Westminster  Hall,  and  is  supported  by  the  main  current  of 
American  authorities.  Byles  on  Bills,  122-125,  307,  and  cases  cited, 
especially  Camidge  v.  Allenby,  6  B.  &  C.  373 ;  Gompertz  v.  Bartlett, 
24  Eng.  L.  &  Eq.  156 ;  Gurney  v.  Womersley,  28  Eng.  L.  &  Eq.  257 ; 
Hall  v.  Conder,  38  Eng.  L.  &  Eq.  259,  and  cases  cited;  2  Am.  Lead. 
Cases  (Hare  &  Wallace's  Notes)  180-189.  As  remarked  by  Sergeant 
B}les  in  his  valuable  treatise,  after  quoting  several  conflicting  Ameri- 
can cases  bearing  upon  this  subject :  "The  confusion  has  arisen  from 
neglecting  to  distinguish  between  questions  of  law  and  questions  of 
fact."  Byles  on  Bills,  122,  note  "i."  In  other  words,  what  was  the 
agreement  of  the  parties  with  regard  to  the  transfer  of  a  note  or  bill — 
that  is,  whether  it  was  by  way  of  sale  or  exchange,  or,  in  case  of  a 
precedent  debt,  whether  by  way  of  complete  payment  or  as  mere 
security  for  payment  of  it — is  a  question  of  fact,  and  varies  with 
proof,  direct  and  presumptive,  in  cases  in  other  respects  similar. 
It  is  obvious  what  contrariety  of  decision  must  necessarily  arise  if 
courts,  mistaking  their  province,  undertake  to  decide  such  questions 
as  if  they  were  questions  of  law;  and,  however  they  decide  them, 
of  what  little  value  their  decisions  must  be  as  precedents. 

In  case  at  bar,  the  matter  of  fact  has  been  withdrawn  from  the  jury, 
and,  under  the  statute,  has  been  submitted  to  us  by  the  parties,  alono- 
with  the  matter  of  law.  We  find,  in  fact,  that  the  defendant  agreed 
to  take  the  note  in  question,  so  far  as  it  would  go,  in  exchange  for 
his  cotton;  and  this,  without  any  fraud  practiced  upon  him  by  the 
plaintiffs,  either  by  expression  or  suppression,  and  without  express' war- 
ranty, on  their  part,  of  the  solvency  of  the  maker  of  the  note.  In 
such  case,  the  law  certainly  implies  no  warranty  by  the  plaintiffs  of  the 
solvency  of  the  maker  of  the  note;  and  we  see  no  reason  why  they 
should  not  be  entitled  to  the  benefit  of  a  contract  fairly  made  by  them. 
because  the  risk  assumed  under  it  by  the  defendant  has  chanced  to 
turn  against  him. 

«  See  Brown  v.  Montgomery,  20  N.  Y.  2S7,  75  Am.  Dec.  404  (1859). 


Cli.  3)  TRANSFERROR.  641 

The  case  of  Roget  v.  Merritt,  2  Caines  (N.  Y.)  117,  is  relied  upon 
as  sustaining  the  defense  that  by  the  insolvency  of  Weeden  the  consid- 
eration agreed  to  be  given  to  the  defendant  l-iad  wholly  failed  before 
the  execution  of  the  contract  by  delivery,  and  upon  that  ground  that 
he  had  a  right  to  retract  from  the  contract.  The  note  existed  at  the 
time  of  the  contract,  like  the  sea-damaged  goods  sold  during  a  voy- 
age, or  the  annuity  whilst  the  person  upon  whose  life  it  was  depend- 
ent was  in  extremis,  and,  though  perhaps  of  little  value,  will,  like  them, 
support  a  contract  of  sale  which  is  based  upon  it  (Sutherland  v.  Pratt, 
11  M.  &  W.  296;  Hastie  v.  Couturier,  20  Eng.  L-  &  Eq.  535);  and  it 
would  be  a  singular  perversion  of  a  contract,  the  legal  efifect  of  which 
is  that  the  risk  of  the  value  of  a  note  is  to  be  assumed  by  one  con- 
tractor, to  say,  that  he  was  freed  from  the  contract  upon  the  ground 
of  failure  of  consideration,  because  the  note  did  not  turn  out  to  be  as 
valuable  as  he  anticipated.     *     *     * 

Judgment  for  plaintiff.^ 


LITTAUER  V.  GOLDMAN. 

(Court  of  Appeals  of  New  York,  1878.     72  N.  Y.  50G.  28  Am.  Rep.  171.) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme  Court 
in  the  First  Judicial  Department,  entered  upon  an  order  affirming  an 
an  order  of  Special  Term,  which  overruled  a  demurrer  to  the  com- 
plaint herein.    Reported  below,  9  Hun,  231. 

The  complaint  alleged,  in  substance,  that  defendant  sold  and  trans- 
ferred by  delivery  to  plaintiff,  for  valuable  consideration,  a  promissory 
note,  which  was  void  for  usury  in  its  inception ;  that  plaintiff  sued 
the  makers,  who  interposed  the  defense  of  usury ;  that  plaintiff  notified 
defendant  of  the  bringing  of  the  action  and  of  the  defense  set  up,  and 
requested  him  to  take  charge  of  the  prosecution  of  said  action,  and 
that  he  would  be  held  liable  in  case  the  defense  was  sustained ;  that 
plaintiff  was  beaten  in  said  action  and  a  judgment  for  costs  rendered 
against  him.  It  was  not  alleged  that  defendant  had  knowledge  of 
the  defect,  or  that  any  express  representation  or  guaranty  was  made. 
The  defendant  demurred  that  the  complaint  did  not  state  facts  suffi- 
cient to  constitute  a  cause  of  action.* 

Miller.  J.  The  right  of  the  plaintiff  to  maintain  this  action  rests 
upon  the  ground  that  the  note  in  question,  which  was  sold  and  trans- 
ferred by  the  defendant  to  the  plaintiff,  was  invalid  and  void,  by  rea- 
son of  its  original  usurious  consideration.  It  is  alleged  that,  being  in 
violation  of  the  statute  against  usury,  it  was  no  note,  and  by  implica- 
tion of  law  the  defendant  did  warrant  and  undertake  that  the  same 

3  Compare  Dille  v.  White,  132  Iowa.  327,  109  N.  W.  009  (190G) ;  Gordou  v. 
Irvine,  105  Ga.  144,  31  S.  E.  151  (1898). 

4  Arguments  of  counsel  are  omitted. 

Sm.&  M.B.&  N. 


642  LIABILITY  OF  PAUTiES.  (Part  3 

was  not  usurious  or  illegal,  but  a  valid  and  legal  note.  The  complaint 
does  not  allege  that  the  defendant  had  any  knowledge  of  the  usury 
or  was  a  party  to  the  same,  but  states  that  the  seller  by  the  act  of 
transfer  for  a  valuable  consideration,  impliedly  warranted  that  the 
paper  was  genuine  and  all  that  it  purports  to  be  upon  its  face,  and 
incurred  an  obligation  by  the  sale  to  make  the  paper  good,  although 
he  did  not  indorse  or  guarantee  the  same.  The  question  whether  an  ac- 
tion will  lie  for  the  loss  sustained  by  the  plaintiff  by  reason  of  the 
note  being  usurious,  and  the  recovery  of  the  amount  thereof  thereby 
defeated,  has  never  arisen  under  the  precise  circumstances  presented 
in  this  case,  and  demands  an  examination  of  the  principle  applicable 
to  the  contract  entered  into  upon  the  sale  of  paper  of  this  description, 
and  of  the  authorities  bearing  upon  the  subject. 

The  rule  is  well  settled  that  generally  one  who  transfers  paper  by 
delivery  only  incurs  none  of  the  liabilities  which  attach  to  an  indorser, 
for  the  reason  that  the  irresistible  inference  is  that  if  he  transfers  it, 
and  it  is  received  without  his  indorsement,  that  such  liabilities  did  not 
enter  into  the  bargain  or  the  intention  of  the  parties.  This  rule, 
however,  is  not  without  exception,  and  the  transferror  of  notes  or  bills 
by  delivery  warrants  the  genuineness  of  the  signatures,  and  that  the 
title  is  what  it  purports  to  be.  If  the  paper  is  forged,  the  transferee 
is  liable  upon  the  original  consideration,  which  has  never  been  extin- 
guished by  the  sale.  2  Parsons  on  Contracts,  37,  38.  So,  also,  it  is  laid 
down  by  the  same  author  that  the  vendor  without  indorsement  war- 
rants that  the  paper  is  of  the  kind  and  description  that  it  purports 
to  be,  and  there  is  an  implied  warranty  that  the  parties  to  the  paper 
are  under  no  incapacity  to  contract,  as  from  infancy  or  marriage  or 
other  disability,  and  the  assignment  of  a  bill  or  note  for  a  valuable 
consideration  raises  an  implied  warranty  that  the  assignor  has  done 
nothing,  and  will  do  nothing,  to  prevent  the  assignee  from  collecting 
it.  The  reason  given  as  to  forged  paper  is  that  it  is  nothing,  and  the 
one  who  has  transferred  it  has  transferred  nothing,  and  is  therefore 
liable.    Id.  39,  40. 

The  question  whether  paper  tainted  with  usury,  which  is  transferred 
by  the  holder  without  knowledge  of  this  defect,  can  be  regarded  as 
within  the  principle  of  the  exceptions  stated,  is  not  free  from  difficulty, 
and  at  first  view  there  appears  to  be  some  ground  for  claiming  that  a 
note  made  in  violation  of  a  statute  which  declares  usury  to  be  a  mis- 
demeanor, and  that  all  paper  of  this  kind  shall  be  void,  should  stand 
on  the  same  footing  as  forged  or  other  paper,  which  is  excepted  from 
the  general  rule.  Although  the  reported  cases  do  not  decide  the  ex- 
act point,  an  examination  of  some  of  the  leading  authorities  tends 
to  throw  some  light  on  the  subject. 

In  Marvin,  Pres't  of  the  Delaware  Bank,  v.  Jarvis,  20  N.  Y.  22f5. 
a  note  was  transferred  to  the  plaintiff  which  had  been  taken  at  a  usuri- 
ous premium  by  the  defendant  and  the  avails  received  by  him.  Upon 
being  sued,  the  defense  of  usury  was  interposed,  which  was  successful, 


Ch.  3)  TRANSFERROR.  643 

and  the  bank  sued  the  defendant  to  recover  the  amount  and  costs  of 
prosecuting  the  note.  It  was  held  that  one  who  transfers  a  chose  in 
action  impHedly  warrants  that  there  is  no  legal  defense  to  its  collec- 
tion arising  out  of  his  own  connection  with  its  origin,  and  that  the 
party  accepting  the  transfer  is  at  liberty  to  act  upon  the  implied  asser- 
tion of  the  validity  of  the  paper,  and  to  bring  an  action  for  its  collec- 
tion, and  when  defeated  to  recover  the  costs  incurred  by  him  from  his 
assignor.  The  opinion  lays  down  the  rule  that  the  authorities  hold 
the  doctrine  in  general  terms  that  the  vendee  of  a  chose  in  action,  in 
the  absence  of  express  stipvilations,  impliedly  warrants  its  legal  sound- 
ness and  validity,  and  that  exceptions  do  not  exist  when  the  invalidity 
of  the  debt  or  security  sold  arises  out  of  the  vendor's  dealing  in  re- 
lation to  it.  It  is  also  said  that  the  act  of  transferring  the  note  was 
the  strongest  possible  assertion  that  no  legal  defense  existed.  The 
defendant  in  the  case  cited  had  knowledge  of  the  usury,  which  was 
not  the  fact  here ;  and  hence  it  differs  from  the  case  at  bar,  and  is 
not  decisive  of  the  question ;  but  the  opinion  is  very  strong  in  uphold- 
ing the  general  doctrine  referred  to  where  there  is  a  radical  defect  in 
the  note. 

In  Webb  v.  Odell,  49  N.  Y.  583,  a  recovery  for  the  purchase  price, 
was  upheld  where  notes  were  sold  for  less  than  their  face,  upon  a  rep- 
resentation that  they  were  business  paper,  when,  in  fact,  they  were 
accommodation  notes,  and  thus  usurious  and  void  in  the  hands  of 
the  vendee.  The  decision  is  placed  upon  the  ground  that  the  thing 
sold  differed  in  substance  from  what  the  purchaser  was  led  by  the 
vendee  to  believe  he  was  buying,  and  the  difference  was  so  substantial 
and  essential  in  its  character  as  to  amount  to  a  failure  of  considera- 
tion. The  representation  that  the  notes  were  business  paper  was  an 
important  fact,  and  hence  the  decision  does  not  exactly  cover  a  case 
where  the  party  transferring  had  no  knowledge  of  the  true  character 
of  the  paper. 

In  Ross  V.  Terry,  63  N.  Y.  613,  the  defendant  sold  a  bond  and 
mortgage  to  the  plaintiff,  which  was  usurious  and  void.  The  defend- 
ant was  personally  concerned  in  the  making  of  them,  and  in  the  un- 
lawful acts  which  vitiated  them,  and  it  was  held  that  there  was  an 
implied  warranty  of  the  validity  of  the  securities.  It  will  be  observed 
that  here,  also,  the  defendant  had  knowledge  of  the  usury,  and  hence 
the  case  is  not  directly  in  point. 

In  Fake  v.  Smith,  7  Abb.  Prac.  (N.  S.)  106,  the  defendants,  who 
sold  a  usurious  note  to  the  plaintiff,  were  held  liable  upon  an  implied 
warranty  by  defendants,  on  the  sale  of  the  note,  that  there  was  no 
legal  defense  to  an  action  upon  it;  but  it  appeared  that  the  defend- 
ants were  privy  to  the  consideration  of  the  note,  and  the  facts  and 
circumstances  under  which  it  was  given  and  transferred. 

The  foregoing  constitute  the  principal  cases  in  this  state  which 
have  a  direct  bearing  upon  the  question  arising  where  the  notes  trans- 
ferred were  tainted  with  usury.     In  the  cases  of  Whitney  v.  National 


644  LIABILITY  or  TARTiKS.  (Part  3 

Bank  of  Potsdam,  45  N.  Y.  305,  and  Bell  v.  Dagg,  60  N.  Y.  530,  the 
notes  were  forged,  and  the  implied  warranty  related  to  the  genuine- 
ness of  the  signature,  which,  as  we  have  seen,  is  expressly  provided 
for  in  the  elementary  works. 

In  the  case  of  Gemport  v.  Bartlett,  75  Eng.  C.  L.  849,  an  unstamped 
bill  of  exchange,  indorsed  in  blank,  purporting  to  be  a  foreign  bill, 
was  sold  without  recourse  by  the  holder.  It  was  shown  to  have  been 
drawn  in  the  country  where  the  parties  resided,  and  was  for  that  rea- 
son unavailable  for  want  of  a  stamp,  and  it  was  held  that  the  article 
did  not  answer  the  description  of  that  which  was  sold,  viz.,  a  foreign 
bill,  and  hence  the  purchaser  could  recover  back  the  price  from  the 
vendor.  This  case  sustains  the  doctrine  that  the  money  might  be 
recovered  as  paid  under  a  mistake  of  fact,  which  seems  to  have  been 
a  mutual  mistake,  and  the  whole  case  appears  to  have  been  disposed 
of  upon  the  ground  that  the  article  did  not  answer  the  description. 
There  is  some  analogy  between  the  case  last  cited  and  the  one  at  bar. 
for  here  the  note  on  its  face  purported  to  be  valid,  and  was  only  shown 
not  to  be  by  proof  of  extrinsic  facts,  which  affected  the  original  con- 
sideration. The  difference,  however,  is  that  in  the  case  last  cited  the 
purchaser  contracted  for  a  foreign  bill  which  required  no  stamp,  and 
did  not  receive  what  he  was  entitled  to,  while  here  there  was  a  secret 
ciefect  unknown  to  both  parties,  and  not  provided  for;  and  as  was 
said  by  the  Lord  Chief  Justice  in  Gemport  v.  Bartlett:  "If  it  really 
had  been  a  foreign  bill,  any  secret  defect  would  have  been  at  the  risk 
of  the  purchaser." 

From  the  authorities  to  which  we  have  adverted,  it  appears  that  in 
every  case  where  usury  was  involved  there  was  knowledge  of  its 
existence  on  the  part  of  the  person  who  held  and  transferred  the  note. 
It  is  true  that  in  Delaware  Bank  v.  Jarvis,  supra,  it  is  remarked  by 
the  judge  that  he  does  not  consider  it  a  material  circumstance  that 
the  defendant  had  knowledge  that  the  note  had  not  been  negotiated 
prior  to  the  time  when  it  was  received,  and,  as  we  have  seen,  lays 
down  the  broad  rule  that,  in  any  case  where  there  is  not  an  express 
agreement,  the  vendor  of  a  chose  in  action  warrants,  not  only  the  title, 
but  the  soundness  and  validity,  of  the  note.  The  opinion  of  the  learned 
judge  is  entitled  to  great  respect;  but.  as  the  facts  show  it  was  not 
necessary  to  go  to  this  extent  to  sustain  the  decision  made,  it  is  not 
entirely  controlling. 

It  is  of  grave  importance  whether  a  scienter  is  material  for  the  pur- 
pose of  upholding  an  implied  warranty  in  a  case  of  this  kind.  In 
Hoe  v.  Sanborn,  21  N.  Y.  552,  78  Am.  Dec.  163,  Selden,  J.,  lays  down 
the  rule  "that  whenever  an  article  sold  has  some  latent  defect,  which 
is  known  to  the  seller  and  not  to  the  purchaser,  the  former  is  liable 
for  this  defect  if  he  fails  to  discover  his  knowledge  on  the  subject  at 
the  time  of  the  sale."  He  proceeds  to  state  that,  where  knowledge  is 
proved  by  direct  evidence,  the  responsibility  rests  upon  the  ground  of 
fraud ;  but  where  the  probability  of  knowledge  is  so  strong  that  courts 


Ch.  3)  TRANSFERROR.  G45 

will  presume  its  existence  without  proof,  the  vendor  is  held  respon- 
sible upon  an  implied  warranty.  And  the  difference  between  the  two 
cases  is  that  in  the  one  the  scienter  is  actually  proved ;  in  the  other  it 
is  presumed.  A  scienter  is,  therefore,  essential  to  establish  an  im- 
plied warranty;  and,  as  we  have  seen,  the  cases  to  which  we  have  re- 
ferred all  show  knowledge  on  the  part  of  the  vendor.  The  cases 
which  are  cited  to  sustain  the  doctrine  that  the  scienter  is  immaterial 
where  there  is  a  warranty  either  express  or  implied  do  not  go  to  that 
extent. 

In  Evertson  v.  Miles,  6  Johns.  138,  the  action  was  assumpsit  for  a 
breach  of  warranty  on  the  sale  of  a  horse,  and  the  judge  upon  the  trial 
rejected  evidence  to  show  that  the  representations  proved  were  false, 
and  decided  that  the  plaintiff  must  show  an  express  warranty,  other- 
wise they  could  not  recover  upon  the  declaration.  This  ruling  was  sus- 
tained by  the  higher  court,  and  it  was  said  that  there  is  no  case  which 
permits  a  plaintiff  to  establish  deceit  and  fraud,  when  he  declares  only 
in  assumpsit  on  a  warranty  express  or  implied.  The  question  presented 
related  to  the  form  of  the  complaint,  and  has  no  application  to  the 
case  now  considered,  where  the  point  is,  What  constitutes  an  implied 
warranty  upon  the  sale  of  a  chose  in  action? 

In  Ross  v.  Mather,  47  Barb.  582,  the  action  was  for  a  false  war- 
ranty in  the  sale  of  a  horse,  and  it  was  held  it  was  unnecessary  for 
the  plaintiff  to  make  proof  of  the  scienter ;  but  proof  of  the  warranty 
was  sufficient,  and  whether  the  defendant  knew  the  warranty  was 
false  at  the  time  of  making  it  was  of  no  importance.  The  warranty 
in  the  case  cited  was  express,  and  of  course,  when  proved,  made  out  a 
case.  Here  the  question  is,  where  there  is  no  express  warranty  and 
the  evidence  does  not  show  knowledge  or  deceit,  whether  any  implied 
warranty  is  made  out,  and  the  cases  cited  furnish  no  light  on  that 
subject. 

In  Williamson  v.  Allison,  2  East,  446,  the  warranty  was  proved 
and  the  same  rule  was  laid  down.  The  reason  of  the  rule  was  stated 
by  Lord  EHenborough  to  be  that  the  plaintiff  was  equally  entitled  to 
recover  on  the  same  proof,  by  striking  out  the  whole  averment  of  a 
scienter.  This  is  apparent,  and  hence  the  rule  last  stated  has  no  appli- 
cation to  a  case  where  the  warranty  is  necessarily  dependent  upon 
proof  of  knowledge.  Without  proof  of  such  knowledge  no  warranty  is 
made  out,  for  there  is  only  the  naked  fact  that  the  plaintiff  purchased 
the  notes,  and  as  we  have  seen  there  is  no  reported  case  which  holds 
that  where  such  purchase  is  made  without  actual  knowledge  by  the 
defendant  that  an  implied  warranty  is  established. 

It  is  true  that  some  of  the  cases  to  which  we  have  referred  hold  that 
express  representations  are  not  necessary  to  establish  a  case  and  fix 
a  liability,  but  in  all  of  those  where  the  notes  were  affected  by  usury 
the  evidence  showed  that  such  fact  was  known  to  the  defendant.  The 
case  of  a  forged  instrument,  as  we  have  seen,  rests  upon  a  different 
principle,  viz. :    That  the  note  is  no  note,  and  hence  none  of  the  cases 


646  LIABILITY  OF  PARTIES.  (Part  3 

cited  aid  the  plaintiff.  The  doctrine  that  an  action  can  be  maintained 
to  recover  back  the  purchase  price  paid  under  a  contract  of  sale  of 
personal  property,  without  proof  of  warranty  or  fraud,  where,  upon 
delivery  of  the  property,  it  proves  utterly  valueless,  and  where  an 
offer  to  return  has  been  made  and  refused,  which  is  held  in  Stone  v. 
Frost,  61  N.  Y.  61-4,  is  scarcely  applicable  to  negotiable  paper  which 
must  be  governed  by  entirely  a  different  rule.  In  the  latter  case,  w^here 
the  transfer  is  made  without  indorsement,  it  is  not  unreasonable  to 
suppose  that  certain  liabilities  did  not  enter  into  the  consideration  of 
the  transfer,  and  had  it  been  so  intended  some  agreement  would  have 
been  made  in  regard  to  the  same. 

The  authorities  cited  in  Parsons  on  Contracts,  supra,  in  the  note, 
to  uphold  the  rule  stated  that  there  is  an  implied  warranty  that  the 
parties  are  under  no  incapacity  to  contract,  do  not  sustain  the  doctrine 
laid  down  in  the  text.  In  Lobdell  v.  Baker,  1  Mete.  (Mass.)  193, 
35  Am.  Dec.  358,  and  3  Mete.  (Mass.)  469,  the  note  was  indorsed 
by  a  minor,  and  the  action  was  for  deceit  in  procuring  the  minor  to 
indorse  it,  and  then  putting  it  in  circulation.  Knowledge  was  a  neces- 
sary ingredient  of  the  plaintiff's  action,  and  hence  the  case  cited  is 
not  in  point.  In  Thrall  v.  Newell,  19  Vt.  202,  47  Am.  Dec.  682,  where 
the  note  was  invalid,  as  one  of  the  signers  of  the  same  was  insane, 
and  had  successfully  defended  on  that  ground,  the  case  turned  some- 
what upon  the  construction  to  be  given  to  a  written  assignment  to  the 
plaintiff,  which  it  was  held  must  be  construed  as  an  express  warranty 
on  the  part  of  the  defendant  that  it  was  a  valid  note,  and  that  the 
signers  were  of  sufficient  capacity  to  contract,  and  although,  in  the 
opinion,  the  judge  was  inclined  to  think  that  there  was  a  warranty  im- 
plied by  law  from  the  sale  of  the  note,  that  question  was  not  in  the 
case ;  nor  do  the  text-books  sustain  the  doctrine  as  stated  in  Parsons 
in  reference  to  incapacity. 

In  Story  on  Promissory  Notes,  §  118,  it  is  said  that  the  holder  war- 
rants by  implication,  unless  otherwise  agreed,  that  he  is  the  lawful 
holder  and  has  title;  that  the  instrument  is  genuine,  and  not  forged 
or  fictitious ;  that  he  has  no  knowledge  of  facts  which  prove  the  in- 
strument, if  originally  valid,  to  be  worthless,  either  by  a  failure  of 
the  maker,  or  by  its  being  paid,  or  otherwise  to  have  become  void  or 
defunct. 

In  Chitty  on  Bills,  p.  245,  it  is  laid  down  that  where  a  person  ob- 
tains money  on  a  note,  and  it  turns  out  to  be  forged,  he  is  liable  to 
refund  the  money  to  the  party  from  whom  he  received  it,  on  the 
ground  that  there  is,  in  general,  an  implied  warranty  that  the  instru- 
ment is  genuine.  Again,  at  page  247,  it  is  said :  "If  a  man  assign  a 
bill  for  any  sufficient  consideration,  knowing  it  to  be  of  no  value, 
and  the  assignee  be  not  aware  of  the  fact,  the  former  would  in  all 
cases  be  compellable  to  repay  the  money  he  had  received."  It  is  knowl- 
edge of  the  defect  which  renders  the  party  liable  for  a  note  which  is 
of  no  value,  and  this  rule  applies  to  a  note  which  is  tainted  with  usury. 


Ch.  3)  TRANSFERROR.  647 

In  Ferns  v.  Harrison,  3  D.  &  E.  757,  the  same  rule  was  laid  down. 
In  the  case  last  cited  the  holder  of  a  bill  of  exchange  desired  to  get 
it  discounted,  but  refused  to  indorse  it,  and  delivered  it  to  another 
party,  who  passed  it  oflf  for  that  purpose  to  a  third  party,  informing 
him  to  whom  it  belonged,  and  such  last-named  party  disposed  of  It 
by  indorsing  it,  being  prevailed  upon  to  do  so  by  the  person  who  de- 
Hvered  it  to  him.  Although  the  original  owner  afterward  promised 
to  pay  the  bill,  it  was  held  that  such  promise  cannot  support  an  action 
brought  against  him  by  the  indorser.  Lord  Kenyon  says:  "It  is 
extremely  clear  that  if  the  holder  of  a  bill  sends  it  to  market  without 
indorsing  his  name,  neither  morality  nor  the  laws  of  this  country 
will  compel  him  to  refund  the  money  for  which  he  sold  it,  if  he  did 
not  know  at  the  time  that  it  was  not  a  good  bill.  If  he  knew  the  bill 
to  be  bad,  it  would  be  like  sending  out  a  counterfeit  into  circulation 
to  impose  upon  the  world  instead  of  current  coin.  In  this  case,  if 
the  defendant  had  known  the  bill  to  be  bad,  there  is  no  doubt  that  he 
would  have  been  obliged  to  refund  the  money."  See,  also,  Byles  on 
Bills,  158,  159;    Story  on  Bills,  §  111;   Edwards  on  Bills,  191. 

In  Lambert  v.  Heath,  15  M.  &  W.  485,  the  defendant,  a  share 
broker,  bought  for  the  plaintiff  scrip  certificates,  which  were  sold  in 
the  share  market,  at  a  premium,  as  "Kentish  Coast  Railway  Scrip," 
and  were  signed  by  the  secretary  of  the  railway  company.  The 
genuineness  of  the  scrip  was  denied  afterwards  by  the  directors,  who 
alleged  that  it  was  issued  without  authority.  In  an  action  brought 
to  recover  back  the  price  on  the  ground  that  it  was  not  genuine,  it  was 
held  that  it  was  a  proper  question  for  the  jury  whether  what  the  de- 
fendant intended  to  buy  was  that  which  was  sold  in  the  market  as 
such  scrip.  Alderson,  B.,  said:  "It  appears  that  it  was  signed  by 
the  secretary  of  the  company;  and  if  this  was  the  only  Kentish  rail-i 
Vv^ay  scrip  in  the  market,  as  appears  to  have  been  the  case,  and  one 
person  chooses  to  sell  and  another  to  buy  that,  then  the  latter  has  got 
all  he  contracted  to  buy."  The  scrip  was  of  no  value,  because  it  was 
not  genuine,  as  the  note  here  is  worthless,  by  reason  of  the  usury. 
The  same  principle  is  applicable  in  both  cases,  and  the  plaintilif  cannot 
recover  unless  it  is  made  to  appear  that  the  plaintiff  intended  to  pur- 
chase and  the  defendant  to  sell  the  note  without  the  alleged  defect. 

In  Hall  V.  Conder,  26  L.  J.  (C  P.)  138,  an  action  was  brought  to 
recover  money  agreed  to  be  paid  upon  the  sale  of  an  interest  in  a 
patent  right.  One  of  the  pleas  interposed  to  the  declaration  was  that 
the  invention  was  not  new  in  England,  and  was  worthless,  and  the 
plaintiff  was  not  the  first  inventor.  To  that  there  was  a  demurrer,  and 
it  was  held  that  there  was  in  the  agreement  no  warranty,  express  or 
implied,  that  the  patent  was  indefeasible,  and  no  fraud  being  alleged, 
and  the  defendant  having  the  same  means  of  knowledge  as  to  the 
novelty  and  value  of  the  patent  as  the  plaintiff,  the  plea  was  bad.  The 
rule  is  laid  down  by  Caswell,  J.,  that  on  the  sale  of  a  known  ascertain- 
ed article  there  is  no  implied  warranty  of  its  quality. 


C4S  LIABILITY    OF    PAUTIES.  (Pait   3 

The  examination  we  have  made  of  the  question  shows  that  the  law 
in  regard  to  the  transfer  of  negotiable  bills  of  exchange  and  promis- 
sory notes,  as  laid  down  for  a  century  or  more,  only  excepts  two 
cases  as  coming  within  the  doctrine  of  an  implied  warranty,  viz.,  a 
warranty  of  title,  and  that  the  instrument  is  genuine  and  not  forged. 
There  is  no  precedent  and  not  a  single  reported  case  in  the  books  in 
favor  of  the  doctrine  that  where  a  promissory  note  is  infected  with 
usury,  and  that  fact  is  unknown  to  the  party  who  transferred  it,  that 
is  an  implied  warranty  of  the  validity  of  the  note.  To  uphold  such  a 
doctrine  would  be  an  innovation  upon  a  settled  principle  of  law  and 
the  establishing  of  a  new  and  different  rule  from  that  which  has 
governed  the  sale  and  transfer  of  this  species  of  property  for  a  long 
period  of  time.  It  is  at  least  exceedingly  doubtful  whether  it  would 
be  expedient  to  inaugurate  a  new  and  questionable  rule  of  conduct 
for  the  government  of  transactions  of  this  description,  even  if  the 
law  permitted  it  to  be  done.  The  hardship  which  may  fall  upon  the 
plaintiff  by  the  purchase  of  the  paper  in  question  may  operate  quite 
as  harshly  on  tiie  defendant,  as  the  assumption  is  that  he  had  no  knowl- 
edge of  the  inherent  vice  which  affected  the  note.  It  is  difficult  to 
apply  the  rules  of  law  in  all  cases  with  exact  justice.  In  fact,  if  the 
rule  be  as  the  authorities  hold,  and  as  should  be  if  it  is  not  well  un- 
derstood, that  the  purchaser  of  paper  of  this  description  takes  it  at 
his  own  hazard  and  risk  without  any  warranty,  unless  he  chooses  to 
require  such  an  indemnity  and  makes  it  a  part  of  the  contract  no  seri- 
ous inconvenience  or  injury  can  follow.  The  doctrine  of  caveat  emp- 
tor applies,  and  the  fault  is  with  the  person  who  fails  to  exact  a  war- 
ranty, if  it  turns  out  that  he  has  been  mistaken  or  has  unfortunately 
made  an  unprofitable  or  a  bad  bargain.  Neither  party  has  any  just 
ground  of  complaint  in  such  a  case. 

The  result  is  that  the  judgment  was  wrong  and  must  be  reversed, 
with  leave  to  the  plaintiff  to  amend  his  complaint  upon  the  usual  terms 
in  such  cases.     All  concur,  except  E.vrl,  J.,  dissenting. 

Judgment  accordingly,'' 

5  Contra:     Giffert  v.  West.  33  Wis.  617  (1S73). 

"There  is  an  exceptional  case.  Littauer  v.  Goldman,  72  N.  Y.  506.  28  Am. 
Rep.  171  (lS7St.  which  holds  that  the  common-law  obligation,  as  to  the  implied 
warranty  of  identity  in  the  thing  sold,  in  the  case  of  commercial  paper,  ex- 
tends only  to  the  gennineuess  of  the  instrnineut.  The  case  was  one  involv- 
ing the  nullity  of  a  usiu-ious  note,  and.  if  correctly  decided,  would  be  author- 
ity ifor  the  proposition  that  there  was  a  peculiar  species  of  warranty  in  the 
sale  of  commercial  paper,  differing  from  all  others;  in  other  words,  that 
there  was  a  law  merchant  of  warranty  where  there  was  no  commercial  con- 
tract. The  opinion  in  this  case  illustrates  the  same  contradictory  position 
presented  here  by  the  argument  of  the  defendant  in  error,  to  which  we  have 
just  called  attention ;  that  is,  that  it  admits  the  common-law  rule  and  then 
denies  its  essential  result  by  eliminating  conditions  of  nonexistence  which 
are  necessarily  embraced  by  it.  It  follows  that  this  New  York  decision  leads 
logically  to  the  view  expressed  in  the  Maine  and  Maryland  cases  just  re- 
ferred to.  for  either  the  principle  of  warranty  of  identity  must  be  accepted 
or  rejected.  It  cannot  be  accejited,  and  its  legitimate  and  inevitable  results 
De  denied.     The  rule  there  announced  was  in  conflict  with  previous  decisions 


Ch.  3)  TRANSPBKROU.  649 


PACKARD  et  al.  v.  WINDHOLZ. 

(Supreme  Court,  Appellate  Division,  Fourth  Department,  New  York,  1903.    88 
App.  Div.  365,  84  N.  Y.  Supp.  6GG.) 

Spring,  J.  Adolph  Truman  made  his  promissory  note  for  $50, 
dated  July  31,  1902,  to  the  order  of  C.  D.  Eaton,  and  due  in  three 
months  from  its  date.  The  maker  forged  the  indorsement  of  Eaton, 
who  was  his  father-in-law,  to  the  note,  and  then  procured  the  defend- 
ant to  indorse  the  same.  The  note,  with  these  two  indorsements  ap- 
pearing upon  it,  was  presented  to  the  plaintiffs,  who  were  note  bro- 
kers, to  be  by  them  negotiated  for  the  benefit  of  Truman.  The  plain- 
tiffs obtained  one  Packelnisky  to  indorse  it,  and,  after  indorsing  it 
themselves,  sold  it  to  the  New  York  State  Banking  Company  for  $55, 
and  turned  over  the  avails  to  the  maker.  The  defendant  and  those 
subsequent  to  him  believed  the  indorsement  of  Eaton  was  genuine, 
and  the  plaintiffs  learned  he  was  responsible.  The  banking  company 
soon  after  suspended  business,  and  before  the  maturity  of  the  note 
it  was  taken  up  by  the  plaintiffs. 

The  maker  also  presented  to  the  plaintiffs  a  note  of  $120,  bearing 
the  apparent  indorsement  of  Eaton  and  the  genuine  signature  of  the 
defendant  on  its  back,  and  this  was  put  in  circulation  for  the  benefit 
of  Truman,  and  purchased  by  the  plaintiffs  before  maturity,  the 
same  as  the  note  above  described.  The  latter  note,  when  indorsed  by 
the  defendant,  was  $20,  and  was  fraudulently  raised  to  $120  before 
it  was  presented  to  the  plaintiffs.  The  notes  were  duly  protested  for 
nonpayment,  and  due  notice  thereof  given  to  the  defendant.  The 
plaintiffs  have  been  allowed  to  recover  on  the  first  note,  and  $20  on 
the  second  note. 

The  defendant,  by  his  contract  of  indorsement,  guaranteed  the  gen- 
uineness of  the  signature  of  Eaton,  the  prior  indorser  on  each  note, 
and  that  the  note  was  a  "valid  and  subsisting"  obligation.  Neg.  Inst. 
Law  (chapter  612,  p.  734,  Laws  1897)  §  116;  Lennon  v.  Grauer.  159 
N.  Y.  433,  54  N.  E.  11;  Erwin  v.  Downs,  15  N.  Y.  575.  The  de- 
fendant expected  that  the  note  was  to  be  negotiated  for  the  benefit 
of  the  maker.  He  indorsed  at  his  request,  and  the  note  was  put  in 
circulation  not  only  within  the  legal  contemplation  of  the  contract  of 
indorsement  entered  into  by  the  defendant,  but  as  he  in  fact  intended. 
To  be  sure,  the  plaintiffs  knew  the  note  was  to  be  used  for  the  benefit 
of  the  maker,  and  that  the  defendant  indorsed  for  his  accommoda- 
tion. These  circumstances  do  not  relieve  the  indorser  from  the  effect 
of  his  contract.  Neg.  Inst.  Law  (Laws  1897,  p.  727,  c.  612)  §  50,  and 
section  55,  as  amended  by  Laws  1898,  c.  336.    One  cannot  enter  into 

in  New  York,  and  the  decision  is  strongly  criticised  by  the  Court  of  Errors 
and  Appeals  of  New  Jersey  in  Wood  v.  Sheldon,  42  N.  J.  Law.  421,  425,  3G  Am. 
Rep.  523."  Meyer  v.  Richards,  103  U.  S.  385.  411,  16  Sup.  Ct.  1148,  41  L.  Ed. 
199  (1896). 


650  LIABILITY  OF  PARTIES.  (Part  3 

this  contract,  knowing  that  he  is  indorsing  solely  for  the  benefit  of 
another,  and  then  shield  himself  from  the  enforcement  of  the  agree- 
ment because  the  purchaser  is  apprised  that  the  indorsement  is  without 
actual  consideration.  Such  a  construction  of  the  contract  of  indorse- 
ment would  impair  materially  the  transfer  of  commercial  paper,  and 
nullify  the  effect  of  the  contract. 

The  plaintiffs  negotiated  the  notes  without  any  knowledge  or  sus- 
picion of  any  infirmity  in  them.  They  then  purchased  them  before 
maturity  from  a  bona  fide  holder,  still  without  any  information  as  to 
any  vice  in  them.  They  are  holders  in  good  faith.  Neg.  Inst.  L,aw 
(Laws  1897,  pp.  732,  733,  c.  612)  §§  91,  95-98. 

The  judgment  should  be  affirmed,  with  costs.' 

«  Affirmed  180  N.  Y.  54t>,  73  N.  E.  1129  (1905).  Accord:  Willard  v.  Crooke. 
21  App.  D.  O.  238  (1903) ;  Leonard  v.  Draper,  187  Mass.  536,  73  N.  E.  644 
(1905). 


PART  IV 
DISCHARGE 


SECTION  1.— PAYMENT  AND  RENUNCIATION 


DE  SILVA  V.  FULLER. 

(Nisi  Prius,  1776.     1  Cliitty,  Jr.  392.) 

Trover  for  a  bill,  draft,  or  check,  drawn  by  one  Cox  on  the  de- 
fendants, who  were  bankers,  payable  to  "No.  437,  or  bearer,  on  de- 
mand." It  was  drawn  the  17th  June,  but  dated  the  18th.  On  the 
17th  the  plaintiff  received  it,  that  day  he  lost  it,  and  the  same  day 
(the  17th)  it  was  presented  to  the  defendants,  who  paid  it.  ^t^was 
proved^JxiJje  contrary  to  the  usual  j:ourse_of  business  to  pa^  drafts 
beforeJ±Le  .da^^g"  wliich  they  were  dated,  and  on  that  ground  the 
plaintiff  had  avercHcf? 


BURBRIDGE  v.  MANNERS. 

(Nisi  Prius,  1812.     3  Camp.  19.3.) 

This  was  an  action  on  a  promissory  note  for  £101. 15s.  5d.  dated 
11th  October,  1810,  drawn  by  J.  Finney,  payable  three  months  after 
date  at  Eraser  &  Co.'s  to  the  defendant,  indorsed  by  him  to  one  Tinson 
and  by  Tinson  to  the  plaintiff. 

The  note  was  regularly  presented  for  payment  in  the  forenoon  of 
the  day  it  became  due,  when  payment  was  refused ;  and  in  the  after- 
noon of  the  same  day  the  plaintiff'  caused  notice  of  its  dishonor  to  be 
sent  to  the  defendant. 

Park,  for  the  defendant,  objected  that  this  was  not  sufficient  notice 
of  the  dishonor.  Finney,  the  maker  of  the  note,  had  the  whole  of  the 
day  it  became  due  to  pay  it,  and  till  the  last  minute  of  that  day  it 
could  not  be  considered  as  dishonored.  The  notice  therefore  stated 
what  was  untrue,  and  was  evidently  premature. 

Lord  EllenborouGH.  I  think  the  note  was  dishonored  as  soon  as 
the  maker  had  refused  payment  on  the  day  when  it  became  due,  and 
the  notice  sent  to  the  defendant  must  have  answered  all  the  purposes 
for  which  notice  in  such  cases  is  required.  The  holder  of  a  bill  or 
note  gives  notice  of  its  dishonor  in  reasonable  time  the  day  after  it  is 

(C51) 


652  DISCHARGE.  (Part  4 

due;  but  he  may  give  such  notice  as  soon  as  it  has  been  dishonored 
the  day  it  becomes  due,  and  the  other  party  cannot  complain  of  the 
extraordinary  diligence  used  to  give  him  information. 

By  the  defendant's  evidence  it  appeared  that  this  bill,  being  in  the 
hands  of  Maude  &  Co.,  was  paid  in  by  them  when  indorsed  only  by  the 
defendant  to  their  bankers,  Masterman  &  Co.,  who  were  to  present  it 
for  payment.  Maude  &  Co.  had  received  it  from  Finney,  the  maker, 
as  a  collateral  security  for  an  acceptance  of  his,  then  in  their  hands 
overdue.  On  the  10th  of  January,  four  days  before  the  note  was  due, 
some  person  unknown  came  to  Masterman  &  Co.'s,  where  it  lay,  paid 
it.  and  carried  it  away  without  its  being  canceled,  or  any  memorandum 
being  made  upon  it.  However,  it  had  been  indorsed  by  Tinson,  and 
had  come  into  the  hands  of  the  plaintiff,  before  it  was  due. 

Park  contended  that  after  the  bill  had  been  once  paid,  it  could  not 
be  reissued,  and  he  relied  upon  Beck  v.  Robley,  1  H.  Bl.  89,  note. 

Lord  Ellenborough.  Payment  means  payment  in  due  course,  and 
not  by  anticipation.  Had  the  bill  been  due  before  it  came  into  the 
the  plaintiff's  hands,  he  must  have  taken  it  with  all  its  infirmities. 
In  that  case  it  would  have  been  his  business  to  inquire  minutely  into 
its  origin  and  history.  But  receiving  it  before  it  was  due,  there  was 
nothing  to  awaken  his  suspicion.  I  agree  that  a  bill  paid  at  maturity 
cannot  be  reissued,  and  that  no  action  can  afterwards  be  maintained 
upon  it  by  a  subsequent  indorsee.  A  payment  before  it  becomes  due, 
however,  I  think  does  not  extinguish  it  any  more  than  if  it  were  merely 
discounted.  A  contrary  doctrine  would  add  a  new  clog  to  the  circula- 
tion of  bills  of  exchange  and  promissory  notes ;  for  it  would  be  im- 
possible to  know  whether  there  had  not  been  an  anticipated  payment 
of  them.  It  is  the  duty  of  bankers  to  make  some  memorandum  on 
bills  and  notes  which  have  been  paid ;  but  if  they  do  not,  the  holder? 
of  such  securities  cannot  be  affected  by  any  payment  made  before 
they  are  due.  While  a  bill  of  exchange  is  running,  it  remains  in  a 
negotiable  state.  I  cannot  limit  its  negotiability  the  last  four  davs 
before  it  becomes  due  more  than  the  first  four  days  after  it  is  drawn. 

Verdict  for  the  plaintiff. 


THOROGOOD  v.  CLARKE. 

(Nisi  Prius,  1817.     2  Starkie,  251.) 

This  was  an  action  by  the  indorsee  against  the  acceptor  of  a  bill  of 
exchange,  dated  29th  of  July,  1S15,  drawn  by  Powys  on  the  defend- 
ant, for  the  sum  of  £-10.,  payable  two  months  after  date,  to  the  order 
of  the  drawer,  and  by  him  indor.sed  to  the  plaintiff. 

Upon  the  evidence  for  the  defendant,  it  appeared,  that  when  the  bill 
became  due.  it  was  in  the  hands  of  Cripps  &  Co.,  the  bankers  of  Po- 
wys; and  that  on  the  26th  of  October,  some  time  after  the  bill  had 
been  due,  Powys  gave  the  defendant,  after  a  settlement  of  the  ac- 


Sec.  1)  PAYMENT    AND    RENUNCIATION.  653 

counts  between  them,  a  receipt  in  full  of  all  demands ;  and  that  after 
this,  the  bill  was  in  Powys'  hands,  for  several  months  after  having 
been  refused  payment. 

Peake,  for  the  plaintiff,  insisted  that  this  was  not  a  sufficient  answer, 
since  it  was  not  shown  that  the  bill  had  been  indorsed  to  the  plaintiff, 
after  it  became  due ;  but, 

Lord  ElIvENborough  held,  that  since  Powys,  who  the  26th  of  Oc- 
tober, gave  a  receipt  in  full  of  all  demands,  could  not  have  sued  upon 
the  bill,  which  was  due  on  the  2d  of  October,  the  plaintiff  could  derive 
no  title  from  him. 

Verdict  for  the  defendant.^ 


JOHNSON  et  al.  v.  WINDLE  et  al. 
(Court  of  Common  Pleas,  1836.     3  Bing.  N.  C.  22.5.) 

This  was  an  action  of  trover  to  recover  the  value  of  the  promissory 
note,  set  out  as  follows : 

"Milford  Wharf,  London,  30th  March,  1835. 

"Sixty  days  after  date,  we  promise  to  pay  C.  Johnson  &  Sons,  or 
order,  i30.  value  received  in  coals,  ex  ship  Two  Brothers,  at  Messrs. 
Gosling  &  Sharpe.  W.  &  C.  Windle." 

The  declaration  was  in  the  usual  form,  and  alleged  that  the  plaintiffs 
were  lawfully  possessed  of  the  note  as  of  their  own  property. 

The  defendants  pleaded,  first,  not  guilty ;  secondly,  that  the  plain- 
tiffs were  not  lawfully  possessed  as  of  their  own  property  of  the  said 
promissory  note  in  manner  and  form  as  the  declaration  alleged. 

Upon  these  pleas  issues  were  joined. 

By  order  of  a  judge,  and  consent  of  the  parties,  the  following  facts 
were  stated  in  a  special  case  for  the  opinion  of  the  court : 

The  defendants  were  the  makers  of  the  promissory  note  above  set 
forth,  and  the  plaintiffs  were  the  payees  therein  mentioned. 

1  In  an  action  by  one  who  had  lost  a  promissory  note  payable  to  bearer 
(in  the  form  of  a  coupon),  against  the  maker,  which  had  paid  it  after 
maturity  to  the  finder,  the  court  said:  "There  is  another  circumstance  in 
this  case  which  tends  to  fix  more  clearly  upon  the  defendant  the  duty  of 
inquiry,  and  that  is  that  the  coupon  was  long  overdue.  The  maker  of  a 
coupon  cannot  be  exempt  from  the  liabilities  which  attach  to  all  negotiable 
instruments  when  overdue.  It  is  an  elementary  principle  of  commercial 
law  that  negotiable  paper  overdue  carries  with  it.  on  its  very  face,  notice  of 
defective  title  sufficient  to  put  the  transferee  on  inquiry.  Gold  v.  Eddy,  1 
Mass.  1;  Vermilye  v.  Adams  Express  Co.,  21  Wall.  138.  22  L.  Ed.  609.  Al- 
though the  application  of  the  simple  rule  to  payment  would  be  practically  of 
rare  occurrence,  since  notice  of  the  loss  or  stealing  would  be  given  in  almost 
every  case,  there  is  no  reason  why  a  distinction  should  be  made  in  this 
respect  between  transfer  and  payment,  and  no  such  distinction  is  consistent 
with  tke  language  of  Chief  Justice  Shaw  in  Wheeler  v.  Guild  [20  Pick.  545, 
32  Am.  Dec.  231],  before  cited.  After  maturity,  a  coupon,  like  any  other 
negotiable  security,  loses  the  protection  of  the  law  merchant,  and  becomes  a 
mere  chose  in  action.  There  is  no  presumption  of  law  that  the  party  pre- 
senting such  a  chose  in  action  to  the  party  liable  to  pay  is  the  true  holder." 
Hinckley  v.  U.  P.  R.  II.,  129  Mass.  52,  60,  37  Am.  Rep.  297  (1880). 


054  DISCHARGE.  (Part  4 

The  note  in  question  was  made  and  drawn  by  the  defendants  on  the 
day  of  its  dale,  and  delivered  by  them  to  the  plaintitls  in  the  usual 
course  of  business,  in  part  payment  for  part  of  a  cargo  of  coals  ex 
ship  the  Two  Brothers. 

The  note  was  afterwards  stolen  from  the  plaintiffs ;  and  at  the  time 
it  was  so  stolen  there  was  no  indorsement  upon  it. 

On  the  day  when  it  became  due,  Messrs.  Wilkins  were  holders  of  the 
said  note  for  value,  and  the  same  was  presented  by  a  clerk  of  Messrs. 
Glynn  &  Co.,  bankers  in  London,  on  account  of  the  said  Messrs.  Wil- 
kins to  Messrs.  Gosling  &  Sharpe,  for  payment,  who,  as  the  defend- 
ants' bankers,  paid  the  note  and  debited  the  defendants'  account  with 
the  sum  paid.  The  note  was  afterwards  handed  over  to  the  defend- 
ants, in  whose  possession  it  still  remained. 

Upon  the  delivery  of  the  note  to  the  defendants  by  Messrs.  Gosling 
&  Sharpe,  and  whilst  it  remained  in  the  defendants'  possession,  and 
before  the  commencement  of  this  suit,  the  plaintiffs  demanded  the  note 
of  the  defendants,  but  they  refused  to  give  it  up.  Afterwards  the  pres- 
ent action  was  commenced. 

The  promissory  note  was  never  indorsed  by  the  plaintiffs,  or  by  their 
authority,  nor  was  any  person  ever  authorized  by  them  to  receive  the 
amount  thereof.     At  the  time  when  the  note  was  handed  over  to  the 
defendants,  the  fijllowing  indorsements  appeared  upon  the  back  of  it. 
"By  C.  Johnson  &  Sons  to  Mr.  John  Atkin. 
"John  Atkin. 
"George  Wright." 

All  the  indorsements  on  the  notes  were  forgeries  in  the  handwriting 
of  one  George  Wryghte,  who,  at  the  time  the  note  was  made  and  de- 
livered to  the  plaintiffs,  and  for  some  time  afterwards,  was  a  clerk  in 
their  employ.  The  note  was  stolen  from  the  plaintiff's  by  the  said  G. 
Wryghte.  whilst  he  was  in  their  service. 

The  defendants  had  no  notice  that  the  indorsement  of  "C.  Johnson 
&  Sons"  was  a  forgery  at  the  time  their  bankers,  Messrs.  Gosling  & 
Sharpe,  paid  the  note,  nor  till  six  weeks  afterwards,  when  notice  was 
given  to  the  defendants  of  that  fact  upon  the  plaintiffs'  first  discover- 
ing that  the  note  had  been  stolen. 

If  the  court  upon  the  circumstances  above  stated,  should  be  of  opin- 
ion that  the  plaintiffs  were  entitled  to  the  property,  and  to  the  posses- 
sion of  the  note  when  the  same  was  demanded  as  aforesaid,  and  that 
there  was  sufficient  evidence  of  a  conversion  by  the  defendants,  the 
pleas  were  to  be  withdrawn,  and  judgment  was  to  be  entered  for  the 
plaintiffs  by  confession,  damages  £30.  and  interest,  together  with  their 
costs  and  charges  of  this  suit.     But 

If  the  court  should  be  of  opinion  that  the  plaintiffs  were  not  so  enti- 
tled, or  that  there  was  not  sufficient  evidence  of  a  conversion,  then 
judgment  of  nolle  prosequi  was  to  be  entered.^ 

» Arguments  of  counsel  are  omitted. 


Sec.  1)  PAYMENT    AND    RENUNCIATION.  655 

TiNDAL,  C.  J.  It  would  be  of  most  dangerous  consequence  if  we 
were  to  give  legality  to  a  forged  indorsement  of  a  bill  of  exchange, 
and  that  would  be  the  effect  of  a  judgment  in  favour  of  these  defend- 
ants. 

The  general  rule  is,  that  no  title  can  be  obtained  through  a  forgery. 
Here  the  indorsement  upon  the  bill  has  been  forged,  and  the  only 
ground  which  has  been  urged  to  take  the  case  out  of  the  general  rule, 
is,  that  there  has  been  such  gross  negligence  in  the  plaintiffs  as  to  di- 
vest them  of  any  remedy  against  the  defendants.  But  for  aught  that 
appears  on  this  case  they  may  have  acted  with  sufficient  caution  to  ex- 
clude any  such  ground  of  defense.  If  such  negligence  were  to  be  the 
defense  relied  on,  it  should  have  been  stated  in  the  case. 

Gasele^e,  J.  In  the  case  relied  on  for  the  defendants,  it  was  ex- 
pressly found  that  there  had  been  gross  negligence  on  the  part  of  the 
plaintiff. 

Vaughan,  J.  The  plaintiffs  have  fulfilled  all  the  requisites  to  en- 
able them  to  maintain  an  action  of  trover;  and  no  fact  is  stated  from 
which  negligence  can  be  inferred.  It  differs  therefore  entirely  from 
the  case  in  which  negligence  was  expressly  found. 

Bosanouet,  J.  I  am  of  the  same  opinion.  This  instrument  on  the 
face  of  it,  was  marked  as  the  property  of  the  plaintiffs.  By  an  indorse- 
ment which  is  a  nullity,  it  has  found  its  way  into  the  hands  of  the  de- 
fendants. It  has  been  demanded  of  them,  and  refused;  and  that  af- 
fords sufficient  ground  for  an  action  of  trover. 

Judgment  for  plaintiffs. 


MORLEY  V.  CULVERWELL. 

(Court  of  EJxchequer,  1840.     7  Mees.  &  W.  174.) 

Assumpsit  by  indorsee  against  drawer  of  a  bill  of  exchange  for 
£100.,  dated  7th  of  March,  1840,  drawn  by  the  defendant  on  and  ac- 
cepted by  Thomas  G.  C.  Riley,  payable  to  the  order  of  the  defendant 
three  months  after  date,  indorsed  by  the  defendant  to  John  Short,  and 
by  Short  to  the  plaintiff.  The  defendant  pleaded  nine  pleas,  of  which, 
however,  the  seventh  and  ninth  only  are  material  to  this  report. 

The  seventh  plea  stated  that  after  the  drawing  and  accepting  of  the 
bill  of  exchange  in  the  declaration  mentioned,  and  before  the  delivery 
of  the  same  to  the  said  T.  G.  C.  Riley,  before  the  same  became  due 
and  payable,  and  before  the  commencement  of  this  suit,  and  while  the 
defendant,  as  such  drawer  as  aforesaid,  was  the  holder  thereof,  and 
entitled  to  sue  upon  the  same,  to  wit,  on  the  20th  of  April,  1840,  it  was 
agreed  between  the  defendant  and  Riley,  that  he,  Riley,  should  exe- 
cute a  certain  indenture,  and  thereby  assign  by  way  of  mortgage  cer- 
tain leasehold  premises  to  the  defendant,  to  secure  the  payment  of  a 
large  sum  of  money,  to  wit,  £853.,  part  of  which,  to  wit,  the  sum  of 
£703.,  was  theretofore  lent  and  advanced  by  the  defendant  to  Riley,  and 


056  DISCHARGE.  (Part  4 

for  part  of  which  Riley,  before  the  said  20th  of  April,  1840,  gave  to 
the  defendant  certain  bills  of  exchange,  drawn  by  the  defendant  on 
Riley,  and  accepted  by  him  [stating  four  bills  of  exchange,  one  of 
which  was  the  bill  mentioned  in  the  declaration]  ;  and  that  the  defend- 
ant should  deliver  up  to  Riley  the  said  four  bills  of  exchange,  that  is 
to  say,  the  three  bills  of  exchange  in  this  plea  mentioned,  and  the  said 
bill  of  exchange  in  the  declaration  mentioned,  as  discharged  and  fully 
satisfied  by  the  said  T.  G.  C.  Riley.  Averment,  that  in  pursuance  of 
the  said  agreement,  the  said  mortgage  was  executed  by  Riley,  and  ac- 
cepted and  received  by  the  defendant  in  discharge  and  satisfaction  of 
the  said  four  bills  of  exchange,  and  thereupon  the  said  bills  respectively 
were  given  up  and  delivered  to  Riley,  as  paid  and  fully  satisfied  by 
him,  Riley,  the  acceptor  thereof,  and  not  for  the  purpose  of  being 
transferred,  indorsed,  or  otherwise  negotiated;  that  the  said  bill  in 
the  declaration  mentioned  was  indorsed  and  delivered  by  Riley  to 
Short,  without  any  consideration  or  value  for  the  same,  and  without 
any  authority  or  sanction  from  the  defendant,  as  drawer  thereof,  and 
that  Short  indorsed  and  delivered  it  to  the  plaintiff  without  any  con- 
sideration or  value  for  the  same,  and  the  plaintiff  now  holds  the  same 
without  having  given  any  consideration  or  value  for  the  same.  Veri- 
fication. 

The  ninth  plea  stated  that  the  said  bill  of  exchange  was  and  is  an 
instrument  or  bill  liable  to  the  charges  and  duty  imposed  by  the  statute 
in  such  case  made  and  provided,  and  that  the  said  bill  afterwards,  and 
after  the  drawing  and  accepting  thereof,  and  before  the  same  became 
due,  to  wit,  on,  etc.,  was  fully  paid  and  satisfied  by  the  said  T.  G.  C. 
Riley,  and  was  then,  to  wit,  on,  etc.,  and  after  the  said  bill  had  been 
so  fully  paid  and  satisfied  by  Riley,  according  to  the  statutes  in  such 
case  made  and  provided,  without  any  new  stamp,  or  the  payment  of 
any  rate  of  duty  chargeable  thereon,  reissued  by  the  said  T.  G.  C.  Ri- 
ley. Verification.  To  each  of  these  pleas  the  plaintiff  replied  de  in- 
juria, on  which  issue  was  joined. 

At  the  trial  before  Lord  Abinger,  C.  B.,  at  the  last  assizes  for  the 
county  of  Surrey,  the  delivery  up  of  the  bills  by  the  defendant  to  Riley, 
the  acceptor,  on  his  executing  a  mortgage,  was  proved  as  stated  in  the 
seventh  plea.  It  appeared  also  that  Riley,  before  the  bill  in  question 
became  due,  indorsed  it  to  Short  for  a  valuable  consideration,  who  al- 
so, before  it  became  due,  indorsed  it  for  a  valuable  consideration  to  the 
plaintiflF.  It  was  not  proved  that  the  plaintifif  had  any  knowledge  of 
the  circumstances  under  which  the  bill  had  been  negotiated  by  Riley. 
The  learned  Chief  Baron  thought  that  the  seventh  and  ninth  pleas 
were  proved  in  substance,  and  directed  a  verdict  on  those  issues  for 
the  defendant,  leave  being  reserved  to  the  plaintiflF  to  move  to  enter  a 
verdict  for  him,  with  £102.  damages.  The  plaintiflF  obtained  a  rule 
nisi  accordingly.^ 

«  Arguments  of  counsel  are  omitted. 


Sec.  1)  PAYMENT  AND  UENUNCIATION.  657 

Lord  Abinger,  C.  B.  I  am  of  opinion  that  this  rule  ought  to  be 
made  absolute.  On  the  trial,  it  struck  me  that  the  pleas  were  substan- 
tially proved ;  but  upon  consideration  I  am  satisfied  that  I  was  wrong. 
I  think,  under  the  circumstances,  the  seventh  plea  could  not  be  sup- 
ported, unless  the  allegation,  that  the  plaintiff  took  the  bill  without  any 
consideration  or  value,  was  proved.  It  seems  to  me  that  was  an  es- 
sential part  of  the  plea,  in  order  to  make  out  the  defense.  As  to  the 
last  plea,  I  think  it  is  bad  in  point  of  law ;  but  the  question  now  is, 
whether  it  was  proved  or  not.  It  is  bad,  on  the  ground  that  it  does 
not  allege  a  payment  in  satisfaction  of  the  bill,  after  it  became  due. 
But  even  supposing  that  payment  by  the  acceptor  in  satisfaction  of  the 
bill,  before  it  became  due,  were  a  good  answer  in  point  of  law  to  an 
action  by  an  indorsee,  the  plea  was  not  proved ;  because  upon  this  is- 
sue the  plaintiff  had  a  right  to  expect  proof  of  actual  payment  in  money, 
not  of  a  mere  accord  and  satisfaction.  If  the  bill  were  satisfied  other- 
wise than  by  payment  in  money,  the  plaintiff  had  a  right  to  expect  that 
the  particular  kind  of  satisfaction  should  be  set  forth  in  the  plea. 
Proof  of  payment,  therefore,  was  essential  to  support  this  plea ;  and 
that  not  having  been  given,  the  defendant  cannot  maintain  his  verdict 
upon  it. 

With  respect  to  the  more  general  question  which  arises  in  this  case, 
I  am  now  satisfied,  after  some  doubt,  that  the  plaintiff  is  entitled  to 
recover.  The  defendant,  the  drawer  of  the  bill,  agrees  with  the  accept- 
or, while  it  is  running,  to  deliver  it  up  to  him,  in  consideration  of  his 
having  the  security  of  a  mortgage  of  property  of  the  acceptor ;  and 
gives  up  the  bill  accordingly,  without  striking  out  his  name  as  drawer. 
Before  the  bill  becomes  due,  a  party  who  is  ignorant  of  this  transac- 
tion discounts  it  for  the  acceptor,  and,  before  it  becomes  due,  transfers 
it  for  value  to  the  plaintiff,  who  is  also  ignorant  of  the  transaction. 
The  question  then  is,  whether  the  discharge  of  a  bill  by  the  acceptor, 
by  an  arrangement  with  the  drawer  before  it  is  due,  can  aft'ect  the  bill 
in  the  hands  of  an  innocent  holder  for  valuable  consideration.  I  think 
it  cannot.  The  contract  of  the  drav^er  and  of  each  indorser  is,  that 
the  bill  shall  be  paid  by  the  acceptor  at  its  maturity — not  before  it  is 
due;  that  it  shall  be  paid,  as  Mr.  Peacock  has  observed,  according  to 
its  tenor  and  effect — that  is,  when  it  becomes  due.  If,  upon  its  being 
discharged  before  it  becomes  due.  the  drawer  inadvertently  leaves  his 
name  upon  the  bill,  he  is  but  in  the  ordinary  case  of  a  party  who  has  a 
bill  in  negotiation  with  his  name  upon  it,  against  his  intention.  It  is 
in  the  hands  of  an  innocent  holder,  who  has  no  notice  that  it  has  been 
discharged.  Suppose  mutual  accommodation  acceptances  to  be  given, 
and  to  be  exchanged  before  they  have  been  negotiated,  the  names  re- 
maining on  them  ;  the  parties  may  circulate  them  so  as  to  give  a  title 
to  a  bona  fide  holder,  before  they  become  due.  And  wherein  does  this 
case  differ  from  that?  Therefore,  a  bill  is  not  properly  paid  and  satis 
fied  according  to  its  tenor,  unless  it  be  pajd  when  due;  and  conse- 
Sm.&  M.B.&  N.— 42 


658  DISCHARGE.  (Part  4 

quently,  if  it  be  satisfied  before  it  is  due,  by  an  arrangement  between 
the  drawer  and  acceptor,  that  does  not  prevent  the  acceptor  from  ne- 
gotiating it,  or  an  innocent  indorsee  for  value  from  recovering  upon 
it.    The  rule  must  therefore  be  absolute. 

Parke,  B.  I  entirely  concur  with  the  Lord  Chief  Baron,  and  think 
that  in  this  case  neither  of  the  pleas  was  proved.  [His  Lordship  stat- 
ed the  seventh  plea.]  Undoubtedly,  if  all  the  facts  alleged  in  this  plea 
had  been  proved,  they  would  have  amounted  to  a  good  defense ;  be- 
cause the  plaintiff  would  then  have  been  in  the  same  situation  as  Short, 
and  Short  as  Riley,  and  as  to  Riley  the  bill  was  satisfied.  But  in  or- 
der to  establish  the  plea,  it  was  necessary  to  prove  the  two  allegations 
which  put  the  plaintiff  in  the  same  situation  with  Riley,  viz.  that  Riley 
indorsed  to  Short,  and  Short  to  the  plaintiff*,  without  value  or  consid- 
eration ;  whereas  it  was  proved  that  there  was  a  valuable  consideration 
for  both  indorsements.  The  question  therefore  is,  whether  the  fact  of 
the  acceptor  having  satisfied  the  bill  before  it  became  due,  is  any  de- 
fense against  a  bona  fide  indorsee.  I  am  of  opinion  that  nothing  will 
discharge  the  acceptor  or  the  drawer,  except  payment  according  to  the 
law  merchant — that  is,  payment  of  the  bill  at  maturity.  If  a  party 
pays  it  before,  he  purchases  it,  and  is  in  the  same  situation  as  if  he  had 
discounted  it.  The  rule  is  laid  down  correctly  by  Lord  EHenborough, 
in  Burbridge  v.  Manners,  that  a  payment  before  a  bill  becomes  due 
"does  not  extinguish  it,  any  more  than  if  it  were  merely  discounted"; 
and  that  "payment  means  payment  in  due  course,  and  not  by  anticipa- 
tion." The  party  who  takes  a  bill  before  it  becomes  due  has  no  means 
of  knowing  whether  payment  has  been  anticipated  or  not.  The  seventh 
pica,  therefore,  was  not  proved.  As  to  the  cases  that  have  been  cited, 
they  are  all  cases  of  bills  paid  at  maturity,  because  they  were  payable 
on  demand. 

With  respect  to  the  ninth  plea,  the  question  now  is,  whether  it  was 
proved  in  fact.  It  is  bad  in  point  of  law ;  because  the  payment  men- 
tioned in  the  stamp  act  must  be  taken  to  mean  payment  by  the  party 
liable,  at  the  maturity  of  the  bill,  and  according  to  the  tenor  of  it ;  oth- 
erwise there  have  been  many  cases  wrongly  decided.  But  I  agree  that, 
even  assuming  the  plea  to  be  good,  it  was  not  proved  in  fact.  It  would 
be  essential,  in  order  to  support  it,  to  prove  payment  of  the  bill  in  mon- 
ey, and  not  merely  a  satisfaction  of  it  by  an  agreement  such  as  was 
proved  in  this  case,  which  was  no  payment  in  the  proper  sense  of  the 
word.  On  a  demurrer  to  this  plea,  for  stating  only  that  the  bill  had 
been  "paid  and  satisfied,"  without  stating  the  mode  of  payment,  the  plea 
would,  I  think  have  been  held  suflftcient  on  the  ground  that  those  words 
would  be  construed  to  mean  payment  in  money.  It  follows  that,  in  or- 
der to  support  that  averment  in  evidence,  the  proof  should  have  been  of 
a  payment  in  money.  Neither  of  these  pleas,  therefore,  being  proved  the 
rule  must  be  absolute  to  enter  a  verdict  on  those  issues  for  the  plaintiff. 

GuRNEY  and  Rolfe,  BB.,  concurred. 

Rule  absolute. 


Sec.  1)  PAYMENT  AND  RENUNCIATION.  659 

ATTENBOROUGH  v.  MACKENZIE. 

(Court  of  Exchequer,  1856.     25  L.  J.  Ex.  244.) 

Action  on  a  bill  of  exchange  for  £400.,  drawn  by  the  defendant,  ac- 
cepted by  one  Tingay,  indorsed  by  the  defendant  to  Tingay,  by  him  in- 
dorsed to  Robert  Attenborough  (the  plaintiff  being  Richard),  and  by 
him  to  the  plaintiff. 

Pleas — First,  denying  the  indorsement  to  Tingay ;  secondly,  deny- 
ing the  indorsement  by  Tingay  to  the  plaintiff ;  thirdly,  that  while  the 
bill  was  in  the  hands  of  the  drawer  and  payee,  and  before  it  was  due, 
the  acceptor,  Tingay,  paid  the  defendant  the  amount  (less  the  inter- 
est), and  deposited  the  bill  with  Robert  Attenborough,  who  fraudulent- 
ly transferred  it  to  the  plaintiff. 

Issues  were  joined  on  these  pleas;  and  at  the  trial,  before  Alder- 
son,  B.,  it  appeared  that  the  defendant,  having  money  due  from  Tin- 
gay, got  him  to  accept  the  bill,  and  gave  it  to  one  Score  to  get  it  dis- 
counted. Score  offered  it  to  one  Barton  for  that  purpose,  who  took 
it  to  Tingay,  and  got  from  him  £375.,  which  was  offered  to  the  defend- 
ant, and  by  him  accepted,  he  at  the  same  time  observing  that  he  took 
it  because  the  bill  was  in  Tingay's  hands,  and  that  he,  the  defendant, 
was  thereby  discharged.  But  it  did  not  appear  that  this  had  been  com- 
municated to  Tingay.  Before  the  bill  was  due,  Tingay  transferred  it 
to  Robert  Attenborough  on  discount,  and  afterwards  said  "that  all 
that  he  knew  Robert  Attenborough  knew."  After  the  bill  was  due,  it 
came  to  the  plaintiff.  Burbridge  v.  Manners,  3  Campb.  193,  was  cited. 
The  learned  judge,  upon  this  state  of  facts,  directed  a  verdict  for  the 
plaintiff,  reserving  to  the  defendant  leave  to  move  to  enter  a  verdict 
on  either  of  the  pleas. 

A  rule  having  been  obtained  accordingly,  but  no  one  appearing  to 
show  cause. 

Bovill  and  Honyman,  for  the  defendant,  were  called  upon  to  sup- 
port it.  The  acceptor,  Tingay,  had  no  authority  to  transfer  the  bill,  ei- 
ther actual  or  legal. 

[Martin,  B.  He  did  not  require  any  authority  other  than  that 
which  was  involved  in  the  transfer  of  the  bill  to  him  for  discount.] 

That  transfer  by  the  defendant  was  on  the  understanding  that  it 
should  not  be  transferred  by  Tingay,  and  that  he  took  it  to  retire  it  as 
acceptor,  and  in  discharge  of  the  drawer. 

[Pollock,  C.  B.  The  transfer  of  a  bill  cannot  be  clogged  with  any 
such  secret  condition,  whether  it  be  to  the  acceptor  or  any  one  else.] 

It  was  mentioned  to  the  agent  who  came  from  Tingay. 

[Alderson,  B.     But  not  communicated  to  him.] 

[Martin,  B.  On  the  expiration  of  a  reasonable  time  after  the  agent 
brought  the  money,  the  transfer  to  Tingay,  as  indorsee,  was  complete ; 
and  if  the  defendant  did  not  mean  to  make  such  a  transfer,  he  should 
have  returned  the  money.] 


660  DISCHARGE.  (Part  i 

The  evidence  is  that  Robert  Attenborough  knew  what  Tingay  knew, 
and  therefore  knew  that  the  bill  was  not  to  be  transferred. 

[Pollock,  C.  B.  Why  not?  Assuming  that  he  knew  all  that  Tin- 
gay  knew,  nothing  that  Tingay  knew  precluded  his  transfer  of  the 
bill.] 

If  a  party  take  a  bill,  knowing  that  the  transferror  had  no  authority 
to  transfer,  it  is  not  a  valid  indorsement.  Marston  v.  Allen,  8  Mee.  & 
W.  494,  11  Law  J.  Rep.  (N.  S.)  Exch.  122. 

[M.vRTiN,  B.  No  "authority"  was  necessary.  The  interest  in  the 
bill  was  transferred  to  Tingay,  who  was  a  bona  fide  holder  for  value.] 

Then,  assuming  the  indorsements  are  prima  facie  proved,  the  special 
plea  was  sustained.  Payment  by  the  acceptor  discharges  the  drawer. 
Morley  v.  Culverwell,  7  Mee.  &  W.  174,  10  Law  J.  Rep.  (N.  S.) 
Exch.  35. 

[Pollock,  C.  B.  Payment  in  due  course,  and  payment  as  payment. 
In  this  case  the  money  was  paid  before  the  bill  was  due,  and  by  way 
of  discount,  not  payment.] 

The  acceptor  cannot  reissue  the  bill  after  paying  the  amount,  less 
the  discount,  in  order  to  charge  parties  upon  it,  to  whom  he  himself 
will  be  liable. 

[Pollock,  C.  B.  Not  after  paying  it  in  due  course.  But  this  was 
not  payment,  it  was  discount ;  and  as  regards  discount,  the  acceptor  is 
in  the  same  position  as  any  other  person.  It  cannot  be  contended  that 
an  acceptor  or  bona  fide  holder  of  a  bill,  by  discounting  it  before  it  is 
due,  cannot  reissue  it.] 

Not  if  he  is  ultimately  liable  upon  it. 

[Pollock,  C.  B.  He  is  always  ultimately  liable,  except  in  the  case 
of  accommodation  acceptances.] 

It  is  clear  the  defendant  understood  that  the  bill  was  discharged. 

[Martin,  B.     That  only  shows  that  he  mistook  the  law.] 

[Pollock,  C.  B.  When  a  bill  has  been  created  according  to  the  cus- 
tom of  merchants  as  a  real  commercial  transaction,  it  is  part  of  the 
general  circulating  medium  of  the  country,  and  the  acceptor,  after  its 
issue,  stands  with  regard  to  a  retransfer  of  it  to  him  in  the  same  posi- 
tion as  any  other  person.  He  may  indeed  pay  it  to  discharge  it,  but 
discounting  it  is  not  paying  it ;  and  if  he  discounts  it,  he  may  reissue 
it.  Nothing  will  discharge  the  drawer  but  payment  according  to  the 
law  mercliant.  That  is  the  doctrine  of  Morley  v.  Culverwell.  Here 
the  bill  was  not  satisfied. 

M.\uTiN,  B.  The  defendant  was  bound  by  the  transfer  to  Tingay, 
when  he  took  the  money  of  Tingay.  He  could  not  retain  Tingay's 
money  on  any  other  terms  than  those  which  Tingay  understood — the 
general  terms  of  discount.  He  could  not  attach  to  the  transfer  secret 
terms  or  conditions  of  which  Tingay  never  heard.  If,  indeed,  there 
had  been  a  bargain  with  Tingay  not  to  transfer  the  bill,  that  would 
have  been  a  bar  to  the  action ;   but  nothing  of  the  kind  appeared.     As 


Sec.  1)  PAYMENT    AND    RENUNCIATION.  GGl 

to  the  case  of  Morley  v.  Culverwell,  it  confirms  this  view.  There  the 
bill  was  satisfied,  here  it  was  not.    It  was  merely  discounted. 

Alderson,  B.,  concurred.  If  an  acceptor  discounts  a  bill  he  may 
reissue  it. 

Rule  discharged. 


GREVE  V.  SCHWEITZER. 

(Supreme  Court  of  Wisconsiu,  1875.     36  Wis.  554.) 

This  is  an  appeal  from  an  order  denying  the  motion  of  defendant 
for  judgment  on  the  counterclaim  set  up  in  his  answer,  which  was  not 
replied  to.  The  only  question  presented  on  the  appeal  is.  Does  the 
counterclaim  state  facts  sufficient  to  constitute  a  cause  of  action  enti- 
tling the  defendant  to  judgment  upon  it? 

The  material  allegations  in  the  counterclaim  are  that  the  defendant, 
nearly  20  years  ago,  at  the  request  of  one  Arnold  H.  Greve,  and  in 
consideration  of  a  loan  to  him  of  $1,100,  executed  his  promissory  note 
for  $1,000,  which  was  made  payable  to  one  Keller,  or  bearer,  and  de- 
livered the  same  to  said  Greve ;  that  Greve  died  single  and  intestate 
in  1857,  greatly  involved  in  debt,  leaving  his  father  and  several  broth- 
ers surviving  him ;  that  shortly  after  his  death  the  note  was  found  in 
the  possession  of  the  plaintiff,  who  represented  himself  as  the  owner 
thereof,  and  that  it  had  been  given  to  him  by  his  deceased  brother ; 
that  the  defendant,  believing  these  representations  to  be  true,  was  in- 
duced to  take  up  and  exchange  that  note  for  another  of  $1,000  paya- 
ble to  the  plaintiff  or  order,  which  latter  note  was  secured  by  a  chattel 
mortgage;  that  he  has  paid  the  plaintiff  on  the  latter  note  various 
sums  amounting  to  $625  ;  that  after  these  payments  were  made,  he 
learned  that  the  plaintiff  was  not  the  owner  of  the  Keller  note,  and 
never  received  it  as  a  gift  from  his  brother,  but  obtained  possession 
of  it  by  undue  and  improper  means ;  that  the  creditors  and  legal  rep- 
resentatives of  Arnold  H.  Greve  were  entitled  to  the  note  and  its  pro- 
ceeds ;  and  that  as  a  consequence,  the  note  and  chattel  mortgage  given 
by  the  plaintiff  in  exchange  therefor  were  without  consideration  and 
void.  He  claims,  upon  these  facts,  the  right  to  recover  of  the  plain- 
tiff the  moneys  which  he  has  paid  him  on  account  thereof,  and  that  the 
complaint  be  dismissed. 

Cole,  J.  The  matters  alleged  by  defendant,  as  above  stated,  are  in- 
sufficient to  show  a  good  counterclaim.  The  consideration  for  the  note 
m  suit  was  the  note  surrendered,  which  still  remains  in  the  possession 
of  the  defendant.  It  is  very  obvious,  therefore,  that  there  is  no  fail- 
ure of  consideration,  and  that  the  defendant  cannot  be  relieved  from 
the  payment  of  the  substituted  note  and  mortgage  upon  any  such 
ground.  Besides,  as  is  well  remarked  by  the  counsel  for  the  plaintiff, 
the  allegations  in  the  answer,  while  they  may  show  that  a  fraud  was 
perpetrated  by  the  plaintiff  upon  the  creditors  and  legal  representa- 


662  DISCHARGE.  (Part  4 

tives  of  Arnold  H.  Greve  in  obtaining  the  possession  of  the  Keller 
note,  still  fail  to  show  any  fraud  upon  the  defendant,  and  afiford  no 
reason  why  he  should  be  permitted  to  recover  back  the  money  which 
he  has  already  paid  on  his  indebtedness.  The  Keller  note  was  paya- 
ble to  bearer,  and  any  arrangement  which  the  defendant  made  for  its 
extinguishment,  or  any  payments  which  he  has  made  in  good  faith 
upon  the  substituted  paper,  are  protected  in  law,  and  valid.  The  plain- 
tiff had  the  possession,  and  was  presumably  the  lawful  holder,  of  the 
Keller  note ;  and  the  defendant  had  the  right  to  deal  with  him  upon 
that  assumption.  And  he  did  discharge  and  extinguish  that  note  by 
giving  another  note.  Upon  the  latter  note  he  has  made  payments  in 
good  faith,  which  he  seeks  to  recover  back.  In  equity  and  good  con- 
science he  owed  this  money  to  some  one,  and  the  question  is.  Can  he 
possibly  be  compelled  to  pay  it  again?  We  think  not.  He  is  protect- 
ed in  law,  and  even  if  the  plaintiff  was  not  the  true  owner  of  the  Kel- 
ler note,  that  will  not  deprive  him  of  his  rights  in  the  transaction.  For 
he  has  paid  his  note  to  the  presumptive  owner,  the  person  producing 
it,  and  the  party  prima  facie  entitled  to  receive  payment  thereof.  The 
rule  of  law  applicable  to  this  question  is  clearly  stated  in  Byles  on  Bills, 
in  the  following  language: 

"If  a  bill  or  note  payable  to  bearer,  either  originally  made  so  or  be- 
come so  by  an  indorsement  in  blank,  be  lost  or  stolen,  we  have  seen 
that  a  bona  fide  holder  may  compel  payment.  Not  only  is  the  payment 
to  a  bona  fide  holder  protected,  but  pa}ment  to  the  thief  or  finder  him- 
self will  discharge  the  maker  or  acceptor,  provided  such  payment  were 
not  made  with  knowledge  or  suspicion  of  the  infirmity  of  the  holder's 
title,  or  under  circumstances  which  might  reasonably  awaken  the  sus- 
picions of  a  prudent  man."    Chapter  15,  p.  172. 

In  Story  on  Bills  the  doctrine  is  laid  down  in  substantially  the  same 
language;  and  there  can  be  no  doubt  of  the  rule  upon  the  subject. 
Sections  415  and  416. 

Now,  within  this  rule,  it  is  apparent  that  even  if  the  plaintiff  was  a 
wrongful  holder  of  the  Keller  note,  yet  the  possession  of  it  was  pre- 
sumptive evidence  that  he  was  the  lawful  owner;  and  any  arrange- 
ment which  the  defendant  entered  into  in  good  faith  for  its  discharge, 
and  any  payments  which  he  has  made,  are  valid.  It  is  quite  immater- 
ial whether  these  payments  were  made  upon  the  original  or  substitut- 
ed paper.  In  either  case  the  payments  will  extinguish  pro  tanto  his 
indebtedness,  and  he  runs  no  risk  of  being  compelled  to  pay  it  again, 
unless  guilty  of  negligence,  which  is  denied.  Suppose  the  proceeds  of 
the  original  note  belong  to  the  creditors  or  legal  representatives  of 
Arnold  H.  Greve ;  that  does  not  concern  him  so  long  as  he  is  under 
no  obligation  to  respond  to  any  one  for  moneys  already  paid  in  dis- 
charge of  his  debt.  In  any  view  we  see  no  ground  for  holding  that 
the  defendant,  upon  the  facts  alleged,  is  entitled  to  recover  back  the 
money  paid  the  plaintiff.  This  disposes  of  all  questions  arising  upon 
the  merits  of  the  counterclaim. 


Sec.  1)  PAYMENT  AND  RENUNCIATION.  663 

It  is  insisted  that  the  motion  of  defendant  for  judgment  on  his  coun- 
terclaim was  not  disposed  of  when  the  court  rendered  judgment  on  the 
verdict,  and  that  this  is  such  an  error  or  irregularity  as  should  reverse 
the  order  appealed  from.  Assuming  that  the  objection  is  borne  out  by 
the  record,  still,  upon  the  views  expressed  upon  the  merits  of  the  coun- 
terclaim, the  error  could  not  have  affected  any  substantial  right  of  the 
defendant.  The  order,  therefore,  should  not  be  reversed  by  reason  of 
the  error  or  irregularity  complained  of.  Section  40,  c.  125,  Rev.  St. ; 
Allard  v.  Lamirande,  29  Wis.  502-510 ;  Bonnell  v.  Gray,  36  Wis.  574, 
decided  herewith. 

The  order  of  the  circuit  court  is  affirmed.* 


NASH  et  al.  v.  DE  FREVILLE. 
(Court  of  Appeal,  [1900]  2  Q.  B.  72.) 

A.  L.  Smith,  L.  J.,  read  the  following  judgment:  In  this  case  the 
plaintiffs,  who  are  tailors  and  money  lenders,  sue  Major  Freville  upon 
five  promissory  notes  amounting  in  all  to  i5,300.,  payable  on  demand, 
of  which  notes  the  defendant  was  the  maker  and  a  solicitor  named 
Peed  was  the  payee.  These  notes  at  one  time  had  been  in  the  plain- 
tiffs' possession,  though  they  had  been  fraudulently  induced  by  Peed 
to  hand  them  back  to  him,  and  the  notes  then  got  back  into  the  de- 
fendant's hands,  as  hereafter  will  appear.  There  is  also  a  count  in 
trover. 

This  case  is  complicated,  as  ordinarily  is  the  case  when  fraud  inter- 
venes in  the  matter  of  negotiable  instruments ;  but,  having  heard  ex- 
cellent arguments  on  each  side,  for  the  reasons  I  will  now  state,  I  think 
the  question  in  the  case  is:  Did  the  defendant,  when  he  received  the 
notes  back  into  his  possession  from  Peed,  take  them  under  such  cir- 
cumstances as  to  give  him  a  better  title  to  the  notes  than  Peed  had 
when  he  gave  them  back  to  the  defendant?  If  the  defendant  had  not  a 
better  title  than  Peed  had,  then  the  plaintiffs,  in  my  judgment,  can 
succeed  in  this  action;   aliter,  if  the  defendant  had. 

Peed  was  a  solicitor  who  for  years  had  carried  on  business  at  Cam- 
bridge, and  down  to  September  29,  1897,  when  he  absconded  and  aft- 
erwards became  bankrupt,  was  a  man  of  unimpeachable  credit  and 
above  suspicion.  Between  the  years  1885  and  September,  1897,  inclu- 
sive. Peed  was  the  trusted  solicitor  of  the  defendant,  and  from  time 
to  time  made  advances  of  money  to  and  disbursements  for  the  defend- 
ant, and  in  January,  1895,  the  defendant  owed  him  for  so  doing  about 
£800.  Peed  then  suggested  that  the  defendant  should  give  him  a  prom- 
issory note  payable  on  demand  by  way  of  security  for  the  debt. 
This  the  defendant  did,  and  it  was  a  note  for  £800.,  dated  January  14, 

<  Compare  Prouty  v.  Roberts,  6  Gush.  (Mass.)  19,  52  Am.  Dec.  761  (1850), 
mte,  p.  428. 


6G4  D155CUAKGE.  (Part  4 

1895,  pa\  able  on  demand  in  favor  of  Peed,  and  it  was  expressly  agreed 
between  the  defendant  and  Peed  that  Peed  should  not  negotiate  or  part 
with  this  note.  For  further  advances  and  disbursements  the  defend- 
ant made  two  other  notes  payable  on  demand  in  favor  of  Peed,  and 
handed  them  to  him.  The  one  was  dated  January  31,  1896,  for  i5UU., 
and  the  other  was  dated  April  4,  1896,  also  for  £500.,  and  there  was 
the  like  agreement  about  not  negotiating  or  parting  with  these  two 
notes.  The  reason  for  this  agreement  as  to  Peed  not  negotiating  or 
parting  with  these  notes  was  that  the  defendant  did  not  then  wish  to 
be  called  upon  to  pay  the  amounts  represented  by  them,  it  being  an- 
ticipated, as  turned  out  to  be  the  case,  that  in  the  month  of  June,  1897, 
when  the  defendant's  son  would  come  of  age,  the  defendant,  by  means 
of  barring  an  estate  tail,  would  be  placed  in  funds. 

In  the  next  year,  namely,  upon  February  9,  1897,  the  defendant  gave 
to  Peed  two  notes,  the  one  of  £1,500.  and  the  other  for  £2,000. ;  i.  e. 
for  £3,500.  in  all — payable  on  demand  and  in  favor  of  Peed.  These 
two  notes  were  given  to  and  taken  by  Peed  to  pay  off  the  first  three 
notes  for  £1,800.  and  to  cover  further  advances.  These  two  notes  were 
also  by  agreement  between  the  defendant  and  Peed  not  to  be  parted 
with  or  negotiated  by  him.  The  defendant  did  not  take  back  from 
Peed  the  first  three  notes  thus  paid  by  the  defendant,  but  left  them  in 
Feed's  possession,  and  this,  as  will  be  seen,  was  what  enabled  Peed 
to  commit  the  fraud  which  he  subsequently  practiced  upon  the  plain- 
tiffs as  regards  these  three  notes. 

In  the  month  of  March,  1897,  Peed,  without  the  knowledge  of  the 
defendant,  broke  faith  with  him  and  negotiated  all  five  notes  with  the 
plaintiffs,  they  paying  to  him  the  sum  of  £4,800.  and  taking  a  bonus  of 
£500.  for  so  dning.  These  notes  were  indorsed  by  Peed,  and  he  also 
deposited  with  the  plaintiffs  an  insurance  upon  the  life  of  the  defend- 
ant's son.  In  June,  1897,  the  defendant's  son  came  of  age.  the  estate 
tail  was  barred,  the  defendant  became  possessed  of  funds,  and  a  set- 
tlement of  accounts  was  then  come  to  between  the  defendant  and  Peed, 
and  the  only  material  fact  as  to  this  settlement  is  that  the  defendant 
then  gave  to  Peed  £4,000.  wherewith  to  pay  the  two  note?  for  £3,500. 
and  interest.  The  defendant  did  not  get  back  from  Peed  those  two 
notes  when  he  paid  them,  but  left  them  in  Peed's  hands,  as  he  had  done 
when  he  paid  the  first  three  notes.  By  his  doing  so  Peed  was  enabled 
to  perpetrate  the  fraud  he  subsequently  practiced  upon  the  plaintiffs 
as  rer:ards  these  two  notes. 

It  is  not  denied  that  the  plaintiflFs,  when  they  discounted  the  five 
notes  for  Peed,  became  holders  of  them  in  due  course  and  for  value, 
and  without  notice  of  anything  which  would  have  impeached  the  plain- 
tififs'  title  to  sue  the  defendant  or  Peed  upon  these  notes.  That  the 
plaintififs  could  have  sued  the  defendant  upon  these  five  notes  I  have 
no  doubt,  and  the  defendant  would  have  been  undefended.  It  is  true 
that  up  to  this  point  the  plaintiffs  have  no  cause  of  complaint  and  were 
in  no  way  prejudiced  by  the  defendant  not  having  taken  back  the  notes 


Sec.  1)  PAYMKXT    AND    REXUN'CIATION.  GG5 

from  Peed  as  and  when  they  were  paid ;  and,  on  the  contrary,  the 
plaintiffs,  by  reason  of  the  notes  not  having  been  returned  by  Peed  to 
the  defendant  when  they  were  paid,  have  been  enabled  to  discount  the 
notes  for  Peed  at  the  rates  they  did,  and  were  also  enabled  to  enrich 
themselves  by  the  sum  of  £500.,  being  the  bonus  they  took  when  they 
discounted  them  for  Peed.  But  the  prejudice  to  the  plaintiffs  comes  in 
later  on.  The  plaintiffs  pressed  Peed  for  payment  of  the  notes,  but 
could  not  get  payment,  and  upon  September  28,  1897,  this  took  place. 
Peed,  desiring  to  have  the  notes  back,  gave  to  the  plaintiffs  his  check 
for  £5,581.  in  exchange  for  the  notes  which  they  held  for  £5,300.,  and 
also  what  the  plaintiff's  call  a  contango — whatever  that  may  mean — 
amounting  to  £86. ;  they  preferring,  I  suppose,  Peed's  check  coupled 
with  the  contango  of  £86.  to  the  signature  of  the  defendant  upon  the 
notes,  with  no  contango.  This,  however,  the  plaintiffs  were  clearly  en- 
titled to  do.  The  Lord  Chief  Justice  finds,  and  I  have  no  doubt  cor- 
rectly, "that  the  plaintiffs  then  voluntarily  or  intentionally  parted  with 
the  notes,  intendmg  that  Peed  should  take  them,  and  intending  that 
they  should  take  and  rely  upon  Peed's  check  which  he  had  given  in  ex- 
change for  them" ;  and  he  also  finds,  and  I  think  correctly,  that  "when 
Peed  drew  his  check  he  knew  that  it  would  not  be  met,  and  he  did  not 
intend  that  it  would  be  met,  and  in  point  of  fact  he  was  contemplating 
the  perpetration  of  a  fraud  upon  the  plaintiffs." 

That  Peed  defrauded  the  plaintiffs  is  clear  What  is  the  effect  of 
this?  Before  I  discuss  this,  I  should  state  that  Peed,  when  he  thus 
got  back  the  notes  by  means  of  his  worthless  check  in  exchange,  at 
once  placed  them  in  an  envelope  and  sent  them  to  the  defendant,  who 
received  them  upon  September  29,  1897,  and  knowing,  as  was  the  fact, 
that  he  had  paid  them  long  since  to  Peed,  and  not  knowing  that  Peed 
had  ever  parted  with  them,  out  them  into  the  fire  and  treated  the  mat- 
ter as  at  an  end.  Upon  October  1,  1897,  Peed's  check  was  returned 
to  the  plaintiffs  marked  "referred  to  drawer."  The  plaintiffs  made  no 
communication  to  the  defendant  upon  the  matter  until  some  four 
months  after  the  check  was  thus  returned,  and  the  question  arises,  in 
these  circumstances,  who  has  the  better  title  to  the  notes,  obtained  as 
they  were  by  fraud  from  the  plaintiffs,  who  were  the  bona  fide  hold- 
ers for  value  of  the  notes?  Now,  the  notes  having  been  obtained  by 
Peed  from  the  plaintiffs  by  fraud,  although  the  property  in  the  notes 
passed  to  Peed,  the  plaintiffs  as  against  Peed  were  entitled  to  disaf- 
firm the  transaction  on  discovering  the  fraud,  and  if,  before  the  trans- 
action with  Peed  was  disaffirmed  by  the  plaintiffs,  the  defendant  had 
become  holder  in  due  course  of  the  notes,  it  would  then  be  too  late  in 
my  judgment  to  disaffirm,  so  far  as  the  defendant  was  concerned,  and 
the  plaintiff's  could  not  then  successfully  sue  the  defendant  either  upon 
the  notes  or  in  trover;  and  the  real  question,  therefore,  as  I  have 
above  stated,  comes  to  this :  Did  the  defendant,  when  he  took  the  notes 
on  September  29,  1897,  from  Peed,  obtain  a  better  title  to  them  than 
Peed  had?    Which  means:   Did  he  take  them  bona  fide,  and  for  value. 


666  DISCHARGE.  CPart  4 

and  without  notice  of  Feed's  fraud,  and  before  they  were  due?  For, 
if  so,  the  defendant  would  in  my  judgment  have  taken  a  better  title 
to  the  notes  than  Peed  had,  and  a  title  which  would  prevail  over  that 
of  the  plaintilTs. 

That  the  defendant  received  back  the  notes  bona  fide  and  without 
notice  of  Feed's  fraud  is  clear.  The  defendant,  when  he  received  the 
notes  from  Feed,  knew  nothing  of  Feed  having  ever  parted  with  them, 
nor  had  he  ever  heard  of  the  plamtiflfs  in  the  matter.  That  the  defend- 
ant received  back  the  notes  before  the  fraud  of  Feed  was  discovered 
is  clear,  for  he  received  them  the  day  after  the  fraud  was  committed. 
But  did  he  give  value  for  the  notes  when  he  received  them  back,  and 
did  he  take  them  from  Feed  before  they  were  overdue?  As  to  the 
question  of  value,  what  value  did  the  defendant  give  for  the  notes 
when  he  took  them  back  from  Feed  ?  He  had  given  value  for  the  first 
three  notes  when,  upon  February  9,  1897,  he  gave  the  second  two 
notes  to  Peed  in  order  to  pay  off  the  first  three  notes,  and  he  gave 
value  for  the  second  two  notes  when  he  paid  the  £4,000.  in  July,  1897, 
to  Peed  to  pay  them  off;  but  this  was  months  before  the  fraud  was 
perpetrated  by  Peed  upon  the  plaintiffs,  and  before  the  defendant  got 
the  notes  back  on  September  29,  1897.  When  he  got  the  notes  back 
the  defendant  gave  nothing  for  them.  How  can  it  be  said,  then,  that 
he  took  back  the  notes  for  value?  For  he  did  not.  If  the  case  cited 
of  London  &  County  Banking  Co.  v.  London  &  River  Plate  Bank,  21 
O.  B.  D.  535,  were  to  be  held  to  apply  to  this  case,  we  should  have 
to  hold  that  the  defendant  gave  real  value  for  the  notes  and  then  a 
supposed  value  over  again  for  the  same  notes,  which  cannot  be.  But 
supposing  the  defendant  did  give  value  for  the  notes  when  he  took 
them  back,  which  in  my  opinion  he  did  not,  did  he  take  the  notes  aft- 
er they  were  due  ? 

I  cannot  see  how  it  can  be  held  that  defendant,  w'hen  he  received 
back  the  notes  in  September,  1897,  though  payable  on  demand,  did  not 
take  them  when  overdue ;  for  he  must  have  known  they  were  overdue 
if  he  thought  about  it  at  all,  inasmuch  as  he  had  himself  paid  them  off, 
the  first  three  notes  in  February,  1897,  and  the  last  two  notes  in  July, 
1897.  How  can  the  defendant  now  say  that  they  were  not  overdue 
in  September,  1897,  when  he  received  them  back?  It  seems  to  me  that 
as  the  defendant  did  not  give  value  for  the  notes  when  he  took  them 
back,  and  as,  even  if  he  did,  the  notes  were  then  overdue,  the  defendant 
did  not  take  a  better  title  to  them  than  Feed  had,  and  that  the  plain- 
tiffs, having  disaffirmed,  as  they  were  entitled  to  do,  the  transaction 
with  Peed,  can  maintain  trover  for  the  notes  and  bring  an  action  upon 
the  notes  against  the  defendant,  who  has  no  better  title  to  set  up  than 
that  of  Peed.  I  must  point  out  that  the  difficulty  which  the  defendant 
unfortunately  is  in  arises  through  his  own  default  in  not  getting  the 
notes  back  from  Peed  when  he  paid  them,  thereby  giving  Peed  the  op- 
portunity of  cheating  the  plaintiffs  as  he  did.  It  is  a  well-known  prin- 
ciple of  law  that  whenever  one  of  two  innocent  persons  must  suffer  by 


Sec.  1)  PAYMENT    AND    RENUNCIATION.  G67 

the  acts  of  a  third  person,  he  who  has  enabled  such  third  person  to 
occasion  the  loss  must  sustain  it.  See  the  well-known  cases  of  Lick- 
barrow  V.  Mason  in  1  Smith's  Leading  Cases,  and  Babcock  v.  Lawson, 
[1879]  4  O.  B.  D.  394,  which  contains  matters  very  apposite  to  the 
present  case. 

In  my  opinion  counsel  for  the  plaintiffs  are  right  in  their  construc- 
tion of  section  61  of  the  Bills  of  Exchange  Act,  which  was  so  much 
relied  upon  by  the  defendant's  counsel,  and  that  section  does  not  ap- 
ply to  the  present  case,  and  the  words  "in  his  own  right"  do  not  mean 
in  contradistinction  to  a  representative  right  as  argued  for  the  defend- 
ant. 

For  these  reasons  I  think  that  the  appeal  must  be  allowed,  and  that 
judgment  must  be  entered  for  the  plaintiffs.^ 


SCHWARTZMAN  v.  POST  et  al. 

(Supreme    Court,    Appellate    Division,    First    Department,    New    York,    1903. 
94  App.  Dlv.  474,  Si  N.  Y.  Supp.  922,  87  N.  Y.  Supp.  872.) 

Appeal  by  the  plaintiff,  Abraham  Schwartzman,  from  an  order  of 
the  Appellate  Term  of  the  Supreme  Court,  entered  in  the  office  of  the 
clerk  of  the  county  of  New  York  on  the  16th  day  of  November,  1903, 
which  order  reversed  a  judgment  of  the  City  Court  of  the  city  of  New 
York  in  favor  of  the  plaintiff',  entered  in  the  ofiice  of  the  clerk  of  said 
court  on  the  15th  day  of  February,  1903,  upon  the  verdict  of  a  jury, 
and  also  (as  stated  in  the  notice  of  appeal)  from  a  judgment  of  rever- 
sal entered  in  the  office  of  the  clerk  of  the  city  of  New  York  on  the 
13th  day  of  January,  1904,  upon  said  order  of  the  Appellate  Term. 

Per  Curiam.  Determination  of  Appellate  Term  affirmed,  with 
costs,  on  the  opinion  of  the  court  below,  and  judgment  absolute  order- 
ed for  defendant,  with  costs. 

Van  Brunt,  P.  J.,  and  Patterson,  Ingraham,  and  McLaughlin, 
JJ.,  concur. 

Laughlin,  J.  (dissenting).  According  to  the  testimony  of  the  plain- 
tiff, the  note  was  not  paid,  nor  was  it  surrendered  up  to  the  defendant 
Post  upon  the  understanding  that  it  was  to  be  deemed  paid,  but  on  the 
distinct  agreement  that  the  defendants  were  to  remain  liable  for  the 
balance  for  which  plaintiff'  has  recovered  in  this  action.  The  defend- 
ants did  not,  therefore,  in  my  opinion,  by  this  surrender  become  hold- 
ers of  the  note  in  their  "own  right,"  within  the  intent  and  meaning  of 
subdivision  5  of  section  200  of  the  negotiable  instruments  law.  Laws 
1897,  p.  744,  c.  612,  and  the  transaction  did  not  constitute  a  discharge 
of  the  note.  The  defendant  Post  merely  became  the  bailee  tliereof  for 
the  payee. 

B  Collins  and  Romer,  L.  JJ.,  delivered  concurring  opinions,  which,  with 
the  statement  of  the  case  and  the  arguments  of  counsel,  are  omitted. 


0G8  DISCHARGE.  (Part  4 

The  following  is  a  part  of  the  opinion  dehvered  by  Freedman,  P. 
J.,  in  the  court  below : 

This  action  was  brought  to  recover  an  alleged  balance  of  $1,750, 
claimed  to  be  due  upon  a  demand  note  for  $5,000,  dated  May  1,  1899, 
payable  to  the  order  of  the  maker,  the  defendant  Post,  and  indorsed 
by  him  and  his  father,  the  defendant  Postawalsky.  Postawalsky  was 
not  served  with  the  summons  and  did  not  appear.  After  a  trial  by  a 
jury,  a  verdict  for  the  amount  claimed  was  rendered  in  favor  of  the 
plaintiff.  The  plaintift''s  complaint  originally  averred  that  he  is  "now 
the  lawful  owner  and  holder"  of  the  note  in  suit,  but  it  was  subse- 
quently amended  by  striking  out  the  allegation  that  plaintiff  was  the 
"holder."  The  answer  denied  the  delivery  of  the  note  to  the  plaintiff, 
and  that  he  was  the  owner  thereof,  and  set  up,  among  other  defenses, 
that  the  note  had  been  delivered  up  and  surrendered  to  Post,  the  mak- 
er, about  April  9,  1900,  and  that  defendant  had  ever  since  been  the 
holder  thereof. 

At  the  beginning  of  the  trial,  the  note,  in  pursuance  of  a  notice  giv- 
en by  plaintift''s  attorney,  was  produced  by  the  defendant  Post,  and  by 
plaintift''s  attorney  offered  and  received  in  evidence.  The  testimony 
of  the  transaction  out  of  which  the  cause  of  action  arose,  as  given  by 
the  parties,  is  very  conflicting,  and  a  reading  of  the  record  convinces 
one  that  neither  party  has  given  a  complete  statement  of  the  facts. 
The  plaintiff's  version,  however,  was  accepted  and  believed  by  the 
jury,  and  must,  therefore,  for  the  purposes  of  this  appeal,  be  taken 
as  true,  and,  briefly  stated,  is  as  follows : 

In  1898  plaintiff'  and  the  defendant  Postawalsky  were  copartners  in 
the  cloak  business.  This  partnership  was  dissolved  by  mutual  consent 
in  1899,  and  plaintiff  received  the  note  in  question  for  his  interest  in 
said  business.  Subsequently,  upon  demanding  payment  of  the  note 
of  the  defendant.  Post  told  the  plaintiff  that  he  (Post)  could  not  pay 
the  full  amount  of  the  note,  but  would  pay  $2,000  if  the  plaintiff  would 
give  up  the  note.  This  offer  was  afterwards  increased  by  Post  to  the 
sum  of  $2,500.  Plaintiff  then  authorized  his  brother  (Schwartz)  to 
continue  the  negotiations  with  Post.  For  some  reason,  not  appearing, 
the  plaintiff  had  placed  the  note  with  one  Kohn,  who  testifies  that  he 
also  called  upon  Post  in  regard  to  obtaining  payment  of  the  note,  and 
that  Post  refused  to  pay  in  full.  Plaintift''s  brother  (Schwartz)  tes- 
tifies to  similar  conversations  with  Post.  In  all  of  the  conversations 
Post  is  alleged  to  have  said,  in  substance,  that,  unless  the  amount  of- 
fered w^as  accepted  by  the  plaintiff,  and  the  note  given  up,  that  he. 
Post,  would  "protect"  himself;  that  "I  have  been  through  the  mill 
once  before,  and  know  how  to  take  care  of  myself."  These  witnesses 
also  testify  that  Post  promised  to  pay  the  balance  of  his  indebtedness, 
but  insisted  upon  the  surrender  of  the  note  to  him.  Matters  between 
the  parties  culminated  in  a  meeting  of  Post,  Kohn,  one  Kohler,  at- 
torney for  Post,  one  Essberg,  attorney  for  plaintiff'  or  his  brother, 
Schwartz,  and  Schwartz,  at  Essberg's  office,  at  which  time  Post  paid 


Sec.  1)  PAYMENT    AND    RENUNCIATION.  6G9 

$2,750  and  Essberg  $500  to  Schwartz,  who  then  gave  the  note  to  Ess- 
berg.  The  $3,250  was  then  paid  plaintitf,  and  the  note  eventually 
given  to  Post,  although  when  Post  came  into  possession  of  the  note 
does  not  appear,  nor  is  it  shown  for  what  reason  Essberg  contributed 
the  sum  of  $500  towards  the  amount  paid  the  plaintiff. 

At  the  close  of  the  plaintiff's  case,  and  again  at  the  close  of  the 
whole  case,  the  defendant's  attorney  moved  to  dismiss  the  complaint 
upon  the  ground  that  "the  plaintiff'  has  failed  to  establish  a  cause  of 
action,  and  upon  the  ground  that  by  his  own  admission  of  the  delivery 
and  surrender  of  the  note  by  him  to  the  defendant  [the  plaintiff]  ex- 
tinguished any  liability  on  the  note.  *  *  *  My  contention  is  that 
the  delivery  of  that  note  by  the  plaintiff'  to  the  defendant  constituted 
a  discharge  and  cancellation  of  that  note." 

I  am  of  the  opinion  that  the  defendant  Post  is  right  in  this  conten- 
tion. The  cause  of  action  is  based  wholly  upon  the  note.  Subdivision 
5  of  section  200  of  the  Negotiable  Instruments  Law  (Laws  1897,  p. 
744,  c.  612)  provides  that  a  negotiable  instrument  is  discharged  "when 
the  principal  debtor  becomes  the  holder  of  the  instrument  at  or  after 
maturity  in  his  own  right."  The  instrument  in  question  was  a  nego- 
tiable note.  The  term  "holder"  is  defined  in  section  2,  p.  720,  as  fol- 
lows :  "  'Holder'  means  the  payee  or  indorsee  of  a  bill  or  note  who 
is  in  the  possession  of  it,  or  the  bearer  thereof."  And  section  3  con- 
tains the  following  definition :  "Person  Primarily  Liable  on  Instru- 
ment.— The  person  'primarily'  liable  on  an  instrument  is  the  person 
who,  by  the  terms  of  the  instrument,  is  absolutely  required  to  pay  the 
same." 

The  words  of  subdivision  5  of  section  200,  "in  his  own  right,"  mere- 
ly exclude  such  a  case  as  that  of  a  maker  acquiring  the  instrument  in 
purely  a  representative  capacity.  The  case  at  bar  comes  exactly  with- 
in these  provisions.  Post  was  the  maker  of  the  note,  and  primarily 
liable  thereon.  It  was  surrendered  to  him,  and  he  became  the  "holder" 
thereof  without  fraud  or  mistake,  in  "his  own  right."  Prior  to  the 
adoption  of  the  negotiable  instruments  law  it  has  been  held  that,  if  a 
note  be  surrendered  by  the  payee  to  the  maker,  the  whole  claim  is  dis- 
charged. Jaffray  v.  Davis,  124  N.  Y.  164-170,  26  N.  E.  351,  11  L.  R. 
A.  710;  Ellsworth  v.  Fogg.  35  Vt.  355;  Kent  v.  Reynolds,  8  Hun, 
559;  Beach  v.  Endress,  51  Barb.  570,  affirmed  in  Larkin  v.  Harden - 
brook,  90  N.  Y.  333,  43  Am.  Rep.  176. 

Whether  the  plaintiff  can  maintain  an  action  upon  the  original  in- 
debtedness, or  upon  the  defendant  Post's  promise  to  pay  the  balance 
due,  the  consideration  therefor  being  the  plaintiff's  surrender  of  the 
note,  need  not  now  be  determined.    *    *     *  « 

6  A  fortiori  the  instrument  is  discharged  when  it  is  surrendered,  either  in 
exchange  for  a  part  pavment  which  is  accepted  in  full  sjitisfactiou  (Slade 
v.  Mutrie,  156  Mass.  19,' 30  N.  E.  IGS  [1S921),  or  as  a  gift  (Sherman  v.  Sher 
man,  3  Ind.  337  [1852];  Larkin  v.  Hardeubrook,  90  N.  Y.  333,  43  Am.  Rep. 
176  [1882],  semble). 


670  DISCHARGE.  (Part  4 

FOSTER  V.  DAWBER. 

(Court  of  Exchequer,  1S51.     6  Exch.  839.) 

Assumpsit.  The  first  count  of  the  declaration  was  on  a  promissory 
note,  dated  the  7th  of  December,  1845,  made  by  the  defendant,  for 
payment  of  £500.  and  interest,  on  demand,  to  Clark,  the  plaintiff's 
testator.  The  second  count  was  on  a  similar  note  for  £500.,  dated 
the  20th  of  January,  1846. 

Pleas,  to  the  first  and  second  counts.  First,  payment.  Secondly, 
that  after  the  making  of  the  promissory  notes,  and  before  any  demand 
of  the  sums  of  money  therein  mentioned,  or  of  either  of  them,  or  of  any 
interest  thereon,  and  before  any  breach  of  the  promises  in  those 
counts  mentioned  or  either  of  them,  the  said  J.  Clark,  in  his  lifetime, 
to  wit,  etc.,  exonerated,  absolved,  and  discharged  the  defendant  from, 
and  then  waived,  performance  of  the  promises  therein  mentioned,  and 
l)ayment  of  the  said  notes  respectively,  and  of  the  sums  of  money  and 
interest  therein  mentioned.  Verification.  Thirdly,  that  after  the 
making  of  the  promissory  notes,  and  in  the  lifetime  of  J.  Clark,  to  wit, 
on,  etc.,  it  was  agreed  between  J.  Clark  and  the  defendant  that  the 
defendant  should  purchase  a  piece  of  paper  marked  with  a  certain 
receipt  stamp,  to  wit,  a  10s.  stamp,  to  wit,  of  the  value  of  10s.,  with 
the  moneys  of  the  defendant,  and  that  he  should  then  fill  up  and  write 
on  the  same  to  the  tenor  and  effect  following,  that  is  to  say:  "Hull, 
IGth  February,  1846.  Received  of  Robert  Dawber  the  sum  of  £1080., 
being  the  interest  and  principal  on  two  notes,  dated  December,  1845, 
and  January,  1846,  and  in  full  of  all  demands" — and  that  the  defendant 
should  suffer  and  permit  J.  Clark  to  sign  the  same ;  and  that  such 
agreement  and  purchase  of  the  said  piece  of  paper  so  stamped,  and 
such  writing  on  and  filling  up  by  the  defendant,  and  suffering  and 
permitting  J.  Clark  to  sign  the  same,  should  be,  and  should  be  accepted 
and  taken  by  J.  Clark,  in  full  satisfaction  and  discharge  of  the  several 
causes  of  action  in  the  introductory  part  of  this  plea  mentioned.  The 
plea  then  averred  performance  of  the  agreement  in  terms,  and  that  J. 
Clark  accepted  the  same  in  satisfaction  and  discharge  of  the  several 
causes  of  action.    Verification. 

Replication  de  injuria.  Verdict  for  the  defendant.  The  plaintiff 
obtained  a  rule  nisi  to  enter  a  verdict  for  the  plaintiff  or  judgment  non 
obstante  veredicto.' 

Parke,  B.,  said:  The  court  has  already  disposed  of  all  the  points 
in  this  case  except  two.  The  first  of  these  depends  upon  the  question 
whether  the  evidence  supported  the  second  plea.  [His  Lordship,  after 
reading  that  plea  and  stating  the  substance  of  the  evidence,  proceeded :] 
There  is  no  doubt  that  the  effect  of  that  transaction  of  the  16th  of 
February,  1846,  is  to  show  that  the  testator  meant  to  discharge  the 

T  The  statement  is  abridged,  and  the  arguments  of  counsel  and  part  of  the 
opinion  on  other  points  are  omitted. 


Sec.  1)  PAYMENT    AND    RENUNCIATION.  071 

defendant  from  all  lia1)ility  upon  the  notes.  But  it  was  contended  that. 
as  the  plea  stated  the  transaction  to  have  taken  place  before  breach, 
the  plea  was  not  proved.  The  plea  is  inartificially  drawn,  and  appears 
to  have  been  copied  from  the  precedents  of  a  plea  in  discharge  of  an 
executory  contract.  Now,  it  is  competent  for  both  parties  to  an  execu- 
tory contract,  by  mutual  agreement,  without  any  satisfaction,  to  dis- 
charge the  obligation  of  that  contract.  But  an  executed  contract  can- 
not be  discharged  except  by  release  under  seal,  or  by  performance 
of  the  obligation,  as  by  payment,  where  the  obligation  is  to  be  per- 
formed by  payment.  But  a  promissory  note  or  a  bill  of  exchange 
appears  to  stand  on  a  different  footing  to  simple  contracts ;  and  we 
think  the  words  "before  breach,"  when  taken  with  reference  to  those 
instruments,  are  either  idle  or  absurd.  If  they  are  to  be  taken  as  hav- 
ing any  meaning  in  this  plea,  they  must  be  read  in  conjunction  witli 
the  context,  and  they  merely  amount  to  an  allegation  that  Clark  dis- 
charged the  defendant  from  all  liability  before  any  demand  of  the 
sum  of  money  mentioned  in  the  notes.  And  if  that  be  so,  the  plea  was 
proved,  for  Clark  exonerated  the  defendant  before  he  called  on  him 
to  pay  the  amount  of  the  notes.  We  are,  therefore,  of  opinion  that  the 
plea  was  proved. 

The  next  question  is,  whether  the  plea  is  good  after  verdict.  Mr. 
Willes  disputed  the  existence  of  any  rule  of  law  by  which  an  obliga- 
tion on  a  bill  of  exchange,  by  the  law  merchant,  can  be  discharged  by 
parol,  and  he  questioned  the  decisions,  and  contended  that  the  authori- 
ties merely  went  to  show  that  such  an  obligation  might  be  discharged 
as  to  remote  but  not  as  between  immediate  parties.  The  rule  of  law 
has  been  so  often  laid  down  and  acted  upon,  although  there  is  no  case 
precisely  on  the  point  as  between  immediate  parties,  that  the  obliga- 
tion on  a  bill  of  exchange  may  be  discharged  by  express  waiver,  that 
it  is  too  late  now  to  question  the  propriety  of  that  rule.  In  the  passage 
referred  to  in  the  work  of  my  Brother  Byles,  the  words  "it  is  said" 
are  used ;  but  we  think  the  rule  there  laid  down  is  good  law.  We  do 
not  see  any  sound  distinction  between  the  liability  created  between  im- 
mediate and  distant  parties.  Whether  they  are  mediate  or  immediate 
parties,  the  liability  turns  on  the  law  merchant,  for  no  person  is  liable 
on  a  bill  of  exchange  except  through  the  law  merchant ;  and  probably, 
the  law  merchant  being  introduced  into  this  country,  and  differing 
very  much  from  the  simplicity  of  the  common  law,  at  the  same  time 
was  introduced  that  rule  quoted  from  Pailliet  as  prevailing  in  foreign 
countries,  viz.,  that  there  may  be  a  release  and  discharge  from  a  debt 
by  express  words,  although  unaccompanied  by  satisfaction  or  by  any 
solemn  instrument.  Such  appears  to  be  the  law  of  France,  and  prob- 
ably it  was  for  the  reason  above  stated  that  it  has  been  adopted  here 
with  respect  to  bills  of  exchange.  But  Mr.  Willes  further  contended, 
that  though  the  rule  might  be  true  with  respect  to  bills  of  exchange,  it 
did  not  apply  to  promissory  notes,  inasmuch  as  they  are  not  put  upon 
the  same  footing  as  bills  of  exchange  by  the  statute  law. 


^572  DISCHARGE.  (Part  4 

The  negotiability  of  promissory  notes  was  created  by  the  statute  3 
&  4  Anne,  c.  9,  wliich  recites  that  "notes  in  writing,  signed  by  the  party 
who  makes  the  same,  whereby  such  party  promises  to  pay  unto  any 
other  person  or  his  order  any  sum  of  money  therein  mentioned,  are 
not  assignable  or  endorsable  over,  within  the  custom  of  merchants,  to 
any  other  person"  (that  is  one  of  the  properties  promissory  notes  are 
recited  not  to  have) ;  "and  that  such  person  to  whom  the  suin  of  money 
mentioned  in  such  note  is  payable,  cannot  maintain  an  action  by  the 
custom  of  merchants  against  the  person  who  first  made  and  signed  the 
same ;  and  that  any  person  to  whom  such  note  shall  be  assigned,  en- 
dorsed, or  made  payable,  could  not,  within  the  said  custom  of  mer- 
chants, maintain  any  action  upon  such  note  against  the  person  who 
first  drew  and  signed  the  same."  That  appears  to  apply  to  cases  of 
the  original  liability  on  a  note,  as  well  as  to  those  cases  where  the 
liability  has  been  created  by  the  assignment  of  that  instrument.  Now, 
bills  of  exchange  and  promissory  notes  differ  from  other  contracts  at 
common  law  in  two  important  particulars :  first,  they  are  assignable, 
whereas  choses  in  action  at  common  law  are  not ;  and  secondly,  the 
instrument  itself  gives  a  right  of  action,  for  it  is  presvimed  to  be  given 
for  value,  and  no  value  need  be  alleged  as  a  consideration  for  it.  In 
both  these  important  particulars  promissory  notes  are  put  on  the  same 
footing  as  bills  of  exchange  by  the  statute  of  Anne,  and  therefore  we 
think  the  same  law  applies  to  both  instruments.  This  court  was  of 
this  opinion  in  a  case  of  Mayhew  v.  Cooze  (November  23,  1849.  not 
reported),  in  which  there  was  a  plea  similar  to  the  present,  although 
the  expression  of  that  opinion  was  not  necessary  for  the  decision  of 
that  case.    The  plea  is,  therefore,  good  after  verdict.     *     *     * 

Rule  absolute  accordingly. 


LEASK  et  al.  v.  DEW. 

(Supreme    Court.    Appellate    Division,    First    Department,    New    York,    1905. 
102  App.  Div.  529,  92  N.  Y.  Supp.  891.) 

This  action  was  brought  to  recover  upon  a  promissory  note  given 
by  the  defendant  to  the  plaintiffs'  testator.  The  note  was  dated  No- 
vember 23,  1901,  whereby  the  defendant  promised  to  pay  to  the  order 
of  Oliver  W.  Buckingham,  the  testator,  one  year  after  date,  the  sum 
of  So. 000,  with  interest  at  G  per  cent.  Oliver  W.  Buckingham  died 
testate  on  the  31st  day  of  October,  1903,  and  upon  the  probate  of  his 
will  the  plaintiffs  duly  qualified  as  his  executors.  The  answer  averred, 
for  separate  and  affirmative  defenses,  that  the  testator  had  canceled 
the  said  note  by  an  instrument  in  writing.  Upon  the  trial  of  this  action 
the  plaintiffs  proved  the  making  of  the  note,  the  nonpayment  of  which 
was  admitted,  except  as  stated  in  the  answer,  and  rested.  The  de- 
fendant then  offered  proof  that  after  testator's  death  the  note  in  ques- 
tion was  found  among  his  papers,  inclosed  in  an  envelope  together  with 


Sec.  1)  PAYMENT    AND    RENUNCIATION.  673 

the  following  paper,  all  in  the  handwriting  of  the  testator,  except  the 
signature  of  the  witness : 

"New  York,  Nov.  25,  1901. 

"To  My  Executors — Gentlemen:  The  enclosed  note  I  wish  to  be 
cancelled  in  case  of  my  death,  and  if  the  law  does  not  allow  it  I  wish 
you  to  notify  my  heirs  that  it  is  my  wish  and  orders. 

"Truly  yours,  Oliver  W.  Buckingham. 

"Witness :    Frank  W.  Woglom." 

Judgment  for  plaintiffs.    Defendant  appeals.^ 

Hatch,  j.  *  *  *  This  brings  us  to  the  main  question  in  the 
case — the  construction  of  the  written  declaration  of  the  testator,  which 
was  found  in  the  envelope  which  contained  the  note  after  his  death. 
It  is  probably  true  that  this  declaration  was  sufficient  to  discharge  de- 
fendant's obligation  upon  the  promissory  note,  within  the  authority 
of  Wekett  v.  Raby,  2  Brown's  House  of  Lords  Rep.  386.  The  decla- 
ration therein  was  made  a  few  days  before  the  death  of  the  testator, 
in  these  words:  "I  have  Raby's  bond,  which  I  keep.  I  don't  deliver  it 
up,  for  I  may  live  to  want  it  more  than  he ;  but  when  I  die  he  shall 
have  it,  he  shall  not  be  asked  or  troubled  for  it." 

Suit  haying  been  brought  upon  the  bond,  it  was  ordered  to  be  de- 
livered up  and  canceled,  and  such  decision  was  affirmed  by  the  House 
of  Lords  upon  appeal.  The  declaration  in  the  present  case  is,  in  one 
view,  stronger  than  the  declaration  in  that  case,  for  therein  there  was 
the  express  intention  of  the  testator  to  keep  the  bond  as  a  subsisting 
obligation  against  Raby,  and  it  was  not  to  be  enforced  save  in  the 
event  of  his  death,  when  it  was  to  take  effect.  In  the  writing  under 
consideration  in  this  case  there  is  no  such  expression  in  terms.  A 
similar  doctrine  was  announced  in  Brinckerhoff  v.  Lawrence,  2  Sandf. 
Ch.  412.  Therein  the  Raby  Case  is  cited  with  approval.  The  declara- 
tion therein  was,  like  the  present,  limited  in  its  operative  force  to 
events  which  might  happen  subsequently  to  the  death  of  the  declar- 
ant. These  cases  applied  the  common-law  rule,  and,  while  they  are 
authoritative  declarations  of  the  effect  of  this  instrument  at  common 
law,  they  are  not  controlling  in  its  construction  at  the  present  time,  for 
the  reason  that  the  force  and  effect  of  an  instrument  of  renunciation 
is  now  governed  by  the  provisions  of  section  203  of  the  negotiable 
instruments  law  (Laws  1897,  p.  744,  c.  612).  It  reads:  "The  holder 
may  expressly  renounce  his  rights  against  any  party  to  the  instrument 
before,  at  or  after  its  maturity.  An  absolute  and  unconditional  re- 
nunciation of  his  rights  against  the  principal  debtor  made  at  or  after 
the  maturity  of  the  instrument,  discharges  the  instrument.  But  a  re- 
nunciation does  not  affect  the  rights  of  a  holder  in  due  course  without 
notice.  A  renunciation  must  be  in  writing  unless  the  instrument  is 
delivered  up  to  the  person  primarily  liable  thereon." 

8  The  statement  is  abridged,  and  part  of  the  opinion  omitted. 
SM.&  M.B.&  N.— 43 


674  DISCHAKGE.  (Part  4 

This  statute  was  taken  from  an  act  passed  by  the  British  Parliament 
in  1882,  known  as  the  "Bills  of  Exchange  Act."  It  has  been  quite 
generally  adopted  in  various  states  of  the  American  Union.  Its  pro- 
visions are  as  follows:  "(1)  When  the  holder  of  a  bill  at  or  after  its 
maturity  absolutely  and  unconditionally  renounces  his  rights  against 
the  acceptor,  the  bill  is  discharged.  The  renunciation  must  be  in  writ- 
ing, unless  the  bill  is  delivered  up  to  the  acceptor.  (2)  The  liabilities 
of  any  party  to  a  bill  may  in  like  manner  be  renounced  by  the  holder 
before,  at,  or  after  its  maturity,  but  nothing  in  this  section  shall  af- 
fect the  rights  of  a  holder  in  due  course  without  notice  of  the  renuncia- 
tion." 

It  is  readily  seen  that  these  two  statutes,  in  character  and  import, 
are  alike.  The  only  difference  is  change  in  the  form  of  phraseology, 
but  it  affects  neither  the  sense  nor  the  construction.  A  single  case 
has  arisen  in  England  under  the  provisions  of  this  statute.  In  re 
George,  L.  R.  44  Ch.  Div.  627,  decided  in  1890.  Therein  it  appeared 
that  the  testator  desired  to  have  destroyed  a  note  for  i2,000.  given  by 
Airs.  Francis.  Search  was  made  for  the  same,  that  it  might  be  de- 
stroyed, but  it  could  not  be  found.  At  the  instance  of  the  decedent, 
the  nurse  in  attendance  upon  him  wrote  at  his  dictation:  "30th  Au- 
gust, 1889.  It  is  by  Mr.  George's  dying  wish  that  the  check  [sic] 
for  £2,000.  money  lent  to  Mrs.  Francis  be  destroyed  as  soon  as  found." 
The  nurse  added  to  this  declaration  the  words :  "Mr.  George  is  per- 
fectly conscious  and  in  his  sound  mind.  [Signed]  Nurse  T."  This 
transaction  took  place  two  or  three  hours  before  death.  The  testator 
therein  left  a  will,  in  which  he  bequeathed  to  Mrs.  Francis,  his  niece, 
the  sum  of  £6,000.  The  executors  of  the  will  declined  to  pay  the  be- 
quest in  full,  and  thereupon  the  legatee  brought  an  action  to  determine 
the  question  as  to  whether  the  promissory  note  had  been  duly  canceled. 
The  court,  under  the  provisions  of  the  statute  above  quoted,  deter- 
mined that  the  renunciation  was  insufficient  to  discharge  the  note. 
Upon  the  case  there  presented,  I  should  be  disposed  to  hold  that  it 
amounted,  within  the  terms  of  the  act,  to  an  unconditional  renuncia- 
tion of  the  rights  of  the  testator  against  the  maker  of  the  note.  The 
expression  that  it  was  the  testator's  wish  that  it  be  destroyed  would 
seem  to  constitute  an  announced  declaration  to  destroy  the  instrument, 
and,  as  such,  it  was  a  clear  expression  of  a  renunciation  of  his  right  to 
enforce  it.  In  the  declaration  of  renunciation,  it  is  stronger  than  the 
instrument  relied  upon  in  the  present  case. 

There  is  some  obscurity  in  the  provisions  of  our  statute.  In  its  first 
sentence  it  provides  for  the  renunciation  of  the  rights  of  the  holder 
against  any  party  to  the  instrument  which  may  be  made  before,  at,  or 
after  its  maturity.  In  the  second  sentence  it  provides  for  an  absolute 
and  unconditional  renunciation  of  the  rights  of  the  holder  against  the 
principal  debtor  at  or  after  the  maturity  of  the  instrument,  and  dis- 
charges the  instrument.  The  first  relates  to  the  party ;  the  second,  to 
the  instrument.     It  is  somewhat  difficult  to  see  how  there  could  be  an 


Sec.  1)  PAYMENT  AND  RENUNCIATION.  675 

absolute  discharge  of  a  party  to  an  instrument  without  discharging  the 
instrument  as  an  obhgation,  so  far  as  he  is  concerned.  We  do  not 
clearly  perceive  why  this  distinction  should  have  been  made.  It  is  im- 
material, however,  to  the  rights  of  the  parties  to  the  present  aciion. 
The  instrument  of  renunciation  contains  no  express  declaration  of  the 
testator  to  renounce  his  rights  in  the  note  against  the  party,  or  of  his 
right  to  enforce  it  as  a  subsisting  obligation.  The  expression  is:  "I 
wish  [the  note]  to  be  canceled  in  case  of  my  death."  There  is  nothing 
m  these  words  which  can  be  construed  as  expressing  a  renunciation  of 
any  rights  either  against  the  party  or  upon  the  instrument.  Had  it 
been  delivered  to  the  defendant  during  the  lifetime  of  the  testator,  it 
would  not  have  precluded  the  latter  at  any  time  upon  maturity  from 
enforcing  the  note.  There  is  nothing  indicating  an  intent  upon  his 
part  not  to  enforce  it  during  his  lifetime.  There  was  no  delivery  of 
it  to  anybody,  and  while,  doubtless,  it  was  sufficiently  authenticated  to 
accomplish  a  renunciation,  it  had  no  operative  effect  whatever,  as  it 
did  not  fall  within  the  statute  or  comply  with  its  terms. 

In  principle,  the  question  raised  by  this  case  has  been  decided  by  this 
court.  Dimon  v.  Keery,  54  App.  Div.  318,  66  N.  Y.  Supp.  817. 
Therein  the  plaintiff's  intestate  loaned  to  the  defendant  a  sum  of 
money,  taking  her  promissory  note  in  writing,  wherein  she  agreed  to 
pay  the  same,  with  interest,  on  demand.  At  tlie  time  the  note  was  de- 
livered, the  testator  indorsed  thereon  the  words :  "At  my  death  the 
above  note  becomes  null  and  void.  Stephen  C.  Dimon."  Dimon  con- 
tinued to  retain  possession  of  the  note,  and  the  defendant  paid  interest 
thereon,  but  no  principal.  Dimon  died  about  three  years  after  the  exe- 
cution and  delivery  of  the  note.  In  an  action  to  enforce  the  same  by 
his  administrator,  the  defendant  was  held  liable  thereon,  as  the  indorse- 
ment was  a  mere  declaration  by  the  payee  of  the  note  as  to  his  inten- 
tion concerning  it,  but  that  it  was  insufficient  as  constituting  either  a 
gift  of  money,  or  an  agreement  to  discharge  it  as  an  obligation.  The 
court  therein  did  not  discuss  the  statute  which  is  here  the  subject  of 
consideration.  It  is  manifest,  however,  that  the  declaration  indorsed 
upon  the  note  was  not  a  renunciation  of  the  liability  of  the  maker  dur- 
ing the  lifetime  of  the  deceased,  or  of  any  renunciation  of  the  obliga- 
tion of  the  instrument;  and,  as  it  did  not  constitute  a  gift  or  an  agree- 
ment, it  neither  fell  within  the  terms  of  the  statute,  nor  exempted  the 
defendant,  for  either  reason,  from  liability  thereon. 

In  the  instrument  relied  upon  in  this  case,  so  far  as  the  direction  for 
cancellation  in  the  event  of  death,  and  a  command  to  his  heirs  to  obey 
his  wish  and  follow  his  orders,  the  language  is  no  stronger  than  the  in- 
dorsement upon  the  back  of  the  note  in  the  Dimon  Case.  Nor  is  it  as 
strong,  because  the  language  there  used  was  a  declaration  that  the  note 
at  death  "becomes  null  and  void."  Here  there  is  simply  the  expression 
of  a  wish  to  have  it  canceled,  and  a  direction  to  the  heirs  to  obey  the 
wish.     Consequently  the  Dimon  Case  becomes  a  direct  and  controlling 


676  DISCHARGE.  (Part  4 

authority  in  the  disposition  of  this  controversy.  As  there  was  no 
vahd  renunciation  of  right  of  the  testator  to  enforce  the  note  against 
the  party,  or  of  renunciation  from  hability  upon  the  instrument,  and  as 
nothing'contained  in  the  declaration  otherwise  operates  to  relieve  the 
defendant  from  liability,  it  follows  that  the  note  remains  a  valid  and 
subsisting  obligation. 

The  judgment  enforcing  it  should  therefore  be  affirmed,  with  costs." 


BOYLSTON  V.  GREENE. 
(Supreme   Judicial    Court   of    Massachusetts,    Suffolk,    1812.     8    Mass.    465.) 

Assumpsit,  in  which  the  plaintiff  declares  as  indorsee  against  -the  de- 
fendant as  indorser  of  a  promissory  note  made  by  one  John  R.  Greene, 
dated  April  21,  1S07,  payable  to  the  defendant,  by  him  indorsed  to  one 
Thomas  Lathrop,  and  by  him  to  the  plaintiff,  being  payable  in  60 
days  from  date  with  grace  at  the  Norwich  Bank. 

On  the  trial  of  the  action  upon  the  general  issue  before  Parker,  J., 
it  appeared  that  the  said  Lathrop  had  procured  the  note,  soon  after  its 
date,  to  be  discounted  at  the  Norwich  bank,  and  had  received  therefrom 
the  sum  therein  expressed ;  that  at  the  expiration  of  the  60  days  and 
grace,  neither  the  said  John  R.  Greene  nor  the  defendant  having  paid 
the  same,  the  said  Lathrop  paid  the  said  note  at  the  said  bank,  and, 
having  taken  it  up,  afterwards  indorsed  it  to  the  plaintiff. 

The  judge  directed  the  jury  that,  after  Lathrop  had  thus  paid  and 
taken  up  the  note,  it  ceased  to  be  negotiable,  and  therefore  that  the 
plaintiff  could  not  recover.  And  the  jury  having  returned  a  verdict  for 
the  defendant,  the  plaintiff  moved  for  a  new  trial,  for  the  misdirection 
of  the  judge.^° 

Per  Curiam.  The  question  in  this  case  is  whether  the  note  declared 
on  continued  to  be  capable  of  negotiation  after  it  had  been  paid  by 
Lathrop,  the  last  indorser.  In  such  case  there  would  be  no  incon- 
venience in  considering  the  note  still  negotiable,  having  been  paid  by 
the  last  indorser,  for  he  has  a  full  and  complete  right  upon  the  note 
against  the  maker  and  all  prior  indorsers,  and  their  situation  would 
not  be  made  worse  in  any  respect  by  their  obligation  being  transferred 
to  another. 

But  we  find  the  rule  laid  down  generally  that,  by  payment  of  a  bill 
or  promissory  note,  the  contract  of  the  parties  to  it  ceases,  so  far  as 
to  prevent  their  being  subject  to  new  engagements,  and  an  indorsement 
cannot  be  made  after  it,  so  as  to  affect  any  of  the  parties,  except  the 
person  making  it. 

9  Compare  Faneuil  Hall  Bank  v.  Meloon,  183  Mass.  66,  66  N.  E.  410, 
97  Am.  St.  Rep.  416  (190."^),  and  Baldwin  v.  Dalv.  41  Wash  416,  83  Pac. 
724  (1006).     See  E(l\vard.s  v.  ^Yalters.  [189G]  2  Ch.  157  (C.  A.) 

10  Arguments  of  counsel  are  omitted. 


Sec.  1)  PAYMENT    AND    RENUNCIATION.  677 

The  whole  effect,  however,  of  this  rule,  is  to  make  a  difference  in 
the  form  of  action,  as  it  respects  the  nominal  parties.  The  maker 
and  prior  indorser  are  still  liable  on  their  respective  engagements ;  and 
the  plaintiff,  having  a  bona  fide  transfer  of  the  note  from  Lathrop,  may 
maintain  an  action  in  Lathrop's  name  against  either  of  them ;  and  the 
court  will  see  that  no  interference  of  the  nominal  plaintiff  shall  prevent 
a  recovery. 

Judgment  on  the  verdict.^ ^ 


PRICE  V.  SHARP. 
(Supreme  Court  of  North  Carolina,  1842.     24  N.  C.  417.) 

RuFFiN,  C.  J.^^  This  is  an  action  of  assumpsit  on  two  bills  of  ex- 
change by  the  plaintiff"  as  an  indorser  of  Peebles,  Hall  &  Co.  against 
the  acceptor.  The  bills  were  drawn  on  the  10th  of  July,  1841,  by 
Peebles,  Hall  &  Co.,  of  Petersburg,  in  Virginia,  in  favor  of  F.  E. 
Rives,  on  the  defendant  Sharp,  of  Danville,  in  Virginia,  who  accepted 
.them,  but  failed  to  pay  them  when  they  fell  due.  The  one  was  for 
$783.85  at  90  days,  and  the  other  for  $787.71  at  4  months,  from  date. 
Upon  the  failure  of  Sharp,  the  payee,  Rives,  returned  the  bills  to  the 
drawers,  Peebles,  Hall  &  Co.,  for  payment ;  and  they  accordingly  paid 
him  and  took  up  the  bills.  On  the  10th  of  December,  1841,  Peebles, 
Hall  &  Co.  indorsed  the  bills  to  the  present  plaintiff,  who  resides  in 
Caswell,  in  this  state,  and  immediately  commenced  this  action  by  orig- 
inal attachment,  levied  on  the  estate  of  the  defendant,  situate  in  Cas- 
well. The  indorsement  from  Peebles,  Hall  &  Co.  to  the  plaintiff  was 
without  consideration,  and  was  made  for  the  purpose  of  enabling  Price 
to  take  out  an  attachment  in  his  name  for  the  benefit  of  Peebles,  Hall 
&  Co.,  and  the  present  action  was  accordingly  brought  for  their  use. 
Upon  the  return  of  the  attachment  the  defendant  gave  bail,  and  ap- 
peared and  pleaded,  first,  non  assumpsit,  and,  secondly,  by  way  of  spe- 
cial plea  in  bar,  the  facts  stated  respecting  the  indorsement  and  the 
purpose  of  it.  Upon  the  trial  the  facts  were  agreed  upon  as  here  stat- 
ed, and  upon  them  his  honor  was  of  opinion  for  the  plaintiff,  and  so 
instructed  the  jury,  who  found  a  verdict  accordingly,  and  from  the 
judgment  the  defendant  appealed. 

For  the  defendant  it  has  been  insisted  that  the  plaintiff  cannot  main- 
tain this  action,  commenced  by  original  attachment,  because  it  is  not 
brought  for  his  own  benefit,  but,  in  evasion  and  fraud  of  the  act  of 
1777,  for  that  of  Peebles,  Hall  &  Co.,  who  could  not  have  brought  it  in 
their  own  names,  according  to  the  .case  of  Broghill  v.  Wellborn,  15 
N.  C.  511.  Whether  this  objection  be  valid  or  not,  if  taken  in  apt  time, 
it  is  not  now  necessary  to  say;    for,  if  good,  it  comes  too  late,     Un- 

1 1  Overruled  in  Guild  v.  Eager,  17  Mass.  G15  (1822). 

1 2  The  statement  of  facts  is  omitted. 


GTS  DISCHARGE.  (Part  4 

doubtedly  the  holder  of  a  bill  may  indorse  it  to  ar.other  in  trust  for 
himself,  or  to  collect  as  his  agent,  and  the  indorsee  may  have  an  ac- 
tion against  the  acceptor  of  the  bill.  The  objection  is  not,  therefore, 
that  this  plaintiff  could  not  maintain  assumpsit  on  these  bills,  but  that 
he  cannot  commence  that  action  by  attachment,  but  should  have  done 
it  by  capias.  The  imputed  defect  lies  in  the  writ,  and  the  answer  is 
obvious  that,  by  accepting  the  declaration  and  pleading  to  it,  the  party 
waives  all  defects  in  the  process.  This  point  should  have  been  raised 
by  a  plea  in  abatement  or  in  some  other  method  before  pleading  in  bar. 

But  in  the  opinion  of  the  court  there  is  another  objection  to  the  plain- 
tiff's recovery,  which  has  more  force.  It  is  that  the  bills  could  not  be 
put  into  circulation  by  the  indorsement  of  Peebles,  Hall  &  Co.,  after 
those  persons  had  paid  them  to  Rives.  If  Rives'  name  had  been  put 
on  the  bills,  the  case  of  Beck  v.  Robley,  1  H.  Black.  89,  is  a  direct  au- 
thority against  this  action.  In  that  case  a  bill  was  drawn  by  Brown  on 
Robley,  payable  to  Hodgson  or  order.  Hodgson  put  his  name  on  the 
bill ;  and,  not  being  paid  when  due,  Hodgson,  without  striking  out  his 
blank  indorsement,  returned  the  bill  to  Brown,  and  he  took  it  up,  and 
afterwards  passed  it  to  Beck,  who  brought  the  action.  It  was  held 
that  when  the  bill  came  back  unpaid,  and  was  taken  up  from  the  payee 
by  the  drawer,  it  ceased  to  be  a  bill,  for  it  could  not  then  be  negoti- 
ated by  him  without  making  Hodgson  liable  thereon,  for  which  there 
was  no  color.  Between  that  case  and  the  present  there  is  but  one  point 
of  difference;  and  that  but  increases  the  diffic^'lties  in  the  plaintiff's 
way.  Hodgson's  name  was  remaining  on  the  bill  when  he  returned  it 
to  Brown ;  whereas  it  does  not  appear  that  Rives  ever  put  his  name  on 
these  bills,  and  it  cannot  be  assumed  that  he  did.  But  waiving  that  for 
the  present,  the  case  cited  is  conclusive  for  the  defendant,  even  if 
Rives'  indorsement  were  on  the  bills. 

The  counsel  for  the  plaintiff,  however,  opposes  to  that  case  the  more 
recent  one  of  Callow  v.  Lawrence,  3  Maule  &  Selwyn,  95,  and  the 
language  there  used  by  Lord  Ellenborough :  "That  a  bill  of  exchange 
is  negotiable  ad  infinitum,  until  it  has  been  paid  by,  or  discharged  in 
behalf  of,  the  acceptor;  and  that,  if  the  drawer  has  paid  the  bill,  it 
seems  he  may  sue  the  acceptor  on  the  bill,  and  if,  instead  of  suing  the 
acceptor,  he  put  it  into  circulation  upon  his  own  indorsement  only,  it 
does  not  prejudice  any  of  the  other  parties,  who  may  have  indorsed  the 
bill,  that  the  holder  should  be  at  liberty  to  sue  the  acceptor."  But  it 
seems  to  us  that  neither  the  case  itself,  nor  the  doctrine  here  quoted, 
wlien  correctly  understood,  shakes  the  principle  of  Beck  v.  Robley,  but 
rather  sustains  it.  No  one  can  deny  that  a  bill  is  negotiable  indefinitely 
until  payment.  But  the  question  is,  by  whom  may  it  be  negotiated? 
Why,  by  the  payee,  or  by  any  person  entitled  under  his  indorsement ; 
and  the  acceptor  will  be  as  much  bound  to  pay  it  to  such  indorsee, 
however  remote,  as  he  was  to  the  payee  himself,  before  he  indorsed 
it.  But  it  does  not  follow  that  the  drawer  of  the  bill,  who  takes  it  up, 
after  dishonor,  from  the  payee,  is  to  be  considered  the  indorsee  of  the 


Sec.  1)  PAYMENT    AND    RENUNCIATION.  G79 

payee.  Far  from  it ;  for,  instead  of  claiming  from  the  pa}ee  or  un- 
der him,  he  was,  in  truth,  hable  on  it  to  the  payee,  in  default  of  tlic 
acceptor,  and  in  discharge  of  the  hability  took  it  up.  Then  he  could 
not  look  to  the  payee  to  make  the  bill  good  to  him ;  and,  by  conse- 
quence, he  could  not  by  his  subsequent  indorsement  give  to  his  indorser 
the  right  to  such  recourse  against  the  payee.  But  as  that  would  be 
the  necessary  effect  of  such  indorsement,  if  allowed  at  all,  it  resu-ted 
that  in  such  a  case  the  law  would  not  allow  the  drawer  again  to  put 
his  bills  into  circulation.  That  the  payee  suffered  his  name  to  remain 
on  the  bill,  when  he  returned  it,  will  not  be  an  authority  to  the  drawer 
to  negotiate  it ;  for  it  was  not  left  there  to  give  credit  to  the  bill  with 
the  drawer,  or,  in  other  words,  as  an  indorsement,  but  merely  as  a  re- 
ceipt for  the  amount  paid  by  the  drawer,  animo  solvendi.  After  such 
payment  it  would  be  unjust  to  the  payee  to  allow  the  drawer  to  pass 
the  bill  on  the  responsibility  of  the  former ;  and,  therefore,  he  is  not 
permitted  to  pass  it  at  all.  With  this  reasoning,  the  passage  quoted 
from  Lord  Ellenborough  consists. 

In  Callow  V.  Lawrence  the  bill  was  not,  as  here  and  in  Beck  v.  Rob- 
ley,  payable  to  the  third  person,  but  was  payable  to  the  drawer's  or- 
der. After  acceptance  the  drawer  indorsed  it,  and  it  went  through 
several  hands,  and  was  finally  returned  to  the  drawer  by  the  holder, 
who  struck  out  all  indorsements  after  that  of  the  drawer,  and  received 
payment  from  him,  and  then  the  drawer  passed  the  bill  to  Callow ; 
and  it  was  held  that  the  latter  might  maintain  his  action  against  the 
acceptor.  A  bill  payable  to  the  drawer's  order,  when  accepted,  be- 
comes substantially  a  promissory  note  from  the  acceptor  to  the  drawer, 
being  an  express  promise  to  pay  the  drawer  or  his  assigns.  When  it 
comes  back  to  the  drawer,  he  is  rem.itted  to  his  original  rights  upon 
an  instrument  payable  to  himself,  and  may  sue  on  it,  without  noticing 
indorsements  that  had  been  made  of  it.  Dcjok  v.  Casw^ell,  2  N.  C.  18 ; 
Strong  v.  Spear,  2  N.  C.  214;  Callow  v.  Lawrence,  3  M.  &  8.95.  It 
would  seem  to  follow  necessarily  that  the  drawer  might  again  indorse 
it ;  for  in  so  doing  he  passes  the  instrument  regularly  according  to  its 
face,  and  leaves  no  one  liable  to  his  indorsee  but  himself  and  the  ac- 
ceptor, each  of  Avhom  ought  thus  to  be  liable.  Gomez  Serra  v.  Berke- 
ley, 1  Wils.  46 :   Guild  v^  Eager,  17  Mass.  615. 

Upon  this  distinction  between  bills  payable  to  a  third  person,  on  the 
one  hand,  and  a  promissory  note  or  bill  payable  to  the  drawer's  order, 
on  the  other,  are  obviously  founded  the  observations  of  Lord  Ellen- 
borough  in  the  case  cited.  He  admits  the  authority  of  Beck  v.  Robiey, 
and  carefully  confines  his  rule  to  the  case  then  before  him,  that  is  to 
say,  of  a  bill  payable  to  the  drawer's  order,  by  saying  "that  if,  instead 
of  suing  the  acceptor,  he  (the  drawer)  put  the  bill  into  circulation  up- 
on his  own  indorsement  only,  the  holder  might  sue  the  acceptor,"  which 
can  apply  to  -:o  case  but  that  of  a  bill  payable  to  the  drawer's  order  or 
a  promir.sory  note.  Then  he  immediately  proceeds  to  declare  further 
that  "the  case  would  be  different,  if  the  circulation  of  the  bill  would 


680  DISCHARGE.  (Part  4 

have  the  effect  of  prejudicing  any  of  the  indorsers,"  as  in  Beck  v. 
Robley  was  the  case.  The  other  judges  place  the  matter  in  a  still  clear- 
er light.  Le  Blanc,  J.,  said :  "There  was  in  Beck  v.  Robley  no  color  to 
charge  Hodgson,  and,  striking  out  Hodgson's  indorsement,  the  bill 
could  not  possibly  be  negotiable."  And  Bayley,  J.,  who  is  high  au- 
thority upon  a  point  of  this  kind,  states  the  distinction  very  shortly  and 
happily  by  saying  that  "in  Beck  v.  Robley  payment  by  Brown  struck 
out  the  indorsement  of  Hodgson,  whereas  the  payment  by  Pywell  (the 
drawer  in  Callow  v.  Lawrence)  did  not,  in  legal  effect,  strike  out  Py- 
well's  own  indorsement,  so  as  to  render  the  bill  no  longer  negotiable." 
Thus  those  two  cases  stand  well  together.  The  principle  of  Beck  v. 
Robley  is  that  which  governs  this  case,  and  is  that  a  person  cannot 
negotiate  paper,  when  by  so  doing  he  would  render  responsible  on  it 
another  person,  from  whom  he  had  taken  it  up,  under  a  prior  respon- 
sibility ;  while  the  principle  of  Callow  v.  Lawrence  is  that  a  person 
who  takes  up  paper  once  due  to  himself  may  again  put  it  into  circu- 
lation, provided  that,  in  so  doing,  he  exposes  no  person  to  a  prejudice 
but  himself  or  those  who  are  legally  and  justly  liable  on  the  paper  be- 
fore him. 

In  considering  the  case  hitherto,  it  has  been  treated  as  if  Rives  had 
put  his  name  on  the  bills,  in  which  case,  even,  we  have  seen  that  the 
law  is  against  the  plaintiff.  But  that  fact  is  otherwise  here,  or,  at  least, 
does  not  appear,  which  is  the  same  thing.  In  Beck  v.  Robley  the  plain- 
tiff no  doubt  did  sue  as  the  indorsee  of  Hodgson,  the  payee,  so  that  he 
had  apparently  a  regular  title  to  the  bill.  But  this  plaintiff  declares, 
not  as  the  indorsee  of  Rives,  but  upon  the  indorsement  of  Peebles, 
Hall  Sz  Co.,  which  is  certainly  bad.  No  person  can  acquire  a  title  to 
a  bill,  payable  to  the  order  of  Rives,  but  by  the  order  of  Rives.  When 
he  gave  it  back  to  Peebles,  Hall  &  Co.,  without  his  indorsement,  it  was 
dead  to  all  intents  and  purposes  as  a  negotiable  instrument.  In  the 
words  of  Mr.  Justice  Le  Blanc,  "Striking  out  the  payee's  indorsement, 
the  bill  could  not  possibly  be  negotiated."  The  indorsement  to  the 
plaintiff  was  a  nullity,  and  he  cannot  maintain  any  action  on  the  bills. 

New  trial  awarded. 


BLENN  V.  LYFORD. 
(Supreme  Judicial  Court  of  Maiue,  1879.     70  Me.  149.) 

Assumpsit  by  indorsee  against  the  maker  of  a  promissory  note. 

After  the  note  was  read  in  evidence,  the  defendant  offered  the  receipt 
following,  signed  by  M.  E.  Rice,  the  payee,  which  was  excluded :  "Re- 
ceived of  H.  H.  Lyford  two  notes  of  hand,  dated  in  December  last,  for 
three  hundred  dollars  each,  one  payable  in  six  months  from  date,  the 
other  seven  months  from  date.  These  notes  are  for  my  benefit,  except 
for  his  note  due  me  April  15,  1872,  for  $225.  The  balance  of  the  two 
above-named  $300  notes  I  am  to  pay." 


Sec.  1)  pay:mext  and  rexunciation.  681 

Joseph  H.  Richardson,  called  by  the  defendant,  testified  in  substance 
that  he  bought  the  note  in  suit  of  M.  E.  Rice  in  the  fore  part  of  April, 
1872 ;  that  it  had  about  four  months  to  run ;  that  it  then  had  on  the  back 
the  words,  "Holden  without  demand  or  notice,  M.  E.  Rice,"  now 
erased ;  that  he  kept  it  two  or  three  months  after  it  became  due.  On 
being  asked  whether  M.  E.  Rice  then  paid  it  and  took  it  up,  the  answer, 
on  objection  of  the  plaintiff,  was  excluded. 

Various  other  questions  to  similar  purports,  and  other  testimony 
tending  to  show  equitable  defenses,  was  excluded  on  objection. 

By  consent  of  parties,  the  case  was  withdrawn  from  the  jury  and 
reported  to  the  law  court.  If  the  foregoing  rulings  were  wrong,  and 
if  the  evidence  excluded  was  admissible  and  would  constitute  a  valid 
defense  against  this  plaintiff,  the  case  is  to  stand  for  trial ;  if  inad- 
missible, or  insufficient  to  constitute  such  defense,  a  default  is  to  be 
entered  for  the  amount  of  the  note,  with  interest  since  due. 

The  remaining  material  facts  sufficiently  appear  in  the  opinion.^ ^ 

Appleton,  C.  J.  This  is  an  action  of  assumpsit  on  the  following 
note:  "St.  Albans,  Me.,  Dec.  2,  1871.  ^ 

"Seven  months  from  date,  value  received,  I  promise  to  pay  M.  E. 
Rice,  or  order,  three  hundred  dollars,  at  any  bank  in  Bangor. 

"H.  H.  Eyford." 

The  note  was  indorsed  in  blank :  "M.  E.  Rice."  The  following 
words  were  also  on  the  back  of  the  note,  erased  with  ink,  but  legible : 
"Holden  without  demand  or  notice.     M.  E.  Rice." 

Granting  the  presumption  that  the  plaintiff  is  a  bona  fide  holder  for 
value  of  the  note  before  maturity,  that  .presumption  may  be  over- 
come by  proof. 

It  appears  from  the  testimony  that  the  note  was  indorsed  to  one 
Richardson,  for  value,  in  the  April  following  its  date,  that  it  was  not 
paid  at  maturity,  and  that  about  three  months  after  its  dishonor  he 
delivered  it  to  Rice,  the  payee. 

The  plaintiff  then  received  the  note  in  suit,  when  overdue.  The 
note,  remaining  unpaid  after  maturity,  was  dishonored,  and  it  was 
the  duty  of  the  indorsee  to  make  inquiries  concerning  it.  If  he  takes 
it,  though  h?  gave  a  full  consideration  for  it,  he  does  so  on  the  credit 
of  the  indorser.  He  holds  the  note  subject  to  all  equities  with  which 
it  may  be  incumbered. 

As  the  plaintiff  is  the  indorsee  of  a  dishonored  note,  it  was  com- 
petent for  the  defendant  to  show  that  it  was  an  accommodation  note, 
and  that  it  had  been  paid  by  the  party  for  whose  accommodation  it 
was  given. 

That  the  note  was  for  the  accommodation  of  the  payee  is  abun- 
dantly shown  by  his  receipt  of  the  date  of  February  22,  1872,  as  well 
as  by  the  testimony  offered  and  excluded. 

The  note  being  for  the  accommodation  of  Rice,  it  was  his  duty  to 

13  The  arguments  of  counsel  are  omitted. 


682  DISCHARGE.  (Part  4 

pay  it.  The  note  being  found  after  dislionor  in  the  hands  of  the  one 
bound  to  pay  it,  the  presumption  is  that  he  paid  it.  2  Par.  N.  &  B, 
220.  It  was  competent  to  show  that  in  fact  he  paid  it,  but  the  answer 
to  an  inquiry  whether  the  note  was  paid  by  Rice  was  excluded.  This 
was  erroneous. 

Assuming  the  note  to  have  been  paid  by  Rice,  it  was  the  same  as 
if  paid  by  the  maker.  It  was  paid  by  the  party  whose  duty  it  was  to 
pay  it.  The  purpose  for  which  it  was  given  has  been  accomplished. 
The  negotiability  of  a  note  ceases  after  its  payment  by  the  party  who 
should  rightfully  pay  it.  "Now  it  cannot  be  denied,"  says  Denman,  C. 
J.,  in  Lazarus  v.  Cowie,  43  E.  C.  L.  819,  "that  if  a  bill  be  paid  when 
due  by  the  person  ultimately  liable  on  it,  it  has  done  its  work,  and 
is  no  longer  a  negotiable  instrument.  *  *  *  But  the  drawer  of  an 
accommodation  bill  is  in  the  same  situation  as  the  acceptor  of  a  bill 
for  value.  He  is  the  person  ultimately  liable,  and  his  payment  dis- 
charges the  bill  altogether." 

Rice,  when  he  took  up  the  note  in  suit,  had  no  right  of  action  against 
the  maker,  and  could  not  transfer  to  the  plaintiff  any  better  right  after 
maturity  than  he  had.  Edw.  B.  &  N.  564;  Fish  v.  French,  15  Gray 
(Mass.)  520;  Tucker  v.  Smith,  4  Me.  415. 

In  the  cases  cited  by  the  plaintiff  there  are  most  important  differ- 
ences from  the  one  under  consideration.  In  Bank  v.  Crow,  60  N.  Y. 
85,  the  plaintiffs  were  the  indorsees  of  the  note  for  value  and  before 
maturity,  and  were  consequently  to  be  protected.  In  Thompson  v. 
Shepherd,  12  Mete.  (Mass.)  311.  46  Am.  Dec.  676,  it  was  held  that  the 
indorsee  of  a  note,  who  receives  it  for  value  from  the  second  indorser, 
after  it  has  been  dishonored  by  the  maker,  can  recover  thereon  against 
the  maker,  although  he  knew  when  he  received  it  that  as  between 
the  maker  and  first  indorser  it  was  an  accommodation  note.  But  this 
is  upon  the  principle  affirmed  by  the  court  in  Woodman  v.  Churchill. 
52  Me.  58,  that  where  the  first  indorsee  of  a  promissory  note  acquires 
a  right  of  action  against  the  maker,  by  being  a  bona  fide  purchaser, 
without  notice  and  before  maturity,  he  can  transfer  a  good  title  as 
well  after  as  before  the  note  becomes  due. 

Exceptions  sustained. 


MADISON   SQUARE  BANK  v.   PIERCE. 

(Court  of  Appeals  of  New   York.   1S93.     137  N.  Y.  444.  .33  N.   E.   557.  20  L. 
R.   A.  335,  33   Am.   St.    Rep.   751.) 

This  was  an  action  upon  a  promissory  note.  The  facts,  so  far  as 
material,  are  stated  in  the  opinion. 

FixcH,  J.  We  have  a  novel  and  interesting  question  before  us 
on  this  appeal,  although  its  apparent  importance  will  lessen  as  we  pass 
from  first  impressions  to  some  slower  reflection.  It  arises  upon  facts 
which  are  very  brief  and  simple,  and  may  at  once  be  stated.     The  de- 


Sec.  1)  PAYMENT    AND    RENUNCIATION.  683 

fendant,  Pierce,  made  his  promissory  note  payable  to  his  own  order, 
and  indorsed  it  to  the  Bates  Company.  Limited,  which  indorsed  it  to 
the  plaintiff  bank;  the  latter  discounting  it,  and  paying  the  proceeds 
over  to  the  immediate  indorser.  Thereafter  the  Bates  Company  be- 
came insolvent,  and  passed  into  the  hands  of  a  receiver,  who  paid  to 
the  bank  upon  the  liability  of  the  indorser  73Vt  per  cent,  of  the  amount 
secured  by  the  note.  Later  the  bank  sued  Pierce,  the  maker,  and  re- 
covered judgment  for  the  full  amount  of  the  note,  in  spite  of  the  proof 
showing  the  payment  made  by  the  receiver,  and  in  disregard  of  the 
claim  asserted  by  the  defendant  that  he  should  only  be  held  liable  for 
the  balance  remaining  unpaid.  That  judgment  has  been  affirmed  by 
the  general  term,  Judges  Daniels  and  Barrett  each  writing  very  strong 
and  valuable  opinions  in  support  of  their  doctrine,  and  relying  upon 
the  authority  of  Jones  v.  Broadhurst,  9  Man.  G.  &  S.  177,  67  E.  C.  L. 
175,  which  fully  warrants  their  conclusion.  The  question  does  not 
seem  ever  before  to  have  arisen  in  this  country,  and  we  are  left  at 
liberty  to  examine  the  English  rule,  and  to  follow  it  or  not,  as  we  ap- 
prove or  disapprove  its  logic  and  its  consequences. 

We  are  not  to  regard  the  note  as  being  accommodation  paper,  but 
must  assume  its  transfer  for  value.  The  form  of  the  transaction  is 
equivalent  to  what  it  would  have  been  if  the  Bates  Company  had  been 
named  as  payee,  and  loses  none  of  its  force  by  the  intervention  of  the 
maker  as  first  indorser.  That  indorsement,  in  the  form  adopted,  was 
needed  for  the  regular  transfer  of  title,  but  does  not  change  or  affect 
the  nature  and  character  of  the  maker's  liability.  He  remains  the 
ultimate  debtor,  the  person  who  ought  to  pay  the  debt,  in  preference 
to  and  in  exoneration  of  all  the  other  parties  to  the  paper,  who  in 
some  form  or  other  are  entitled  to  have  final  recourse  to  him ;  and  it 
is  to  the  case  of  such  a  maker  of  the  note  or  such  an  acceptor  of  the 
bill  of  exchan9;e  that  the  English  rule  alone  applies,  and  it  is  ex- 
plicitly declared  inapplicable  where  the  indorser  or  drawer  is  the  real 
debtor,  although  in  form  only  secondarily  liable. 

Pierce,  therefore,  was  the  ultimate  debtor,  and  the  party  who  ought 
to  pay  the  note,  both  in  discharge  of  the  obligation  to  the  holder  and 
in  exoneration  of  the  indorser.  When  the  bank  sued  on  the  note,  it 
was  the  legal  holder  and  the  legal  party  in  interest.  Upon  production 
of  the  paper  and  the  usual  proof,  judgment  against  the  maker  for 
the  full  amount  was  inevitable,  unless  some  defense  should  be  inter- 
posed. The  only  possible  one  for  Pierce  was  part  payment,  and  he 
was  compelled  to  assert,  and  his  counsel  are  compelled  to  argue,  that 
the  money  paid  by  the  indorser  to  the  holder  inured  to  the  benefit  of 
the  maker  as  a  payment  on  his  debt.  But  that  doctrine  cannot  pre- 
vail, for  very  obvious  reasons.  The  indorser's  payment  did  not  in 
the  least  lessen  or  satisfy  the  maker's  debt.  He  owed  it  all  exactly 
as  before.  What  had  happened  possibly  changed  somewhat  the  real 
creditor,  but  left  the  whole  debt  due  and  unpaid.  To  whom  he  sliould 
pay  might  become  a  new  question,  but  how  much  he  should  pay  in 


684  DISCHARGE,  (Part  4 

discharge  of  the  note  was  not  made  doubtful  in  any  degree.  What 
the  receiver  advanced  to  the  holder  is  familiarly  described  as  a  pay- 
ment ;  but  it  was  such  relatively  to  the  indorser's  liability  alone,  while 
relatively  to  the  obligation  of  the  maker  it  was  an  equitable  purchase, 
instead  of  a  payment.  That  view  of  it  was  taken  in  a  very  early 
case,  the  decision  of  which  depended  necessarily  upon  it. 

In  Callow  v.  Lawrence,  3  Maule  &  S.  95,  it  appeared  that  one 
Pywell  drew  a  bill  upon  Lawrence  to  his  own  order,  which  Lawrence 
accepted.  The  drawer  indorsed  the  bill  to  Taylor,  who  discounted  it, 
and  thereafter  indorsed  it  to  Barnett.  It  was  protested  for  nonpay- 
ment. The  drawer  paid  Barnett  the  full  amount,  and  took  the  bill, 
and,  striking  off  the  indorsements  of  Taylor  and  Barnett,  transferred 
the  bill  to  Callow,  who  sued  the  acceptor  upon  it.  The  latter  claimed 
that  the  bill  was  paid  and  extinguished,  which  the  court  denied,  say- 
ing that  the  drawer  "became  the  purchaser  of  the  bill"  when  he  paid 
and  took  it  up  out  of  Barnett's  hands ;  that  it  was  not  paid  by  the 
drawer  animo  solvendi,  in  order  to  extinguish  it,  but  only  to  redeem 
himself  from  the  situation  in  which  he  stood.  That  must  always  be 
true  of  payment  by  indorser  to  holder,  where  the  maker  is  the  ultimate 
debtor.  To  the  extent  of  the  money  paid  the  indorser  becomes  equi- 
tably entitled  to  be  substituted  to  the  rights  and  remedies  of  the 
holder,  and  becomes  pro  tanto  the  beneficial  owner  of  the  debt;  so 
that  the  maker's  obligation  to  pay  the  note  in  full,  at  first  due  to  the 
holder  solely  in  his  own  right,  becomes,  after  the  part  payment  by 
the  indorser,  still  wholly  due  to  the  holder,  but  partly  in  his  own  right 
and  partly  as  trustee  for  the  indorser.  A  court  of  law  cannot  split 
the  note  into  parts,  and  must  act  upon  the  legal  interest  and  owner- 
ship. 

In  the  present  case  there  was  no  privity  between  maker  and  in- 
dorser as  respects  the  action  of  the  latter.  He  paid,  not  as  the  agent 
of  the  maker,  not  at  his  request,  not  for  his  benefit,  and  under  no  duty 
to  relieve  him,  but  independently,  upon  his  own  obligation,  to  lessen 
his  own  responsibility,  and  not  at  all  to  discharge  the  ultimate  debt 
which  it  was  the  maker's  duty  to  pay.  It  seems  very  clear,  therefore, 
that  the  maker  cannot  utilize  for  his  own  benefit  a  payment  which,  as 
to  him,  is  not  a  payment  upon  the  debt.  It  becomes,  as  I  have  said, 
merely  a  question  to  whom  he  shall  pay,  and  who  may  sue  for  an(i 
collect  the  whole  unpaid  sum.  In  that  question  the  maker  has  no 
concern  beyond  the  inquiry  whether  he  may  become  liable  to  different 
persons  for  the  same  debt,  and  encounter  the  danger  of  paying  it 
twice.  I  can  discover  no  such  peril.  The  judgment  in  favor  of^'the 
holder  is  a  bar  to  any  other  suit  on  the  same  note,  and  payment  to  the 
holder  discharges  the  note  utterly.  Ordinarily,  the  indorser  cannot 
recover  except  upon  the  note,  and  as  holder,  and  in  accordance  with 
the  law  merchant.  If  he  ever  has  any  other  right  of  action  against 
the  maker,  it  is  either  in  equity  or  by  force  of  some  facts  beyond  the 


Sec.  1)  PAYMENT   AND    RENUNCIATION.  685 

bare  relation  established  by  the  paper.  And  where  the  note  is  merged 
in  the  holder's  judgment,  or  paid  in  full  to  him  by  the  maker,  the  in- 
dorser's  only  right  is  through  the  judgment  or  against  the  proceeds,  if 
he  has  made  a  partial  payment  to  the  holder.  That  does  the  indorser 
no  wrong.  If  he  is  not  content  that  the  holder  shall  collect  to  some 
extent  as  his  trustee,  he  may  prevent  it  by  payment  in  full  to  the 
holder,  and  so  entitle  himself  to  the  possession  of  the  note  on  which 
to  sue,  or,  if  judgment  has  been  obtained,  to  be  subrogated  to  all  of 
the  rights  of  the  plaintiff  therein. 

I  think  this  result  is  clearly  indicated  by  our  own  decisions.  In 
Mechanics'  Bank  v.  Hazard,  13  Johns.  353,  the  maker  of  the  note  had 
been  arrested  in  an  action  upon  it,  and  his  bail  sought  to  relieve  them- 
selves by  force  of  a  payment  made  by  the  indorser  to  the  holder;  but 
such  effect  was  denied  to  it;  the  court  saying  that  it  was  not  a  pay- 
ment by  or  on  behalf  of  the  maker,  or  of  which  he  or  his  bail  could 
avail  themselves.  And  in  Guernsey  v.  Burns,  25  Wend.  411,  where 
the  suit  was  by  the  holder,  representing  the  legal  title  and  interest,  it 
was  said  to  be  no  defense  to  the  maker,  and  no  concern  of  his,  that 
some  property  in  the  note  was  in  another. 

It  thus  becomes  apparent  that  there  is  no  very  great  importance  in 
the  question  which  method  of  securing  payment  from  the  maker  is 
adopted,  since  the  same  result  follows  from  each,  and  that  it  narrows 
down  to  the  inquiry  whether,  as  matter  of  correct  doctrine  and  of 
convenience  in  practice,  the  holder  may  recover  the  whole  debt  against 
maker  or  acceptor  for  himself  and  as  trustee  for  the  indorser  to  the 
extent  of  his  acquired  interest;  or  whether  he  shall  take  judgment 
only  for  the  balance,  leaving  the  indorser  to  sue  in  some  way  and  on 
some  theory,  which  apparently  could  not  be  upon  the  note,  because 
already  merged  in  the  judgment,  but  might  be  for  money  paid  for  the 
use  of  the  maker,  since  he  gets  the  benefit  of  it  in  the  reduction  of  the 
judgment,  as  was  held  in  Pownal  v.  Ferrand,  6  Barn.  &  C.  439,  where 
the  holder  deducted  the  indorser's  payment  from  the  levy  against  the 
maker.  The  former  seems  to  me  to  be  the  logical  and  convenient 
method,  and  so  I  think  we  should  follow  the  English  doctrine. 

I  have  not  underrated  the  assault  made  upon  it  by  the  appellant. 
He  asserts  that  Jones  v.  Broadhurst  is  contrary  to  the  earlier  cases, 
and  has  been  criticised  and  shaken  by  the  later  ones.  I  have  ex- 
amined them  all,  with  some  wonder  at  the  amount  of  learning  and  in- 
genuity expended  upon  the  subject.  Pierson  v.  Dunlop,  Cowp.  571 ; 
Walwyn  v.  St.  Quintin,  1  Bos.  &  P.  653 ;  Bacon  v.  Searles,  1  H.  Bl. 
88 ;  Hemming  v.  Brook,  1  Car.  &  M.  57 ;  Randall  v.  Moon,  13  C.  B. 
261 ;  Cook  v.  Lister,  13  C.  B.  (N.  S.)  543 ;  Solomon  v.  Davis,  1  Cababe 
&  E.  83 ;  Thornton  v.  Maynard,  L.  R.  10  C.  P.  695.  The  prior  cases 
were  very  fully  and  carefully  reviewed  by  Baron  Cresswell  in  the 
opinion  rendered  in  Jones  v.  Broadhurst,  and  of  the  subsequent  cases 
I  deem  it  only  necessary  to  say  that,  along  with  some  criticism  and 


086  DISCHARGE.  (Part  4 

occasional  doubt,  the  doctrine  has  remained  substantially  unshaken, 
and  tlie  case  last  cited  was  declared  by  Lord  Coleridge  to  be  the  ac- 
cepted law. 

It  must  not  be  forgotten,  however,  and  I  may  prudently  repeat,  that 
the  doctrine  has  no  application  to  accommodation  paper,  and  rests 
wholly  upon  the  actual  and  ultimate  indebtedness  of  maker  or  acceptor 
as  the  party  who  ought  to  pay.  In  such  a  case  as  that,  which  cor- 
rectly describes  the  one  now  before  us.  and  where  no  disturbing  facts 
affect  the  relations  of  the  parties  as  fixed  by  the  paper  itself,  I  think 
the  holder  may  sue  and  recover  the  full  amount,  receiving  so  much 
of  the  proceeds  as  represents  a  part  payment  by  the  indorser  as  trus- 
tee for  him. 

It  follows  that  the  judgment  should  be  affirmed,  with  costs.  All 
concur,  except  Maynard,  J.,  dissenting. 

Judgment  affirmed.^* 


QUIMBY  V.   VARNUM. 

(Supreme   .Tudiclal   Court  of   Massachusetts.    Suffolk,   1906.     190   Mass.    211. 

76  N.  E.  671.) 

Contract  on  two  promissory  notes  made  by  John  M.  Varnum,  the 
defendant,  payable  to  the  order  of  John  H.  Hurley,  attorney,  one  for 
$250,  dated  October  10,  1898,  payable  12  months  after  date,  and  the 
other  for  $200,  dated  April  10,  1899,  and  payable  on  May  1,  1899. 
Writ  dated  June  27,  1904. 

The  answer,  among  other  defenses,  alleged  payment.  At  the  trial 
in  the  superior  court  before  Hardy,  J.,  without  a  jury,  the  following 
facts  appeared : 

Both  of  the  notes  sued  on  were  signed  on  the  back  in  blank  by  Ben- 
jamin Varnum  Howe  after  they  had  been  signed  by  the  defendant  and 
then  were  delivered  by  the  defendant  to  Hurley,  the  payee. 

At  the  maturity  of  each  note  Hurley  notified  Howe  that  the  notes 
were  not  paid  and  that  he  should  look  to  him  for  payment.  Howe 
thereupon  paid  the  amount  due  on  the  notes  to  Hurley,  whereupon 
Hurley  struck  his  own  indorsement  off  the  notes,  by  drawing  a  line 
through  his  name,  and  handed  the  notes  to  Howe. 

Howe  retained  the  notes  in  his  possession  until  April  or  May,  1904, 
when  he  negotiated  them  to  the  plaintiff,  to  whom  he  owed  money  at 
that  time.  The  notes  were  to  be  applied  on  Howe's  account  with  the 
plaintiff.  No  money  ever  was  received  on  the  notes  by  Howe  from  the 
defendant. 

1*  Accord:  Twelfth  Ward  Bank  v.  Brooks,  63  App.  Div.  220.  71  N.  T. 
Supp.  3SS  (1901)  ;  Polhemus  v.  Realty  Co..  74  N.  J.  Law,  570.  67  Atl.  303 
(1907).  But  see  Royal  Bauk  v.  Goldschmidt,  51  Misc.  Rep.  622,  101  N.  Y. 
Supp.  101  (1906). 


Sec.  1)  PAYMRNT    AND    RENUNCIATION.  G87 

The  defendant  requested  the  judge  to  rule  that  the  plaintiff  could 
not  recover,  because  Howe,  having  indorsed  the  notes  before  delivery, 
wa*;  an  original  promisor  and  comaker  with  the  defendant,  and  not 
an  indorser,  and  that  the  plaintiff,  having  received  the  notes  after  ma- 
turity and  after  they  had  been  paid  by  Howe,  the  comaker,  could  not 
maintain  an  action  thereon ;  that  the  co-maker,  Howe,  having  paid  the 
notes  to  Hurley,  the  payee,  at  their  maturity,  the  notes  became  extin- 
guished, and  would  not  support  the  present  action  based  solely  on  the 
notes ;  that  each  note  was  a  promise  to  pay  John  H.  Hurley,  attorney, 
and  that  neither  of  the  notes  offered  in  evidence  bore  the  indorsement 
of  John  H.  Hurley,  attorney,  and  therefore  the  action  on  the  notes 
'could  not  be  maintained;  and  that  on  all  the  evidence  the  plaintiff 
was  not  entitled  to  recover. 

The  judge  refused  to  rule  as  requested,  but  ruled  that  each  note  was 
a  promise  to  pay  to  the  order  of  John  H.  Hurley,  attorney,  and  that 
neither  of  the  notes  offered  in  evidence  bore  the  indorsement  of  John 
H.  Hurley,  attorney,  and  further  ruled,  at  the  request  of  the  plaintiff, 
that  Howe,  by  placing  his  signature  on  the  notes  in  suit  in  blank  be- 
fore deHvery,  became  secondarily  liable  to  the  payee,  that  payment  of 
the  notes  sued  on  by  the  indorser,  Benjamin  Varnum  Howe,  did  not 
discharge  or  extinguish  the  notes,  that  upon  paying  the  face  of  the 
notes  to  the  payee  Howe  was  entitled  to  the  possession  of  the  notes 
and  vested  with  the  right  to  recover  the  amount  from  the  maker,  that 
after  paying  the  amount  of  the  notes  sued  on  and  receiving  possession 
of  them  he  was  entitled  to  negotiate  them,  that  the  plaintiff  upon  re- 
ceiving the  notes  from  Howe  succeeded  to  all  the  rights  against  the 
maker  which  Howe  had,  that  where  an  instrument  is  negotiated  back 
to  a  prior  party  that  party  may  reissue  and  further  negotiate  the  same, 
and  that  the  holder  of  a  negotiable  instrument  may  sue  thereon  in  his 
own  name. 

The  judge  found  for  the  plaintiff  in  the  sum  of  $590.53,  and  the 
defendant  alleged  exceptions. 

Hammond,  J.  The  note  of  October  10,  1898,  was  given  before  St. 
1898,  p.  492,  c.  533  (now  embodied  in  Rev.  Laws,  c.  73),  took  effect; 
and,  of  course,  the  rights  of  the  parties,  so  far  as  respects  that  note, 
are  to  be  determined  by  the  law  of  this  commonwealth  as  it  was  be- 
fore the  statute.  By  that  law  Howe,  although  entitled  to  notice  of 
the  dishonor  of  the  note  the  same  as  an  indorser,  was,  nevertheless,  a 
co-maker  and  joint  promisor,  and  the  payment  of  the  note  by  him  ex- 
tinguished it ;  and  he  could  not  thereafter  put  it  in  circulation  as  against 
his  co-promisor,  although  in  a  proper  action  he  could  recover  of  him 
the  amount  paid,  if,  as  between  the  two,  it  was  the  duty  of  the  latter 
to  pay  the  note.  Pray  v.  Maine,  7  Cush.  253,  and  cases  cited.  Brooks 
V.  Stackpole,  168  Mass.  537,  47  N.  E.  419 ;  National  Bank  of  Republic 
v.  Delano,  185  Mass.  424,  70  N.  E.  444. 

The  same  doctrine  is  applicable  to  the  note  of  April  10,  1899,  which 


688  DISCHARGE.  (Part  4 

was  made  after  the  statute  above  named  took  effect,  unless  there  is 
something  in  that  statute  to  the  contrary.  The  plaintiff  contends  that 
there  is  something  there  to  the  contrary.  He  contends  that,  under 
Rev.  Laws,  c.  73,  §§  80,  81,  the  rights  and  habilities  of  Howe  were 
those  of  an  indorser,  and  therefore  he  was  only  secondarily  liable,  and 
that  by  section  138  the  payment  of  the  note  by  Howe  did  not  extinguish 
it,  but  he  was  remitted  to  his  former  rights  on  the  note,  and  under  that 
section  and  section  67  might  reissue  it. 

But  we  cannot  adopt  this  interpretation  of  the  statute.  It  is  mani- 
fest that  the  precise  case  in  hand,  so  far  as  respects  the  original  sig- 
nature of  Howe,  is  described  in  section  81  of  the  statute  in  the  follow- 
ing words:  "Where  a  person,  not  otherwise  a  party  to  an  instrument, 
places  thereon  his  signature  in  blank  before  delivery,  he  is  liable  as 
indorser:  *  *  *  (1)  If  the  instrument  is  payable  to  the  order  of  a 
third  person,  he  is  liable  to  the  payee  and  to  all  subsequent  parties." 
This  section  accurately  defines  the  liability  of  Howe  upon  this  note. 
And  in  a  sense  this  liability  may  be  said  to  be  secondary. 

Section  138  provides  that,  "where  an  instrument  is  paid  by  a  party 
secondarily  liable  tliereon  it  is  not  discharged ;  but  the  party  so  paying  it 
is  remitted  to  his  former  rights  as  regards  all  prior  parties,  and  he  may 
strike  out  his  own  and  all  subsequent  indorsements,  and  again  negoti- 
ate the  instrument,"  with  some  exceptions  not  here  material.  It  is 
plain  that  this  section  cannot  apply  to  a  case  like  the  one  before  us. 
First,  what  kind  of  note  would  this  have  been  if  Howe  had  done 
what  the  statute  suggests?  Let  him  strike  out  his  own  and  all  subse- 
quent indorsements.  Subsequent  indorsements  must  be  held  to  mean 
subsequent  in  point  of  liability.  He  must  therefore  strike  out,  not  only 
his  own  indorsement,  but  also  that  of  the  payee.  Having  done  what 
the  statute  says,  he  has  a  note  signed  by  Varnum  payable  to  the  order 
of  Hurley,  but  without  Hurley's  indorsement,  and,  further,  without 
any  right  to  Hurley's  indorsement.  Is  such  a  note  negotiable?  In  the 
case  at  bar  the  note  sued  on  did  not  bear  the  indorsement  of  the  payee, 
Hurley  having  struck  out  his  own  indorsement  before  he  handed  the 
note  to  Howe. 

Again,  the  statute  says  that  the  party  secondarily  liable  is  remitted 
to  his  former  rights  as  regards  all  former  parties.  But  the  onlv  prior 
party  Howe  could  look  to  is  the  maker,  for  he  stands  next  to  the  maker 
in  the  order  of  liability,  but,  as  against  him,  Howe  never  had  any  claim 
on  the  note  as  such,  and  it  never  was  intended  that  he  should  have. 
If  this  note  never  had  been  delivered  to  Hurley,  but  had  been  handed 
to  Howe  in  the  first  instance  by  Varnum,  could  Howe  have  negotiated 
it  without  the  indorsement  of  the  payee?  And,  when  he  has  paid  it 
and  is  remitted  to  his  former  rights,  does  he  get  any  other  right  than 
he  had  before?  The  section  is  clearly  inapplicable  to  such  a  state  of 
things.  It  is  intended  to  apply  where  the  person  secondarily  liable  can 
trace  his  title  on  the  face  of  the  note  and  its  indorsements  through  the 


Sec.  2)  CANCELLATION.  689 

prior  parties  to  the  party  whom  he  seeks  to  hold.  This  Howe  could 
not  do,  nor  can  the  plaintiff.  Having  paid  the  note,  Howe  had  an  ac- 
tion against  Varnum  to  recover,  but  the  action  was  not  upon  the  note. 

It  follows  that  the  plaintiff  cannot  recover  on  either  note. 

Exceptions  sustained. 


SECTION  2.— CANCELLATION 


RAPER  et  al.  v.  BIRKBECK  et  al. 
(Court  of  Kings  Bench,  1812.     15  East,  17.) 

This  was  an  action  brought  on  a  bill  of  exchange  for  £534.  18s. 
drawn  by  one  Crossley  on  Samuel  Shawe  &  Co.,  and  accepted  by  them, 
at  Messrs.  Ladbrooke's  and  Co.,  London,  payable  six  months  after  date. 
The  declaration,  after  stating  several  indorsements  over  to  the  defend- 
ants, alleged  an  indorsement  by  them  to  the  plaintiffs  by  name,  and 
then  averred  in  the  usual  way  the  presentment  of  the  bill  for  payment 
at  Ladbrooke's,  and  their  refusal  to  pay  it.  At  the  trial,  before  Lord 
Ellenborough,  C.  J.,  in  London,  after  last  Trinity  term,  it  appeared 
that  the  defendants,  who  were  bankers  in  Yorkshire,  paid  the  bill  in 
question,  with  others,  to  the  plaintiffs,  who  were  likewise  bankers 
there ;  and  it  was  then  in  a  perfect  state,  with  the  several  indorsements 
and  acceptance  on  it.  When  the  bill  became  due,  on  the  21st  of  Janu- 
ary, 1811,  being  then  in  the  hands  of  Down  &  Co.,  their  clerk  carried 
it  to  the  general  clearing  house  of  the  bankers  in  London,  and  re- 
ceived it  back  from  Ladbrooke's  clerk  as  a  dishonored  bill,  with  the 
words  "no  account"  written  thereon.  But  as  there  was  also  written 
at  the  back  of  it,  "in  case  of  need  apply  to  Boldero  Si  Co."  the  bill  was 
sent  to  Boldero's  house  in  the  course  of  the  clearing  hours,  where  H. 
Boldero,  one  of  the  partners,  upon  receiving  the  bill  from  his  clerk, 
intending  to  allow  it  in  account  with  Down  &  Co.  drew  his  pen  through 
the  acceptance,  and  canceled  it  by  mistake,  thinking  it  had  been  an  ac- 
ceptance payable  at  their  house;  but  the  bill  had  not  then  been  al- 
lowed in  the  clearing  house,  nor  taken  down  in  the  clearing  book,  and 
in  less  than  ten  minutes  from  the  time  of  canceling  it,  the  clerk  in- 
formed him  of  his  mistake,  and  wrote  under  the  acceptance,  "Canceled 
by  mistake,"  to  which  H.  Boldero  subscribed  his  initials.  But  never- 
theless the  bill  was  taken  up  by  Boldero's  house  for  the  honor  of  the 
plaintiffs,  with  whom  they  had  an  account,  and  was  never  out  of  their 
hands  afterwards.  On  the  following  day,  one  of  the  prior  indorsers 
called  at  Boldero's  for  the  bill  in  order  to  pay  it ;  but  on  finding  that 
the  acceptance  had  been  canceled,  said  that  as  it  appeared  canceled,  he 
would  not  take  it  up.  Upon  these  facts  the  jury  found  a  verdict  for 
Sm.&  M.B.&  N.— 44 


090  DISCHARGE.  (Part  4 

the  plaintiffs;  and  in  the  following  term  the  Attorney  General  obtained 
a  rule  nisi  for  a  new  trial,  on  the  ground  that  the  cancellation,  in  fact, 
though  accidental,  threw  a  difficulty  upon  the  defendants  of  recovering 
ever  against  the  prior  indorsers,  as  it  would  be  necessary  to  go  through 
the- same  media  of  proof  to  establish  their  claim  over  against  such  prior 
indorsers — a  difficulty  which  ought  not  to  be  thrown  upon  them,  es- 
pecially by  the  act  of  the  then  holders  of  the  bill,  and  which  difficulty 
might  be  increased  by  the  death  of  any  of  the  witnesses  in  the  mean- 
time ;   and  therefore,  he  contended,  that  this  action  did  not  lie. 

Garrow  and  Holroyd  now  showed  cause  against  the  rule,  and  said 
that  the  only  pretense  there  could  be  for  disturbing  the  verdict  was 
that  the  effect  of  this  accidental  cancellation  might  be  to  prevent  the 
defendants  from  recovering  over  against  the  prior  indorsers.  But  their 
legal  remedy  upon  the  bill  remains  the  same  as  before,  however  the 
circumstance  may  throw  more  of  difficulty  in  their  way,  and  require 
some  additional  proof  by  way  of  explanation.  This  is  no  more  than 
might  happen  from  any  other  accident  to  which  a  bill  of  exchange  is 
liable,  as  if  it  should  be  obliterated  by  a  quantity  of  ink  falling  upon 
it,  or  torn  by  a  child  ;  and  yet  it  cannot  be  contended  that  in  such  case 
the  party  would  be  precluded  from  his  remedy  on  the  bill.  It  is  ob- 
servable that  this  cancellation  was  not  only  done  by  mistake,  but  was 
done  also  by  a  person  who  had  no  authority  to  cancel ;  for  the  ac- 
ceptance was  at  Ladbrooke's,  and  not  Boldero's  acceptance.  But  wher- 
ever an  instrument  is  not  made  an  end  of.  then  if  anything  be  done 
to  it  by  a  person  who  has  no  authority  to  do  the  act,  the  act  so  done 
will  not  vitiate  it.  In  Fernandez  v.  Glynn  it  was  held,  where  a  bank- 
er's clerk  had  canceled  a  check  by  mistake,  but  had  afterwards  writ- 
ten under  it,  "Canceled  by  mistake,"  that  the  banker  might,  notwith- 
standing, return  the  check  unpaid,  for  he  had  not  thereby  made  it  his 
own. 

The  Attorney  General,  contra.  The  objection  is  not  of  the  plain- 
tiff's ow-n  raising,  but,  as  appears  by  the  evidence,  has  been  made  b\ 
one  of  the  prior  indorsers  refusing  to  take  the  bill  up  on  that  very 
account.  The  question,  then,  is  whether  the  defendants,  before  they 
are  compellable  to  pay  the  amount  of  the  bill  to  the  plaintiffs,  have  not 
a  right  to  require  that  they  shall  be  placed  in  such  a  situation  as  to 
have  the  usual  means  furnished  them  of  resorting  over  against  the 
prior  indorsers.  If  they  have  such  right,  it  is  an  answer  to  this  action  ; 
for  it  is  clear  that  the  cancellation  will  impose  upon  them  many  dif- 
ficulties of  proof  out  of  the  ordinary  course.  The  bill  upon  the  face 
of  it  appears  to  have  been  paid ;  and  it  will  be  necessary,  in  order  to 
support  any  action  on  it,  to  go  into  evidence  explanatory  of  that  cir- 
cumstance. That  evidence  may  be  removed  out  of  the  reach  of  the 
defendants,  either  by  death,  or  a  variety  of  other  accidents.  It  is  said 
that  this  is  the  common  chance  attending  upon  all  cases ;  the  answer  to 
which  in  the  present  case  is  that  the  parties  themselves,  who  held  the 
bill  at  the  time,  had  no  right  by  their  own  act  to  impose  these  diffi- 


Sec.  2)  CANCELLATION.  6'Jl 

culties  upon  others,  though  if  the  law  had  cast  them  upon  the  defend- 
ants, it  might  have  been  different. 

Lord  Ellenbgrough,  C.  J.  I  should  have  felt  considerable  pressure 
in  the  argument  used  on  behalf  of  the  defendants,  if  the  fact  had  borne 
them  out.  Undoubtedly  the  indorsees,  generally  speaking,  are  bound 
to  return  the  bill  to  the  indorsers  in  the  same  plight  as  they  received 
it,  and  unchanged  by  any  act  of  theirs ;  but  I  cannot  consider  the  act 
of  Boldero  as  the  act  of  the  indorsees,  for  he  had  no  authority,  either 
express  or  implied,  from,  them  to  do  the  act,  and  the  whole  originated 
in  his  mistake.  The  case  then  comes  to  the  instances  put  in  argument 
at  the  trial,  of  a  blot  having  fallen  upon,  or  a  child  having  torn  or  de- 
stroyed, the  instrument.  In  such  cases  the  law  is  not  so  strict  as  to 
require  the  precise  formal  proof  which  is  ordinarily  required ;  for 
that  would  be  at  once  to  preclude  the  party  of  his  remedy.  I  remem- 
ber Pothier  (vol.  2,  114,  partie  1,  c.  3,  §  3)  in  his  treatise  on  Bills  of 
Exchange,  speaking  of  an  acceptor  who  has  put  his  signature  to  a  bill, 
but  has  not  parted  with  it,  says,  that  before  he  does  part  with  it,  "II 
pent  changer  de  volonte  et  rayer  son  acceptation."  A  fortiori,  then, 
a  third  person  who  cancels  an  acceptance  by  mistake,  having  no  au- 
thority so  to  do,  shall  not  be  held  thereby  to  make  void  the  bill,  but 
shall  be  at  liberty  to  correct  that  mistake,  in  furtherance  of  the  rights 
of  the  parties  to  the  bill. 

Per  Curiam.    Rule  discharged.^' 


INGHAM  V.  PRIMROSE. 

(Court  of  Common  Pleas,  1859.    7  C.  B.  [N.  S.l  82.) 
This  was  an  action  upon  a  bill  of  exchange  drawn  by  one  Charles 
Murgatroyd   upon  and  accepted  by  the  defendant,   and  indorsed  by 
Murgatroyd  to  one  King,  and  by  King  to  the  plaintiff.    *    *    * 

The  cause  was  tried  before  Cockburn,  C  J.,  at  the  sittings  in  Lon- 
don after  Hilary  term,  1858.  The  facts  which  appeared  in  evidence 
were  as  follows:  The  defendant  accepted  the  bill  declared  on,  and 
gave  it  to  Charles  Murgatroyd  for  the  purpose  of  procuring  it  to  be 
discounted  for  his  use.  Murgatroyd  tried,  but  in  vain,  to  get  the  bill 
discounted,  and  returned  it  to  the  defendant,  who  in  Murgatroyd's 
presence  tore  the  paper  in  half  and  threw  it  away  in  the  street.  Mur- 
gatroyd picked  up  the  bill,  observing  that  it  was  better  not  to  throw 

15  Accord:  Lyudonville  Bank  v.  Fletcher.  68  Vt.  81,  34  Atl.  38,  54  Am.  St. 
Ren  874  (1895) ;  Humboldt  Bank  v.  Kosslns.  95  Iowa.  1,  G3  X.  W.  351  (lS9o) ; 
Dominion  Bank  v.  Anderson.  35  Sess.  Cas.  408  (18.^).  See.  also.  Bank  of 
Scotland  v  Bank.  [1891]  A.  C.  592.  But  a  destruction  or  canci'llatiou  not  in- 
duced by  fraud  or  mistake  discbar.:;es  all  parties,  or  the  party  whose  signa- 
ture is  canceled  both  from  lialulity  on  the  instrument  (McCurmick  v.  Shea, 
50  Misc  Ren.  592,  99  N.  Y.  Supp.  461  [1906])  and  from  liability  on  the  con- 
sideration given  for  it  (Blade  v.  Nolaud,  12  Wend.  [X-  I'd  1T3,  27  Am.  Dec.  126 
[1834]). 


692  DISCHARGE.  (Part  i 

it  down  in  the  street ;  whereupon  the  defendant  said  nothing.  Mur- 
gatroyd  afterwards  pasted  together  the  two  pieces  of  paper,  and 
passed  the  bill  away  to  one  King,  who  afterwards  indorsed  it  to  the 
plaintiff. 

The  jury  found  that  the  defendant  when  he  tore  the  bill  in  half  and 
threw  it  away  intended  to  cancel  it ;  that  King  bona  fide  gave  £15.  for 
the  bill ;  but  that  the  transaction  between  King  and  the  plaintiff  was 
not  bona  fide. 

The  learned  judge  thereupon  directed  a  verdict  to  be  entered  for 
the  defendant,  but  gave  the  plaintiff  leave  to  move  to  enter  the  ver- 
dict for  him,  the  court  to  be  at  liberty  to  draw  inferences  of  fact. 

Cross,  in  Easter  term,  1858,  accordingly  obtained  a  rule  nisi.^' 

Williams,  J.,  now  delivered  the  judgment  of  the  court. 

This  case  was  argued  before  the  late  Lord  Chief  Justice,  my  Broth- 
ers WiLLES  and  Byles,  and  myself.  We  are  of  opinion  that  the 
plaintiff  is  entitled  to  judgment.  It  is,  we  think,  settled  law  that,  if 
the  defendant  had  drawn  a  check,  and,  before  he  had  issued  it,  he  had 
lost  it,  or  it  had  been  stolen  from  him,  and  it  had  afterwards  found  its 
way  into  the  hands  of  a  holder  for  value  without  notice,  who  had 
sued  the  defendant  upon  it,  he  would  have  had  no  answer  to  the  ac- 
tion. So,  if  he  had  indorsed  in  blank  a  bill  payable  to  his  order,  and 
it  been  lost  or  stolen  before  he  delivered  it  to  any  one  as  indorsee. 
See  the  judgment  in  Marston  v.  Allen,  8  M.  &  W.  504.  The  reason 
is  that  such  negotiable  instruments  have,  by  the  law  merchant,  become 
part  of  the  mercantile  currency  of  the  country ;  and,  in  order  that  this 
may  not  be  impeded,  it  is  requisite  that  innocent  holders  for  value 
should  have  a  right  to  enforce  payment  of  them  against  those  who  by 
making  them  have  caused  them  to  be  a  part  of  such  currency.  In  the 
present  case,  the  defendant  made  the  bill  in  question,  and  rendered 
it  a  negotiable  instrument,  and  then  tried  in  vain  to  get  it  discounted. 
It  was  then  returned  to  him,  and  was  intended  by  him  to  be  whollv 
withdrawn  from  circulation.  But  it  was,  notwithstanding,  again  put 
into  circulation  through  the  fraud  of  another  man,  and  reached  the 
hands  of  the  plaintiff,  who  held  it  for  value,  without  any  notice  of  the 
fraud. 

If  these  were  all  the  facts  of  the  case,  it  appears  to  be  impossible  to 
distinguish  it  in  any  material  point  from  the  cases  already  mentioned, 
of  liability  when  the  original  circulation  has  been  effected  by  fraud, 
without  the  consent  of  him  who  made  the  instrument. 

The  question,  then,  is  whether  such  liability  is  precluded  by  the  fact 
that,  before  the  instrument  was  put  into  circulation  for  the  second 
time,  the  defendant  had  torn  it,  with  the  intention  of  destroying  or 
annulling  it. 

If  an  act  done  with  such  an  intention  by  the  maker  of  a  negotiable 
instrument  does  not  manifest  the  intention  on  the  face  of  the  instru- 

1 8  The  statement  is  abridged,  and  the  arguments  of  counsel  omitted. 


Sec.  2)  CANCELLATION.  693 

ment,  it  can  hardly  be  maintained  that  the  act  would  be  of  any  ef- 
ficacy ;  because  the  instrument  would  nevertheless  be  apparently  a  part 
of  the  mercantile  currency,  as,  for  instance,  if,  in  the  present  case, 
the  defendant  had  merely  crumpled  up  the  bill  in  his  hand  and  thrown 
it  away,  and  it  had  been  restored  to  its  original  appearance,  without 
leaving  any  trace  of  the  act  which  was  intended  to  annul  it.  But  if, 
on  the  other  hand,  the  act  be  such  that  the  paper  bears  on  the  face  of 
it  the  signs  of  something  having  been  done  to  it  which  is  character- 
istic of  an  intention  to  destroy  or  annul  it,  as  in  the  case  of  Scholey  v. 
Ramsbottom,  2  Campb.  485,  where  the  drawer  of  a  check  tore  it  into 
four  pieces  and  threw  it  from  him,  and  the  four  pieces  were  after- 
wards neatly  pasted  together  upon  another  slip  of  paper,  but  the  rents 
were  quite  visible,  and  the  face  of  the  check  soiled  and  dirty,  no 
holder  of  an  instrument  in  such  a  condition  could  enforce  it,  because. 
in  truth,  no  man  of  ordinary  intelligence  and  caution  could  fairly  re- 
gard it  as  part  of  the  apparent  commercial  currency. 

The  case  before  us,  therefore,  appears  to  turn  on  the  question 
whether  the  act  of  tearing  the  bill  into  two  pieces,  being  manifest  on 
the  face  of  it,  is  such  an  act  as  prima  facie  ought  to  have  indicated  to 
the  plaintiff  that  it  had  been  withlield  or  withdrawn  from  circulation. 
As  we  understand  the  facts,  the  tearing  had  been  done  in  such  a  way 
that  the  appearance  of  the  bill  when  it  reached  the  plaintiff's  hands 
was  at  least  as  consistent  with  its  having  been  divided  into  two,  for 
the  purpose  of  safer  transmission  by  the  post,  as  with  its  having  been 
torn  for  the  purpose  of  annulling  it.  It  was,  properly,  a  question  for 
the  jury  whether  the  bill  exhibited  appearances  which  would  have  led 
a  man  of  ordinary  intelligence  to  the  conclusion  that  it  had  been  torn 
for  the  latter  purpose.  But  the  point  has  been  so  reserved  at  the 
trial  that  the  court  is  to  perform  the  function  of  the  jury  in  this  re- 
spect ;  and  we  cannot  find  enough  on  the  facts  of  the  case,  or  on  an 
inspection  of  the  bill  itself,  to  justify  us  in  coming  to  such  a  conclu- 
sion. 

But  it  is  argued,  on  the  part  of  the  defendant,  that  the  putting  to- 
gether of  the  two  halves  under  the  circumstances  amounted  to  for- 
gery, just  as  much  as  if  some  signature  which  he  had  written  for  a  dif- 
ferent purpose  had  been  taken  from  its  proper  place,  and  fraudulently 
attached  as  his  signature  to  the  bill. 

This  would  be  a  very  narrow  ground  of  decision,  inasmuch  as  it 
would  concede  that  the  bill  would  be  enforceable  if  the  tearing  had 
stopped  short  of  utterly  dividing  the  paper,  or  if  the  bill  had  come  to 
the  plaintiff's  hands  in  the  halves,  by  two  successive  posts,  with  an  in- 
timation that  it  was  so  sent  to  him  for  the  purpose  of  safer  transmis- 
sion. 

However,  it  seems  to  us  that,  even  assuming  that  the  act  of  thus 
reconstructing  the  bill  constituted  a  forgery  (which  may  admit  of 
grave  doubt),  yet,  on  the  principle  of  the  decision  of  Young  v.  Grote. 
4  Bingh.  253,  12  J.  B.  Moore,  481,  this  would  be  no  answer  to  the 


G94  DISCHARGE,  (Part  4 

claim  of  the  plaintiff,  because  the  defendant,  by  abstaining  from  an 
effectual  cancellation  or  destruction  of  the  bill,  has  led  to  the  plaintiff's 
becoming  the  holder  of  it  for  value,  and  without  having  any  just  cause 
for  supposing  that  it  had  been  canceled  or  annulled. 

The  rule  must  therefore  be  absolute  for  entering  a  verdict  for  the 
plaintiff  for  the  amount  of  the  bill  and  interest.^^ 


SECTION  3.— ALTERATION 


MASTER  et  al.  v.  MILLER. 

(Court  of  King's  Bench,  1791.     4  Term  R.  320.) 

The  first  count  in  this  declaration  was  in  the  usual  form  by  the  in- 
dorsees of  a  bill  of  exchange  against  the  acceptor;  it  stated  that  Peel 
&  Co.  on  the  20th  of  March,  1788,  drew  a  bill  for  £974.  10s.  on  the  de- 
fendant, payable  three  months  after  date  to  Wilkinson  &  Cooke,  who 
indorsed  to  the  plaintiffs.  The  second  count  stated  the  bill  to  have 
been  drawn  on  the  2Gth  of  March.  There  were  also  four  other  counts, 
for  money  paid,  laid  out  and  expended ;  money  lent  and  advanced ; 
money  had  and  received ;  and  on  an  account  stated.  The  defendant 
pleaded  the  general  issue ;  on  the  trial  of  which  a  special  verdict  was 
found. 

It  stated  that  Peel  &  Co.  on  the  26th  March,  1788,  drew  their  bill 
on  the  defendant,  payable  3  months  after  date  to  Wilkinson  &  Cooke, 
for  £974.  10s.,  "which  said  bill  of  exchange,  made  by  the  said  Peel  & 
Co.,  as  the  same  hath  been  altered,  accepted,  and  written  upon,  as  here- 
after mentioned,  is  now  produced,  and  read  in  evidence  to  the  said 
jurors,  and  is  now  expressed  in  the  words  and  figures  following,  to 
wit:  June  23d.  £974.  10s.  Manchester,  March  26,  1788.  Three 
months  after  date  pay  to  the  order  of  Messrs.  Wilkinson  &  Cooke, 
£974.  10s.  received,  as  advised.  Peel,  Yates  &  Co.  To  Mr.  Chas.  Mil- 
ler. C.  M.  23d  June,  178S."  That  Peel  &  Co.  delivered  the  said  bill 
to  Wilkinson  &  Cooke,  which  the  defendant  afterwards,  and  before 
the  alteration  of  the  bill  hereinafter  mentioned,  accepted.  That  Wil- 
kinson &  Cooke  afterwards  indorsed  the  said  bill  to  the  plaintiffs,  for 
a  valuable  consideration  before  that  time  given  and  paid  by  them  to 
Wilkinson  &  Cooke  for  the  same.  That  the  said  bill  of  exchange  at 
the  time  of  making  thereof,  and  at  tlie  time  of  the  acceptance,  and 
when  it  came  to  the  hands  of  Wilkinson  &  Cooke  as  aforesaid,  bore 
date  on  the  26th  day  of  March,  1788,  the  day  of  making  the  same. 

IT  But  see  Baxendale  v.  Bennett.  3  Q.  B.  D.  525  (1878);  Scholfield  v.  Lon- 
desborough.  \1SUG]  A.  C.  514  ;  National  Exchange  Bank  v.  Lester,  194  N  Y. 
461,  S7  N.  E.  779,  21  L.  R.  A.  (N.  S.)  402  (1909). 


Sec  3)  ALTEKATIUN.  695 

And  that  after  it  so  came  to,  and  whilst  it  remained  in  the  hands  of, 
Wilkinson  &  Cooke,  the  said  date  of  the  said  bill,  without  the  author- 
ity, or  privity,  of  the  defendant,  was  altered  by  some  person  or  per- 
sons to  the  jurors  aforesaid  unknown  from  the  26th  day  of  March, 
1788,  to  the  20th  day  of  March,  1788.  That  the  words  "June  23d,"  at 
the  top  of  the  bill,  were  there  inserted  to  mark  that  it  would  become 
due  and  payable  on  the  23d  of  June  next  after  the  date ;  and  that  the 
alteration  herein  before  mentioned,  and  the  blot  upon  the  date  of  the 
bill  of  exchange,  now  produced  and  read  in  evidence,  were  on  the  bill 
of  exchange,  when  it  was  carried  to  and  came  into  the  hands  and  pos- 
session of  the  plaintiffs.  That  the  bill  of  exchange  was  on  the  23d  of 
June  and  also  on  the  2Sth  of  June,  1788,  presented  to  the  defendant 
for  payment,  on  each  of  which  days  respectively  he  refused  to  pay. 
The  verdict  also  stated  that  the  bill  so  produced  to  the  jury  and  read 
in  evidence  was  the  same  bill,  upon,  which  the  plaintiffs  declared 
etc.^» 

Grose,  J.  The  only  question  in  this  case  is,  whether  there  appears 
on  the  face  of  this  special  verdict  a  right  of  action  in  the  plaintiffs  on 
any  of  the  counts.  The  first  count  is  on  a  bill  of  exchange  dated  the 
20th  of  March ;  but,  there  being  no  proof  of  any  bill  of  that  date, 
there  is  clearly  an  end  of  that  count.  The  second  is  on  a  bill  dated  the 
'26th  of  March;  but  the  defendant  objects  to  the  plaintiffs'  recovering 
on  this  count  also,  because,  the  bill  having  been  altered  while  it  was  in 
the  hands  of  Wilkinson  &  Cooke,  it  is  not  the  same  bill  as  that  which 
was  accepted ;  and  that  is  the  true  and  only  question  in  the  cause. 
My  idea  is  thj^t  the  plaintiffs'  right  of  action,  as  stated  in  this  count, 
:annot  be  maintained  at  common  law,  but  is  supported  only  on  the 
custom  of  merchants,  which  permits  these  particular  choses  in  action 
to  be  transferred  from  one  person  to  another.  The  plaintiffs,  as  in- 
dorsees, in  order  to  recover  on  this  bill,  must  prove  the  acceptance 
by  the  defendant,  the  indorsement  from  Wilkinson  &  Cooke  to  them, 
a.  id  that  this  was  the  bill  which  was  presented  when  it  became  due. 
Now  has  all  this  been  proved?  The  bill  was  drawn  on  the  26th  of 
March,  payable  at  3  months  date.  The  defendant's  engagement  by  his 
acceptance  was,  that  it  should  be  paid  when  it  became  due,  according 
to  that  date;  but  afterwards  the  date  was  altered.  The  date  I  con- 
sider as  a  very  material  part  of  the  bill,  and  by  the  alteration  the  time 
of  payment  is  accelerated  several  days.  According  to  that  alteration, 
the  payment  was  demanded  on  the  23d  of  June,  which  shows  that  the 
plaintiffs  considered  it  as  a  bill  drawn  the  20th  of  March;  then  the 
bill  which  was  produced  in  evidence  to  the  jury  was  not  the  same  bill 
which  was  drawn  by  Peel  &  Co.  and  accepted  by  the  defendant;  and 
here  the  cases,  which  were  cited  at  the  bar,  apply. 

Piggott's  is  the  leading  case;  from  that  I  collect  that  when  a  deed 
is  erased,  whereby  it  be"-^mes  void,  the  obligor  may  plead  non  est 

18  The  arguments  of  counsel  and  the  opiuious  of  Lord  Keuyou,  C.  J.,  and 
Ashhurst  and  Buller,  JJ.,  are  omitte<' 


G96  DISCHARGE.  (Part  4 

factum,  and  give  the  matter  in  evidence,  because  at  the  time  of  plea 
pleaded  it  was  not  his  deed ;  and  secondly,  that  when  a  deed  is  altered 
in  a  material  point  by  himself,  or  even  by  a  stranger,  the  deed  thereby 
becomes  void.  Now  the  effect  of  that  determination  is,  that  a  ma- 
terial alteration  in  a  deed  causes  it  no  longer  to  be  the  same  deed. 
Such  is  the  law  respecting  deeds ;  but  it  is  said  that  that  law  does  not 
extend  to  the  case  of  a  bill  of  exchange.  Whether  it  do  or  not  must 
depend  on  the  principle  on  which  this  law  is  founded.  The  policy  of 
the  law  has  been  already  stated,  namely,  that  a  man  shall  not  take  the 
chance  of  committing  a  fraud,  and  when  that  fraud  is  detected,  re- 
cover on  the  instrument  as  it  was  originally  made.  In  such  a  case  the 
law  intervenes,  and  says  that  the  deed  thus  altered  no  longer  continues 
the  same  deed,  and  that  no  person  can  maintain  an  action  upon  it.  In 
reading  that  and  the  other  cases  cited,  I  observe  that  it  is  nowhere  said, 
that  the  deed  is  void,  merely  because  it  is  the  case  of  a  deed,  but  be- 
cause it  is  not  the  same  deed.  A  deed  is  nothing  more  than  an  instru- 
ment or  agreement  under  seal ;  and  the  principle  of  those  cases  is  that 
any  alteration  in  a  material  part  of  any  instrument  or  agreement 
avoids  it,  because  it  thereby  ceases  to  be  the  same  instrument.  And  ■ 
this  principle  is  founded  on  great  good  sense,  because  it  tends  to  pre- 
vent the  party,  in  whose  favor  it  is  made,  from  attempting  to  make 
any  alteration  m  it.  This  principle  too  appears  to  me  as  applicable  to 
one  kind  of  instruments  as  to  another. 

But  it  has  been  contended  that  there  is  a  difference  between  an  al- 
teration of  bills  of  exchange  and  deeds;  but  I  think  that  the  reason 
of  the  rule  affects  the  former  more  strongly,  and  the  alteration  of 
them  should  be  more  penal,  than  in  the  latter  case.  Supposing  a  bill  of 
exchange  were  drawn  for  £100.  and  after  acceptance  the  sum  was 
altered  to  £1,000.  It  is  not  pretended  that  the  acceptor  shall  be  liable 
to  pay  the  £1,000. ;  and  I  say  that  he  cannot  be  compelled  to  pay  the 
£100.  according  to  his  acceptance  of  the  bill,  beqause  it  is  not  the  same 
bill.  So  if  the  name  of  the  payee  had  been  altered,  it  would  not  have 
continued  the  same  bill.  And  the  alteration  in  every  respect  prevents 
the  instrument's  continuing  the  same,  as  well  when  applied  to  a  bill  as 
to  a  deed.  It  was  said  that  Piggott's  Case  only  .shows  to  what  time 
the  issue  relates ;  but  it  goes  further,  and  shows  that  if  the  instrument 
be  altered  at  any  time  before  plea  pleaded,  it  becomes  void.  It  is 
true  the  court  will  inquire  to  what  time  the  issue  relates  in  both  cases. 
Then  to  what  time  does  the  issue  relate  here?  The  plaintiffs  in  this 
case  undertook  to  prove  everything  that  would  support  the  assumpsit 
in  law,  otherwise  the  assumpsit  did  not  arise.  It  was  incumbent  on 
them  to  prove  that,  before  the  action  was  brought,  this  identical  bill, 
which  was  produced  in  evidence  to  the  jury,  was  accepted  by  the  de- 
fendant, presented,  and  refused;  but  if  the  bill,  which  was  accepted 
by  the  defendant,  were  altered  before  it  was  presented  for  payment. 
then  that  identical  bill  which  was  accepted  by  the  defendant,  was  not 
presented  for  payment;  the  defendant's  refusal  was  a  refusal  to  pay 


Sec.  3)  ALTEItATION.  697 

another  instrument;  and  therefore  the  plaintiffs  failed  in  proving  a 
necessary  averment  in  their  declaration.  If  the  bill  had  been  presented 
and  refused  payment,  and  it  had  been  altered  after  the  action  was 
brought,  then  it  might  have  been  like  the  case  mentioned  at  the  bar. 

It  was  contended  at  the  bar  that  the  inquiry  before  a  jury  in  an 
action  like  the  present  should  be,  whether  or  not  the  defendant  prom- 
ised to  pay  the  bill  at  the  time  of  his  acceptance ;  but  granting  that  he 
did  so  promise,  that  alone  will  not  make  him  liable,  unless  that  same 
bill  were  afterwards  presented  to  him.  I  will  not  repeat  the  observa- 
tions which  have  been  already  made  by  my  Lord  on  the  case  in  Mol- 
loy;  but  the  note  of  that  case  is  a  very  short  one;  and  the  principle 
of  it  is  not  set  forth  in  any  other  book,  nor  indeed  do  the  facts  of  it 
sufficiently  appear.  I  doubt  also  whether  it  was  a  determination  of 
this  court.  It  only  appears  that  there  was  a  point  made  at  nisi  prius, 
but  not  that  it  was  afterwards  argued  here.  But  it  has  been  said 
that  a  decision  in  favor  of  the  plaintiffs  will  be  the  most  convenient 
one  for  the  commercial  world ;  but  that  is  much  to  be  doubted,  for  if, 
after  an  alteration  of  this  kind,  it  be  competent  to  the  court  to  inquire 
into  the  original  date  of  the  instrument,  it  will  also  be  competent  to 
inquire  into  the  original  sum  and  the  original  payee,  after  they  have 
been  altered,  which  would  create  much  confusion,  and  open  a  door  to 
fraud.  Great  and  mischievous  neglects  have  already  crept  into  these 
transactions ;  and  I  conceive  that  keeping  a  strict  hand  over  the  hold- 
ers of  bills  of  exchange  to  prevent  any  attempts  to  alter  them  may  be 
attended  with  many  good  effects,  and  cannot  be  productive  of  any 
bad  consequences,  because  the  party,  who  has  paid  a  value  for  the 
bill,  may  have  recourse  to  the  person  who  immediately  received  it  from 
him.  On  these  grounds,  therefore,  I  am  of  opinion  that  the  plaintiffs 
cannot  recover  on  the  second  count.  Neither  do  I  think  that  they 
can  recover  on  the  general  counts,  because  it  is  not  stated  as  a  fact 
in  the  verdict  that  the  defendant  received  the  money,  the  value  of  the 
bill. 

Per  Curiam.    Judgment  for  the  defendant.^" 


DRUM  V.  DRUM. 
(Supreme  Judicial  Court  of  Massachusetts,  Barnstable,  1S82.     133  Mass.  5G6.) 

Contract  upon  a  promissory  note  for  $100,  dated  October  19,  1869, 
payable  on  demand  to  the  plaintiff,  or  order,  signed  by  the  defendant, 
and  witnessed.  Writ  dated  September  28.  1878.  Trial  in  the  su- 
perior court,  before  Brigham,  C.  J.,  who  allowed  a  bill  of  exceptions, 
in  substance  as  follows  : 

The  plaintiff  offered  the  note  in  evidence;  and  the  signatures  of 
the  defendant  and  of  the  attesting  witness  were  proved.     It  appeared 

19  Affirmed  in  Exchequer  Chamber,  2  H.  Bl.  140  (1793). 


G98  DISCHARGE.  (Part  4 

that  the  note,  after  its  delivery  to  the  plaintiff,  who  could  neither  read 
nor  write,  had  been  changed  in  the  following  respects :  The  figures 
"$100"  had  been  made  to  read  "$13G,"  or  "$156 ;"  the  word  "dollars" 
had  been  made  to  read  "fifty,"  or  "thirty,"  the  word  "six"  being  inter- 
polated thereafter;  and  the  word  "on"  changed  to  "dollars,"  and 
another  word  "on"  interpolated  before  the  word  "demand." 

The  plaintiff  testified  that  he  knew  nothing  about  the  erasures  and 
changes  above  described,  and  neither  made  them  himself,  nor  directly 
or  indirectly  authorized  the  same  to  be  made ;  and  the  -agent  of  the 
plaintiff,  in  whose  possession  the  note  was  left  for  a  time,  testified  the 
same  as  the  plaintiff,  as  to  her  knowledge  of,  and  relation  to,  said 
erasures  and  changes. 

The  defendant  objected  that  the  plaintiff  was  not  entitled  to  re- 
cover upon  the  note,  unless  he  first  explained  and  accounted  for  said 
changes  and  erasures ;  and  that  there  was  a  variance  between  the 
plaintift''s  allegations  and  the  proofs. 

The  plaintiff  asked  the  judge  to  instruct  the  jury  as  follows:  "If 
the  jury  believe  that  said  $100  note  was  altered  without  the  knowledge 
or  consent  of  the  plaintiff,  and  without  his  agency,  directly  or  in- 
directly, it  is  not,  in  law,  an  alteration,  but  a  mutilation  or  spoliation ; 
and  the  note  would  be  good  for,  and  according  to,  its  original  tenor." 

The  judge  declined  to  give  this  instruction;  but  instructed  the  jury 
as  follows :  "The  note  of  $100,  appearing  to  be  materially  altered,  is 
void,  unless  the  plaintiff  proves  that  it  was  altered  by  consent  of  the 
defendant,  or  proves  the  circumstances  of  its  alteration  as  well  as  that 
he  did  not  make  or  procure  it.  The  alteration  would  not  be  suffi- 
ciently explained  by  proof  that  the  plaintiff  did  not  make,  direct  or 
procure  it." 

The  jury  returned  a  verdict  for  the  defendant;  and  the  plaintiff 
alleged  exceptions. 

CoLBURN,  J.  The  note  declared  on  in  this  case  was  for  $100, 
signed  by  the  defendant,  and  payable  to  the  plaintiff,  or  order.  Upon 
the  production  of  the  note,  it  appeared  to  have  been  changed  from  a 
note  for  $100  to  a  note  for  $136,  or  $156,  in  the  manner  stated  in  the 
exceptions. 

It  was  proved  at  the  trial  that  this  note  was  originally  a  valid  note  for 
$100,  and  it  was  not  pretended  that  it  had  ever  been  changed  with  the 
knowledge  or  consent  of  the  defendant.  The  note  was  not  indorsed, 
and,  so  far  as  appears,  had  always  been  owned  by  the  plaintiff,  and 
in  his  possession  or  in  that  of  his  agent. 

These  changes,  under  the  circumstances,  rendered  the  note  prima 
facie  void,  and  the  burden  was  upon  the  plaintiff  to  explain  them.  If 
the  changes  had  been  made  by  the  plaintiff,  or  by  his  authority  or 
consent,  directly  or  indirectly,  the  note  was  absolutely  void.  Adams 
V.  Frye,  3  Mete.  103;  Fay  v.  Smith,  1  Allen,  477,  79  Am.  Dec.  752; 
1  Greenl.  Ev.  §  564.  But  if  the  changes  had  been  made  by  a  stranger, 
without   the   knowledge  or  consent   of   the   plaintiff,    directly   or   in- 


Sec.  3)  ALTEKATION.  699 

directly,  the  note  remained  a  valid  note,  according  to  its  original  tenor. 
Adams  v.  Fr^e,  ubi  supra;  1  Greenl.  Ev.  §  5G6. 

If  the  plaintiff  proved  that  the  note  had  never  rightfully,  or  to  his 
knowledge,  been  in  the  possession  of  any  one  but  himself  and  his 
agent,  and  that  the  alterations  were  not  made  by  him  or  his  agent,  or 
with  the  knowledge  or  consent,  directly  or  indirectly,  of  either  of 
them,  he  was  entitled  to  recover  on  the  note  as  originally  written, 
though  he  might  not  be  able  to  prove  the  circumstances  of  its  alter- 
ation; and  there  was  evidence  tending  to  show  that  these  were  the 
facts  in  this  case. 

We  are  of  opinion  that  the  judge  erred  in  instructing  the  jury,  as 
he  apparently  did,  in  effect,  that  proof  of  the  state  of  facts  above  sup- 
posed would  not  entitle  the  plaintiff  to  recover.  Of  course,  we  ex- 
press no  opinion  as  to  the  credibility  of  the  evidence  at  the  trial,  or 
the  probability  that  such  changes  as  were  made  in  the  note  would  have 
been  made  by  a  stranger.     These  are  considerations  for  the  jury. 

If,  as  we  infer  from  the  exceptions,  the  tenor  of  the  note  as  orig- 
inally written  was  apparent  upon  inspection  of  the  note,  it  was  suffi- 
cient to  declare  upon  it  in  the  usual  way;  and,  upon  showing  that  the 
changes  in  the  note  were  mere  spoliations,  there  would  be  no  variance 
between  the  allegation  and  proof. 

Exceptions  sustained. 


JEFFREY  et  al.  v.  ROSENFELD. 

(Supreme  Judicial  Court  of  ^lassachusetts,  Middlesex,  1901.     179  Mass.  50G, 

Gl  N.  E.  49.) 

Morton,  J.  This  is  a  bill  in  equity  to  restrain  the  foreclosure  of  a 
mortgage,  on  the  ground  that,  after  the  delivery  of  the  mortgage  and 
note,  there  was  a  material  alteration  of  the  note  without  the  plaintiffs' 
assent.  The  nature  of  the  alteration,  or  by  whom  it  was  made,  is  not 
set  out,  nor  is  it  alleged  that  the  alteration  was  fraudulent.  There  was 
a  demurrer  for  want  of  equity,  and  on  the  grounds  that  the  bill  did  not 
state  a  case  that  entitled  the  plaintiff's  to  relief,  and  that  they  had  an 
duequate  remedy  at  law.  The  demurrer  was  sustained,  and  the  bill 
dismissed,  and  the  plaintiff's  appealed. 

The  defendant  contends  that  the  nature  of  the  alleged  alteration 
should  have  been  specifically  set  forth.  St.  1898,  c.  533,  §  125  (the 
negotiable  instruments  act),  provides  what  alterations  shall  be  deemed 
material,  and  it  would  seem,  for  that  and  other  reasons,  that,  as  mat- 
ter of  correct  pleading,  the  bill  should  have  described  the  aheration 
relied  on,  in  order  that  the  court  might  see  whether,  as  matter  of  law, 
the  alteration  was  a  material  alteration.  But  for  the  purposes  of  this 
case,  we  assume  in  favor  of  the  plaintiffs,  without  deciding,  that  this 
defect,  if  relied  on  as  a  ground  of  demurrer,  should  have  been  partic- 
.ularly  pointed  out,  and  that  it  is  not  open  to  the  defendant,  when  the 


7U0  DiscuARGE.  (Part  4 

cause  of  demurrer  assigned  is  the  general  one  of  a  want  of  equity,  or 
that  the  bill  does  not  state  a  case  which  entitles  the  plaintiffs  to  relief. 

The  question  which  has  been  chiefly  argued  relates  to  the  eft'ect  of 
the  alteration  of  the  note  upon  the  mortgage.  The  bill  alleges  that 
the  mortgage  was  given  to  secure  the  payment  of  the  note,  but,  for 
aught  that  appears,  the  transaction  was  the  ordinary  one  of  a  loan  of 
money  secured  by  a  note  and  mortgage.  At  any  rate,  there  is  nothing 
to  show  that  the  note  and  mortgage  were  not  both  given  upon  the  same 
consideration,  and  to  secure  the  same  debt,  and  there  is  no  allegation 
that  the  debt  has  been  paid  or  satisfied  in  any  way.  If  the  mortgage 
was  given  to  secure  the  personal  obligation  created  by  the  note,  and 
nothing  more,  the  allegations  of  the  bill  should  have  been  more  specific. 

There  is  no  doubt  that  the  effect  of  a  material  alteration  of  a  note 
has  been  held  to  be  difi'erent  in  some  respects  in  England  from  what 
it  has  been  held  to  be  in  this  country.  Thus  it  has  been  held  there  that 
a  material  alteration,  even  by  a  stranger,  without  the  knowledge  or  as- 
sent of  any  of  the  parties  to  the  note,  will  avoid  it.  Davidson  v.  Coop- 
er, 11  Mees.  &  W.  778 ;  Id.,  13  Mees.  &  W.  343.  And  very  likely  it 
would  be  held  under  the  bills  of  exchange  act  that  the  effect  of  such 
an  alteration,  by  whomsoever  made,  would  be  to  avoid  the  note  as 
to  all  parties  except  those  consenting  to  it  and  subsequent  indorsers. 
Chalmers'  Bills  of  Exchange  (5th  Ed.)  213,  214.  But  the  law  has 
been  laid  down  differently  in  this  commonwealth  (Drum  v.  Drum,  133 
Mass.  566) ;  and,  according  to  the  weight  of  authority  in  this  country,  a 
material  alteration  of  a  note  by  a  stranger,  or  a  spoliation  of  it,  as  it  is 
termed,  will  not  avoid  the  note  (Drum  v.  Drum,  ubi  supra ;  2  Dan. 
Neg.  Inst.  [3d  Ed.]  §  1373a;  2  Pars.  Notes  &  Bills  [1st  Ed.]  574; 
Norton,  Bills  &  Notes  [2d  Ed.]  234,  235;  1  Ames,  Cases  on  Bills  & 
Notes,  4]9). 

Whether,  therefore,  section  124  of  the  negotiable  instruments  act 
(St.  1898,  c.  533),  which  is  copied  from  section  64  of  the  bills  of  ex- 
change act  (St.  45  &  46  Vict.  c.  61),  should  receive  the  same  construc- 
tion which  that  has  received,  or  which  it  undoubtedly  will  receive,  de- 
serves serious  consideration.  The  statute  enacted  in  this  state  is  the 
same,  in  substance  and  effect,  as  that  adopted  by  the  conference  of  com- 
missioners on  uniformity  of  laws  which  met  at  Detroit  in  1895,  and 
has  already  been  enacted  in  ]."j  states  (14  Harvard  Law  Rev.  241,  Dec. 
1900,  by  Prof.  Ames) ;  and  although  it  is  largely  copied  from  the  Eng- 
lish act,  and  is  in  many  of  its  provisions  an  almost,  if  not  quite,  verba- 
tim copy  of  that  act,  it  would  seem  not  unreasonable  to  suppose  that 
it  was  the  intention  of  the  framers  of  the  American  act  that  section 
124  should  be  construed  according  to  the  law  of  this  country,  rather 
than  that  of  England.  But  it  is  not  necessary  to  pass  upon  that  ques- 
tion now.  In  England,  as  in  this  country,  except  when  an  alteration 
is  fraudulent,  it  does  not  cancel  or  extinguish  the  debt  for  which  the 
note  was  given.  Sutton  v.  Toomer,  7  Barn.  &  C.  416 ;  Atkinson  v. 
Hawdon,  2  Adol.  &  E.  628;  Byles  on  Bills  (4th  Am.  Ed.)  257;  2  Am. 


Sec.  3)  ALTERATION.  7U1 

&  Eng.  Encyc.  of  Law  (2d  Ed.)  200,  202;  2  Dan.  Neg.  Inst.  (3d  Ed.) 
§§  1410a,  1411;   2  Pars.  Notes  &  Hills  (1st  Ed.)  571,  572. 

And  the  cases  are  numerous  in  which  it  has  been  held  that  a  party 
could  recover  upon  the  original  consideration,  notwithstanding  there 
had  been  a  material  alteration  of  the  written  contract.  Lee  v.  Butler, 
167  Mass.  426,  46  N.  E.  52,  57  Am.  St.  Rep.  466 ;  Nickerson  v.  Swett, 
135"  Mass.  514;  Adams  v.  Frye,  3  Mete.  103;  Smith  v.  Dunham,  8 
Pick.  246 ;  Milbery  v.  Storer,  75  Me.  69,  46  Am.  Rep.  361 ;  Croswell 
V.  Labree,  81  Me.  44,  16  Atl.  331,  10  Am.  St.  Rep.  238;  Keene  v. 
Weeks,  19  R.  L  309,  33  Atl.  446. 

Following  out  this  principle,  it  has  been  held  in  many  cases  that  the 
material  alteration  of  a  mortgage  note,  if  not  fraudulent,  will  not  avoid 
the  mortgage.  Elliott  v.  Blair,  47  111.  342 ;  Vogle  v.  Ripper,  34  111. 
100,  85  Am.  Dec.  298 ;  Clough  v.  Seay,  49  Iowa,  111 ;  Gillette  v.  Smith, 
18  Hun,  10;  Cheek  v.  Nail,  112  N.  C.  370,  17  S.  E.  80;  Heath  v. 
Blake,  28  S.  C.  406,  416,  5  S.  E.  842 ;  2  Am.  &  Eng.  Encyc.  of  Law 
(2d  Ed.)  202;    2  Jones,  Mortgages  (3d  Ed.)  §  1215. 

It  is  true  that  in  this  state  it  is  held,  contrary  to  what  is  the  law  in 
most  of  the  states  and  in  England,  that  a  negotiable  note  is  prima  facie 
payment  of  the  debt  for  which  it  is  given.  But  the  rule  is  not  an  un- 
qualified one.  Curtis  v.  Hubbard,  9  Mete.  322.  Thus  when  a  note  is 
avoided  by  the  maker  for  illegality  or  fraud,  the  promisor  may  recover 
the  original  consideration  in  an  action  for  money  lent  or  money  had 
and  received  (Bank  v.  Tyndale,  176  Mass.  547,  57  N.  E.  1022,  51  L. 
R.  A.  447 ;  Walker  v.  Mayo,  143  Mass.  42,  8  N.  E.  873)  ;  and  the  pre- 
sumption of  payment  is  rebutted  when  the  efifect  will  be  to  deprive  a 
party  of  security  which  he  has  taken  for  the  payment  of  the  debt  for 
which  the  note  was  given  (Curtis  v.  Hubbard,  ubi  supra;  Davis  v. 
Parsons,  157  Mass.  584,  32  N.  E.  1117). 

This  being  the  state  of  the  law  at  the  time  of  the  passage  of  the  ne- 
gotiable instruments  act,  we  should  hesitate  to  say  that  the  eft'cct  of 
section  124  is  not  only  to  avoid  the  note  in  case  of  a  material  altera- 
tion, but  to  cancel  the  debt  for  which  it  was  given,  and  to  deprive  a 
party  of  the  benefit  of  any  security  that  he  may  have  taken. 

But  it  is  not  necessary  to  go  so  far.  This  is  a  suit  on  the  equity  side 
of  the  court.  As  already  observed,  there  is  no  allegation  of  fraud  in 
the  bill,  or  of  fault  on  the  part  of  the  mortgagee.  For  aught  that  ap- 
pears, the  alteration  in  the  note  may  have  been  made  by  a  stranger,  or 
may  have  been  innocently  made  by  the  holder,  for  the  purpose  of  recti- 
fying what  he  supposed  to  be  a  mistake,  occurring  under  such  circum- 
stances that  he  would  be  entitled  in  equity  to  a  reformation  of  the  note 
and  mortgage.  There  is  no  allegation  that  the  note  or  the  debt  which 
the  mortgage  was  given  to  secure  has  been  paid,  and  there  is  no  tender 
of  payment. 

The  mortgage  is  a  separate  instrument  from  the  note.  At  law  and 
in  equity  the  holder  can  enforce  his  remedy  upon  the  mortgage  inde- 
pendently of  or  concurrently  with  that  on  the  note,  and  in  some  cases. 


702  DisrnARGE.  (Part  4 

at  least,  where  he  had  lost  his  remedy  upon  the  note.  Thayer  v.  Mann, 
19  Pick.  535;  2  Jones,  Mortga.;>e^  (3d  Ed.)  §  1215  ct  seq.  Under  the 
circumstances,  there  being  no  allegation  of  payment  and  no  offer  of 
payment  in  the  bill,  %ve  think  that  the  bill  does  not  state  a  case  which 
entitles  the  plaintiff  to  relief,  and  that  the  demurrer  was  rightly  sus- 
tained, and  the  bill  rightly  dismissed. 
Decree  affirmed. 


NATIONAL  EXCH.  BANK  OF  ALBANY  v.  LESTER. 

(Court  of  Appeals  of  New  York,  1909.     194  N.  Y.  4G1,  87  N.  E.  779,  21  L.  R, 

A.  (N.  S.)  402.) 

Appeal  from  the  judgment  of  the  Appellate  Division  of  the  Supreme 
Court  in  the  Third  Judicial  Department,  entered  May  16,  1907,  af- 
firming a  judgment  in  favor  of  plaintitt  entered  upon  a  verdict  and  an 
order  denying  a  motion  for  a  new  trial. 

The  defendant  was  sued  as  the  accommodation  indorser  upon  a  note 
for  $375  made  by  one  Frank  L.  Fancher  and  acquired  by  the  plaintiff 
bank  before  maturity  in  the  regular  course  of  its  business.  The  de- 
fense was  that  the  note  as  originally  made  and  indorsed  was  for  $75 
only;  that  the  maker  thereafter,  without  the  knowledge  or  consent  of 
the  indorser,  altered  the  note  by  inserting  in  the  body  thereof  the 
words  "three  hundred"  immediately  in  front  of  the  words  "seventy- 
five"  and  the  figure  "3"  immediately  in  front  of  the  figures  "75,"  there- 
by making  the  instrument  apparently  a  note  for  $375  instead  of  $75; 
and  that  the  maker  thereafter  caused  the  note  as  thus  altered  to  be 
discounted  by  the  plaintiff  bank.  The  answer  prayed  judgment  that 
the  complaint  be  dismissed  except  as  to  the  amount  of  the  note  before 
alteration,  together  with  interest  and  protest  fees,  to  wit,  $78.66.  The 
defendant  also  served  an  offer  to  allow  the  plaintiff  to  take  judgment 
for  that  amount. 

Upon  the  trial  the  court  charged  the  jury  that,  if  the  note  indorsed 
by  the  defendant  was  in  fact  a  note  for  $375  on  its  face,  the  plaintiff 
was  entitled  to  recover  that  amount  and  interest.  The  trial  judge  fur- 
ther charged  the  jury  that  if  they  found  that  there  were  spaces  upon 
the  note  "so  carelessly  and  negligently  left  by  this  indorser.  Mr.  Lester, 
that  a  person  having  custody  of  the  note  might  run  in  a  figure  3  and 
the  words  'three  hundred'  so  as  not  to  occasion  in  the  mind  of  the  in- 
dorser [evidently  meaning  indorsee]  any  inquiry  into  its  validity," 
they  might  find  that  the  indorser  conducted  himself  carelessly  and  neg- 
ligently in  the  premises,  and  thus  invited  the  liability  which  the  face 
of  the  note  called  for  when  presented  to  the  bank. 

The  defendant  duly  excepted  to  that  part  of  the  charge  to  the  ef- 
fect that,  if  the  defendant  was  negligent  in  leaving  blank  spaces,  the 
jury  must  find  a  verdict  for  the  plaintiff  for  the  full  amount  of  the  note 
as  it  stood.     The  court  then  reiterated  the  proposition,  saying  that, 


Sec.  3)  ALTERATION.  703 

"if  the  jury  find  that  the  defendant  was  careless  and  negligent  in  leav- 
ing vacant  spaces  for  the  words  and  figures,  such  carelessness  and  neg- 
ligence on  his  part  would  still  make  him  liable  for  the  note ;"  and  to 
this  the  defendant  also  excepted. 

The  jury  found  for  the  plaintiff  in  the  sum  of  $375,  with  interest. 
The  judgment  entered  upon  the  verdict  has  been  unanimously  affirmed 
by  the  Appellate  Division. 

WiivivAi^D  BartlETT,  J.  As  this  case  went  to  the  jury,  they  might 
well  have  found  that  the  note  in  suit  was  a  note  for  only  $75  when 
originally  prepared  by  the  maker  and  indorsed  at  his  instance  by  the 
defendant,  and  that  it  had  subsequently  been  altered  to  a  note  for  $375 
when  discounted  by  the  plaintiff  bank.  They  were  instructed  in  sub- 
stance, however,  that  the  indorser  was  liable  for  the  amount  of  the 
note  as  raised  by  the  alteration,  if  he  had  been  careless  and  neghgent 
in  placing  his  name  upon  the  instrument  while  there  were  spaces  there- 
on which  permitted  the  insertion  of  the  words  and  figure  whereby  it 
was  transmuted  from  a  note  for  $75  into  a  note  for  $375.  Conceding 
that  the  contract  which  he  actually  signed  bound  him  only  to  pay  the 
smaller  amount,  the  jury  were  permitted  to  find  that  in  consequence 
of  his  negligence  in  the  respect  indicated  it  had  become  a  contract 
which  bound  him  to  pay  the  larger  amount  to  a  subsequent  innocent 
holder  of  the  paper. 

In  support  of  the  correctness  of  this  ruling,  the  learned  counsel  for 
the  respondent  asserts  the  doctrine  that  "a  party  to  a  note  who  puts 
his  name  to  it  in  any  capacity  of  liability,  when  it  contains  blanks  un- 
canceled facilitating  an  alteration  raising  the  amount,  is  liable  for  the 
face  of  the  note  as  raised  to  an  innocent  holder  for  value" ;  and  he  de- 
clares that  this  doctrine  has  been  approved  and  apparently  adopted  in 
Alabama,  California,  Colorado,  Illinois,  Kansas,  Kentucky,  Louisiana, 
Michigan,  Missouri,  Nebraska,  and  Pennsylvania.  In  considering  his 
proposition,  it  is  important  to  bear  in  mind  a  radical  distinction  v^hich 
exists  between  two  classes  of  notes  to  which  tlie  adjudicated  cases  re- 
late: (1)  Those  notes  in  which  obvious  blanks  are  left  at  the  time 
when  they  are  made  or  indorsed,  of  such  a  character  as  manifestly  to 
indicate  that  the  instruments  are  incomplete  until  such  blanks  shall  be 
filled  up;  and  (2)  those  notes  which  are  apparently  complete,  and 
which  can  be  regarded  as  containing  blanks  only  because  the  written 
matter  does  not  so  fully  occupy  the  entire  paper  as  to  preclude  the 
insertion  of  additional  words  or  figures  or  both.  It  is  a  note  of  the 
latter  class  that  we  have  to  deal  with  liere.  One  who  signs  or  indorses 
a  note  of  the  first  class  has  been  held  liable  to  bona  fide  holders  there- 
of, in  some  of  the  cases  cited  by  the  respondent,  according  to  the  terms 
of  the  note  after  the  blanks  have  been  filled,  on  the  doctrine  of  im- 
plied authority,  while  in  other  cases,  relating  to  notes  of  the  second 
class,  the  hability  of  the  maker  or  indorser  for  the  amount  of  the  note 
as  increased  by  filling  up  the  unoccupied  spaces  therein  is  placed  upon 
the  doctrine  of  negligence  or  estoppel  by  negligence. 


704  DISCHARGE.  (Part  4 

The  cases  cited  by  respondent  in  which  parties  to  commercial  paper 
executed  by  them  while  obvious  blanks  remained  unfilled  thereon  have 
been  held  liable  upon  the  instrument  as  completed  by  filling  out  such 
blanks,  on  the  ground  of  implied  authority,  require  no  further  con- 
sideration here,  as  there  is  no  suggestion  that  there  was  any  blank  of 
this  character  upon  the  note  in  suit.  These  cases  are  Winter  &  Loeb 
V.  Pool,  lOi  Ala.  580,  16  South.  543 ;  Statton  v.  Stone,  15  Colo.  App. 
237,  61  Pac.  481 ;  Cason  v.  Grant  Co.  Deposit  Bank,  97  Ky.  487,  31  S. 
W.  40,  53  Am.  St.  Rep.  418;  Weidman  v.  Symes,  120  Mich.  657,  79 
N.  W.  894,  77  Am.  St.  Rep.  603.  There  were  obvious  blanks  also  in 
the  notes  under  consideration  in  Visher  v.  Webster,  8  Cal.  109,  and 
Lowden  v.  S.  C.  Nat.  Bank,  38  Kan.  533,  16  Pac.  748,  and  the  deci- 
sion in  each  of  these  cases  appears  to  have  proceeded  upon  the  doctrine 
of  implied  authority  rather  than  negligence. 

It  must  frankly  be  conceded,  however,  that  the  respondent  finds  sup- 
port for  the  doctrine  which  it  asserts  in  the  case  at  bar  in  the  decisions 
of  Pennsylvania,  Illinois,  and  Missouri,  so  far  as  the  maker  of  com- 
mercial paper  is  concerned,  and  in  those  of  Kentucky  and  Louisiana, 
in  respect  to  the  liability  of  a  party  who  has  indorsed  or  become  surety 
upon  a  note  in  which  there  were  spaces  (not  obvious  blanks)  that  per- 
mitted fraudulent  insertions  enlarging  the  amount.  Garrard  v.  Had- 
dan,  67  Pa.  82,  5  Am.  Rep.  412 ;  Yocum  v.  Smith,  63  111.  321,  14  Am. 
Rep.  120;  Scotland  Co.  Nat.  Bank  v.  O'Connel,  23  Mo.  App.  165; 
Hackctt  v.  First  Nat.  Bank  of  Louisville,  114  Ky.  193,  70  S.  W.  664; 
Isnard  v.  Torres  &  Marquez,  10  La.  Ann.  103. 

In  Garrard  v.  Haddan,  supra,  a  space  was  left  between  the  words 
"one  hundred"  and  the  word  "dollars"  in  which  "fifty"  had  been  in- 
serted after  the  maker  had  signed  and  delivered  it ;  and  the  court  held 
the  maker  answerable  to  a  bona  fide  holder  for  the  full  face  of  the 
note  as  altered  on  the  ground  of  the  negligence  of  the  maker  in  leav- 
ing the  space  in  the  note  which  was  thus  filled  up  after  execution. 
"We  think  this  rule  is  necessary,"  said  Chief  Justice  Thompson,  "to 
facilitate  the  circulation  of  commercial  paper,  and  at  the  same  time  in- 
crease the  care  of  drawers  and  acceptors  of  such  paper  and  also  of 
bankers,  brokers,  and  others  in  taking  it."  It  is  a  little  difficult  to  see 
how  the  rule  tends  to  make  bona  fide  purchasers  more  careful,  as  this 
last  observation  suggests. 

The  case  of  Yocum  v.  Smith,  supra,  held  the  maker  liable  upon  a 
note  which  had  been  raised  after  execution  from  $100  to  $120 ;  the 
words  "and  twenty"  having  been  inserted  in  a  space  left  between  the 
word  "hundred"  and  the  word  "dollars."  The  court  said  that  the 
maker  had  acted  with  unpardonable  negligence  in  signing  the  note  and 
leavirrr  a  blank  which  cmild  so  easilv  be  filled :  that  he  had  thus  placed 
it  in  the  power  of  another  to  do  an  injury;  and  that  he  must,  there- 
fore, sufifer  the  resulting  loss.  This  decision  undoubtedly  sustains  the 
position  of  the  respondent,  although  there  was  another  element  of 
negligence  in  that  case  which  is  not  present  here.     It  appeared  that 


Sec.  3)  ALTERATION,  705 

the  maker  there  was  informed  by  letter  by  the  purchaser,  very  soon 
after  the  date  of  the  note,  that  he  had  bought  it  and  of  its  date  and 
amount;  yet  he  made  no  objection  as  to  the  amount  until  nearly  a 
year  later. 

In  Scotland  Co.  Nat.  Bank  v.  O'Connel,  supra,  the  defendants  ex- 
ecuted and  delivered  a  note  for  $100  to  one  Smith,  the  body  of  which 
was  in  his  handwriting,  in  a  condition  which  enabled  him  to  add  the 
words  "thirty-five"  after  "one  hundred"  in  the  written  part  and  put  the 
figures  "$135"  at  the  head  of  the  note  in  the  space  where  the  amount 
is  usually  indicated  by  figures.  The  St.  Louis  Court  of  Appeals  held 
that  the  defendants  were  liable  for  $135  because  they  had  delivered 
the  note  to  Smith,  who  was  their  co-maker,  "in  such  a  condition  as  to 
enable  him  to  fill  blank  spaces  without  in  any  manner  changing  the 
appearance  of  the  note  as  a  genuine  instrument." 

The  cases  thus  far  discussed  were  all  of  them  actions  against  the 
makers  of  the  raised  paper.  The  same  rule,  however,  was  applied 
against  an  indorser  in  Isnard  v.  Torres  &  Marquez,  supra,  by  the 
Supreme  Court  of  Louisiana  under  the  following  circumstances : 
Marquez  indorsed  a  note  for  $150  for  the  accommodation  of  Torres. 
The  amount  was  raised  to  $1,150,  and  purchased  by  the  plaintiff  in 
good  faith  as  a  note  for  that  smu.  The  report  states  that  there  was 
testimony  of  experienced  persons  to  the  effect  that,  if  at  the  time  of 
the  indorsement  the  word  "onze"  (for  eleven,  the  note  being  in  Frenchi 
and  the  additional  figure  before  150  were  not  there,  "the  note  would 
have  exhibited  blanks  which  at  least  with  regard  to  the  written  part 
were  unusual  and  calculated  to  attract  attention,  and  would  have  ren- 
dered the  note  unsalable  in  the  market."  In  this  opinion,  upon  in- 
spection of  the  note,  the  court  expressed  its  full  concurrence.  The  in- 
dorser was  held  liable  for  the  amount  of  the  note  as  raised  on  the 
ground  that  he  had  not  exercised  proper  caution.  To  the  same  effect 
is  Hackett  v.  First  Nat.  Bank  of  Louisville,  supra,  where  it  was  held 
that  a  surety  who  had  signed  a  note  in  which  were  written  the  words 
"five  hundred"  with  spaces  before  and  after  them,  which  the  maker 
had  filled  up  by  writing  "twenty"  before  and  "fifty"  after  them,  thereby 
making  a  note  for  $2,550,  was  liable  thereon  to  a  purchaser  in  good 
faith.  In  this  case  the  attention  of  the  Kentucky  Court  of  Appeals 
was  called  to  the  fact  that  the  great  weight  of  authority  was  the  other 
way,  but,  in  view  of  the  fact  that  the  rule  had  been  so  established  in 
Kentucky  for  a  quarter  of  a  century,  the  court  determined  to  adhere 
to  it,  in  observance  of  the  principle  of  stare  decisis. 

This  court  is  not  thus  constrained.  The  question  involved  in  the 
present  appeal  has  not  been  authoritatively  decided  in  this  state,  and 
we  are  at  liberty  to  adopt  that  view  of  the  law  which  seems  to  us  most 
consonant  with  sound  reason  and  best  supported  by  well-considered 
adjudications  in  other  jurisdictions. 

The  outcome  of  these  adjudications  is  accurately  set  forth,  as  it 
SM.&  M.B.&  N.— 45 


706  DISCHARGE.  (Part  4 

seems  to  me.  bv  Mr.  Randolph  in  his  treatise  on  the  Law  of  Com- 
mercial Paper,  as  follows :  "Where  negotiable  paper  has  been  executed 
with  the  amount  blank,  it  is  no  defense  against  a  bona  fide  holder  for 
value  for  the  maker  to  show  that  his  authority  has  been  exceeded  m 
filling  such  blank  and  a  greater  amount  written  than  was  mtended. 
This  was  also  once  held  to  be  the  rule  where  no  blank  had  been  ac- 
tually left,  but  the  maker  had  negligently  left  a  space  either  before 
or  after  the  written  amount  which  made  it  easier  for  a  holder  fraudu- 
lently to  enlarge  the  sum  first  written.  It  has  now,  however,  become 
in  America  an  established  rule  that,  if  the  instrument  was  complete 
without  blanks  at  the  time  of  its  delivery,  the  fraudulent  increase  of 
the  amount  by  taking  advantage  of  a  space  left  without  such  mtcn- 
tion  *  *  *  will  constitute  a  material  alteration,  and  operate  to  dis- 
charge the  maker."     1  Randolph  on  Commercial  Paper,  §  187. 

The  rule  thus  stated  is  sustained  by  the  decisions  of  the  courts  of 
last  resort  in  Massachusetts,  Michigan,  New  Hampshire.  Iowa,  :\Iary- 
land,  Mississippi,  Arkansas,  and  South  Dakota.  In  my  judgment  it 
rests  on  a  sounder  basis  than  the  opposite  doctrine,  and  accords  better 
with  such  adjudications  of  this  court  as  bear  more  or  less  directly  on 
the  question  involved. 

The  leading  case  sustaining  this  view  is  Greenfield  Savings  Bank  v. 
Stowell,  123  Mass.  196,  25  Am.  Rep.  67,  in  which  the  opinion  was 
written  by  Chief  Justice  Gray,  afterward  an  Associate  Justice  of  the 
Supreme  Court  of  the  United  States.  The  discussion  is  careful  and 
exhaustive,  reviewing  all  the  important  cases  in  England  and  America 
bearing  upon  the  subject  which  had  been  decided  up  to  that  time 
(1877),  including  that  of  the  Supreme  Court  of  Pennsylvania  in  Gar- 
rard V.  Haddan,  supra,  which  was  the  principal  authority  the  other 
way.  I  shall  not  undertake  to  review  the  same  authorities  here  or 
paraphrase  the  opinion  of  Chief  Justice  Gray  which  deals  with  them 
in  such  a  manner  as  fully  to  justify  his  rejection  of  the  doctrine  that 
the  makers  of  a  promissory  note  apparently  complete  when  they  sign 
it  are  liable  for  an  amount  to  which  it  may  subsequently  be  raised, 
without  their  knowledge  or  consent,  on  the  ground  that  they  were 
negligent  in  permitting  spaces  to  remain  thereon  in  which  the  figures 
and  words  which  affected  the  increase  could  be  inserted.  In  support 
of  his  conclusion,  however,  he  quotes  some  passages  from  the  opinion 
of  Christancy,  J.,  in  Holmes  v.  Trumper.  22  Mich.  427,  7  Am.  Rep. 
661,  which  will  bear  repetition  as  suggestive  of  some  of  the  reasons 
why  the  forgery  of  a  promissory  note  should  not  be  held  to  create  a 
contract,  which  the  party  sought  to  be  charged  never  consciously  made 
himself  or  authorized  anybody  else  to  make  in  his  behalf.  Speaking 
of  the  alleged  negligence  in  leaving  spaces  on  the  note,  Mr.  Justice 
Christancy  said :  "The  negligence,  if  such  it  can  be  called,  is  of  the 
same  kind  as  might  be  claimed  if  any  man  in  signing  a  contract  were 
to  place  his  name  far  enough  below  the  instrument  to  permit  another 
line  to  be  written  above  his  name  in  apparent  harmony  with  the  rest 


Sec.  3)  ALTERATION.  707 

of  the  instrument.  *  *  *  Whenever  a  party  in  good  faith  signs 
a  complete  promissory  note,  however  awkwardly  drawn,  he  should, 
we  think,  be  equally  protected  from  its  alteration  by  forgery  in  what- 
ever mode  it  may  be  accomplished;  and,  unless  perhaps  when  it  has 
been  committed  by  some  one  in  whom  he  has  authorized  others  to 
place  confidence  as  acting  for  him,  he  has  quite  as  good  a  right  to  rest 
upon  the  presumption  that  it  will  not  be  criminally  altered  as  any  per- 
son has  to  take  the  paper  on  the  presumption  that  it  has  not  been ;  and 
the  parties  taking  such  paper  must  be  considered  as  taking  it  upon 
their  own  risk,  so  far  as  the  question  of  forgery  is  concerned,  and  as 
trusting  to  the  character  and  credit  of  those  from  whom  tliey  receive 
it  and  of  the  intermediate  holders." 

While  a  general  reference  to  the  cases  cited  and  reviewed  by  Chief 
Justice  Gray  in  Greenfield  Savings  Bank  v.  Stowell,  supra,  will  suffice, 
there  are  some  later  decisions  to  which  attention  may  be  called.  In 
Knoxville  Nat.  Bank  v.  Clark,  51  Iowa,  264,  1  N.  W.  491,  33  Am.  Rep. 
129,  will  be  found  a  strong  and  well-reasoned  opinion  against  holding 
a  party  to  a  note  which  has  been  fraudulently  raised,  after  it  left  his 
hands,  liable  for  negligence,  because  when  he  executed  the  instrument 
there  were  spaces  left  thereon  (not  being  obvious  blanks  designed  to  be 
filled)  which  would  permit  of  forgery.  The  trial  court  had  rendered 
judgment  against  the  maker  for  the  amount  of  the  note  as  raised 
from  $10  to  $110  on  a  finding  of  negligence  in  leaving  a  space  before 
the  word  "ten"  and  the  figures  "10."  "On  this  ground,"  said  the  Su- 
preme Court  of  Iowa,  "the  court  proceeded  and  the  decision  is  based 
on  the  reasoning  of  the  civil  lawyers.  But  could  it  be  anticipated 
that  such  negligence  would  cause  another  to  commit  a  crime,  and  can 
it  be  said  a  person  is  negligent  who  does  not  anticipate  and  provide 
against  the  thousand  ways  through  or  by  which  crime  is  committed? 
Is  it  not  requiring  of  the  ordinary  business  man  more  diligence  than 
can  be  maintained  on  principle,  or  is  practicable,  if  he  is  required  to 
protect  and  guard  his  business  transactions  so  that  he  cannot  be  held 
liable  for  the  criminal  acts  of  another?  If  so,  why  should  not  the 
negligence  of  the  owner  of  goods  which  are  stolen  excuse  the  bona 
fide  purchaser?"  And,  referring  to  the  argument  that  such  a  measure 
of  liability  is  required  to  promote  the  free  interchange  of  commercial 
paper  (a  view  which  seems  to  have  been  influential  in  the  Pennsyl- 
vania case  of  Garrard  v.  Haddan),  the  court  well  said :  "At  the  pres- 
ent day  negotiable  paper  is  not  ordinarily  freely  received  from  un- 
known persons.  Forgeries,  however,  are  not  confined  to  such.  But 
the  necessities  of  trade  and  commerce  do  not  recjuire  the  law  to  be  so 
construed  as  to  compel  a  person  to  perform  a  contract  he  never  made 
and  which  it  is  proposed  to  fasten  on  him  because  some  one  has  com- 
mitted a  forgery  or  other  crime." 

In  Burrows  v.  Klunk,  70  Ud.  451,  17  Atl.  378,  3  L.  R.  A.  576,  1 1 
Am.  St.  Rep.  371,  the  Maryland  Court  of  Appeals  emphasizes  the 
distinction  between  a  note  in  blank  as  to  the  amount,  when  signed 


708 


DISCHARGE.  (Part  4 


and  delivered  to  another  for  use,  and  a  note  complete  on  its  face  when 
signed  and  delivered,  in  which  has  been  written  the  sum  payable,  the 
date,  time  of  payment,  and  name  of  the  payee.  "In  such  case,"  it  is 
held,  "there  can  be  no  inference  that  the  defendant  authorized  any  one 
to  increase  the  amount  simply  because  blank  spaces  were  left  in  which 
there  was  room  enough  to  insert  a  larger  sum." 

No  one  questions  the  proposition  that,  where  a  party  to  commercial 
paper  intrusts  it  to  another  with  a  blank  thereon  designed  to  be  filled 
up  with  the  amount,  such  party  is  liable  to  a  bona  fide  holder  of  the 
instrument  for  the  amount  filled  in,  though  it  be  larger  than  was  stip- 
ulated with  the  person  to  whom  immediate  delivery  was  made.  Van 
Duzer  v.  Howe,  21  N.  Y.  531.  So,  also,  a  note  executed  with  a  blank 
therein  for  a  statement  of  the  place  of  payment  is  not  avoided  in  the 
hands  of  a  bona  fide  holder  for  value  by  the  insertion  in  the  blank  of 
a  place  different  from  that  agreed  upon  by  the  original  parties.  Red- 
lich  v.  Doll,  54  N.  Y.  234,  13  Am.  Rep.  573.  But,  where  there  is  no 
blank  for  that  purpose  when  the  note  is  indorsed,  the  insertion  of  an 
obligation  to  pay  interest  is  a  material  alteration  which  invalidates  the 
instrument  as  against  the  indorser.  McGrath  v.  Clark,  56  N.  Y.  34, 
15  Am.  Rep.  372.  In  the  case  last  cited  the  note,  when  indorsed, 
ended  with  the  word  "at,"  followed  by  a  space  in  which  the  maker, 
after  indorsement,  inserted  a  place  of  payment,  adding  the  words 
"with  interest" ;  but  no  suggestion  appears  to  have  been  made  that, 
because  the  space  left  was  large  enough  to  allow  the  insertion  of 
these  words,  the  indorser  was  negligent  and  could  be  charged  with 
the  amount  of  the  note,  including  the  interest,  on  that  ground.  On 
the  contrary,  as  the  law  then  stood,  he  was  relieved  of  all  liability 
whatever  as  the  effect  of  the  unauthorized  alteration.  Now,  however, 
under  the  negotiable  instruments  law  (Laws  1897,  p.  745,  c.  612,  § 
205)  he  would  be  liable  on  the  paper  according  to  its  original  tenor. 

To  sustain  the  judgment  in  the  case  at  bar  in  view  of  the  instruc- 
tions under  which  the  issues  were  submitted  to  the  jury,  we  must 
hold  that  the  indorser  of  a  promissory  note,  the  amount  of  which  has 
been  fraudulently  raised  after  indorsement  by  means  of  a  forgery,  is 
liable  upon  the  instrument  in  the  hands  of  a  bona  fide  holder  for  the 
increased  amount,  because  of  negligence  in  indorsing  the  same  when 
there  were  spaces  thereon  which  rendered  the  forgery  easy,  though  the 
note  was  complete  in  form.  To  do  this  would  be  to  create  a  con- 
tract through  the  agency  of  negligence ;  for  the  action  is  not  in  tort 
for  damages,  but  upon  the  contract  as  expressed  in  the  note.  But. 
apart  from  any  question  as  to  the  form  in  which  the  indorser  is  sought 
to  be  charged,  I  am  of  opinion  that  no  liability  on  the  part  of  the  in- 
dorser for  the  amount  of  such  a  note  as  raised  can  be  predicated 
simply  upon  the  fact  that  such  spaces  existed  thereon.  This  conclu- 
sion I  base  upon  the  authorities  to  that  effect  which  I  have  alreadv 
discussed,  and  upon  what  seems  to  me  to  be  considerations  of  sound 
reason  independent  of  judicial  authority. 


Sec.  3)  ALTERATION.  709 

An  averment  of  negligence  necessarily  imports  the  existence  of  a 
duty.  What  duty  to  subsequent  holders  of  a  promissory  note  is 
imposed  by  the  law  upon  a  person  who  is  requested  to  indorse  the 
paper  for  the  accommodation  of  the  maker  and  who  complies  with 
such  request?  It  is  a  complete  instrument  in  all  respects — as  to 
date,  name  of  payee,  time  and  place  of  payment,  and  amount.  There 
are,  it  is  true,  spaces  on  the  face  of  the  instrument  in  which  it  is  pos- 
sible to  insert  words  and  figures  which  will  enlarge  the  amount  and 
still  leave  the  note  apparently  a  genuine  instrument;  in  other  words, 
there  is  room  for  forgery.  On  what  theory  is  the  indorser  negligent 
because  he  places  his  name  on  the  paper  without  first  seeing  to  it  that 
these  spaces  are  so  occupied  by  cross-lines  or  otherwise  as  to  render 
forgery  less  feasible?  It  can  only  be  on  the  theory  that  he  is  bound 
to  assume  that  those  to  whom  he  delivers  the  paper  or  into  whose 
hands  it  may  come  will  be  likely  to  commit  a  crime  if  it  is  compara- 
tively easy  to  do  so.  I  deny  that  there  is  any  such  presumption  in 
the  law.  It  would  be  a  stigma  and  reflection  upon  the  character  of 
the  mercantile  community  and  constitute  an  intolerable  reproach  of 
which  they  might  well  complain  as  without  justification  in  practical 
experience  or  the  conduct  of  business. 

That  there  are  miscreants  who  will  forge  commercial  paper  by 
raising  the  amount  originally  stated  in  the  instrument  is  too  true,  and 
is  evidenced  by  the  cases  in  the  law  reports  to  which  we  have  had  oc- 
casion to  refer;  but  that  such  misconduct  is  the  rule,  or  is  so  general 
as  to  justify  the  presumption  that  it  is  to  be  expected  and  that  busi- 
ness men  must  govern  themselves  accordingly,  has  never  yet  been  as- 
serted in  this  state,  and  I  am  not  willing  to  sanction  any  such  propo- 
sition either  directly  or  by  implication.  On  the  contrary,  the  presump- 
tion is  that  men  will  do  right  rather  than  wrong.  See  Bradish  v. 
Bliss,  35  Vt.  326.  As  was  said  by  Judge  Cullen  in  Critten  v.  Chemical 
Nat.  Bank,  171  N.  Y.  219,  224,  63  N.  E.  969,  57  L.  R.  A.  529,  it  is  not 
the  law  that  the  drawer  of  a  check  is  bound  so  to  prepare  it  that  no- 
body else  can  successfully  tamper  with  it.  Neither  is  it  the  law  that 
the  indorser  of  a  promissory  note  complete  on  its  face  may  be  made 
liable  for  the  consequences  of  a  forgery  thereof  simply  because  there 
were  spaces  thereon  which  rendered  the  forgery  easier  than  would 
otherwise  have  been  the  case. 

I  think  the  judgment  of  the  Appellate  Division  should  be  reversed 
and  a  new  trial  granted,  with  costs  to  abide  the  event. ^"^ 

20  Accord:  Scholfield  v.  Londesborough,  [1896]  A.  C.  514;  Imperial  Bank  v. 
Bank,  [1!>0.3]  A.  C.  40;  Colonial  Bank  v.  Marshall.  [1000]  A.  C.  nr>0.  A  for- 
tiori, where  there  are  no  blank  spaces  in  the  instrnuient.  a  holder  in  due 
course  under  section  124.  Neg.  Inst.  Law,  may  enforce  the  instrument  ac- 
cording to  its  original  tenor.  Massachusetts  Bank  v.  Snow,  187  Mass.  159. 
72  N.  "e.  959  (1905) ;  Colonial  Bank  v.  Duer,  108  App.  Div.  215,  95  N.  Y. 
Supp.  810  (1905)  ;  Hetch  v.  Shenners,  126  Wis.  27.  105  N.  W.  309  (1905), 
semble;  Schwartz  v.  Wilmer,  90  Md.  136,  44  Atl.  1059  (1899),  semble.  See 
Bothell  V,  Schweitzer,  84  Neb.  271,  120  N.  W.  1129,  22  L.  R.  A.  (N.  S.)  263 
(1909). 


APPENDIX 


THE  NEGOTIABLE  INSTRUMENTS  LAW 


A  GENERAL  ACT  RELATING  TO  NEGOTIABLE  INSTRU- 
MENTS (BEING  AN  ACT  TO  ESTABLISH  A  LAW  UNI- 
FORM WITH  THE  LAWS  OF  OTHER  STATES  ON  THAT 
SUBJECT)^ 

TITLE  I.— NEGOTIABLE  INSTRUMENTS  IN  GENERAL 

Article  I. — Form  and  Interpretation 

Section  1.  Be  it  enacted,  etc.,  An  instrument  to  be  negotiable  must 
conform  to  the  following  requirements: 

1.  It  must  be  in  writing  and  signed  by  the  maker  or  drawer ; 

2.  Must  contain  an  unconditional  promise  or  order  to  pay  a  sum 

certain  in  money ; 

3.  Must  be  payable  on  demand,  or  at  a  fixed  or  determinable  fu- 

ture time; 

4.  Must  be  payable  to  order  or  to  bearer ;    and, 

5.  Where  the  instrument  is  addressed  to  a  drawee,  he  must  be  nam- 

ed or  otherwise  indicated  therein  with  reasonable  certainty. 
Sec.  2.  The  sum  payable  is  a  sum  certain  within  the  meaning  of  this 
act,  although  it  is  to  be  paid — 

1.  With  interest ;   or 

2.  By  stated  instalments;   or 

3.  By  stated  instalments,  with   a  provision   that  upon   default   in 

payment  of  any  instalment  or  of  interest  the  whole  shall  be- 
come due ;   or 

1  Recommended  hy  the  Committee  on  Commercial  Law  of  the  Boards  of 
Commissioners  for  promoting  uniformity  of  legislation  in  the  United  States. 
«nd  adopted  (with  ameiidnients  to  a  few  sections)  in  the  following  states 
and  territories:  Alabama  (1!X)7) ;  Arizona  (1901) :  Colorado  (1897) ;  Connecti- 
cut (1S97) ;  District  of  Columbia  (1809) ;  Florida  (1897) ;  Hawaii  (1907) ; 
Idaho  (1903) ;  Illinois  (1907) ;  Iowa  (1902)  ;  Kansas  (190.^)) ;  Kentucky  (1904) ; 
Louisiana  (1904) ;  Maryland  (1S98) ;  Massachusetts  (1S98) ;  Michigan  (190.5) ; 
Missouri  (1905);  Montana  (1903);  Nebraska  (1905);  Nevada  (1907);  New 
Hampshire  (1909);  New  Jersey  (1902);  New  Mexico  (1907);  New  York 
(1897);  North  Carolina  (1899);  North  Dakota  (1899);  Ohio  (1902);  Okla- 
homa (1909);  Oregon  (1899);  Pennsylvania  (1901)  ;  Rhode  Lsland  (1899); 
Tennessee  (1899);  Utah  (18.99);  Virginia  (1897-8);  Washington  (1899); 
West  Virginia   (1907);  Wisconsin   (1899);  Wyoming   (1905). 

Sm.&  M.B.&  N.  (711) 


712  APPENDIX.  (Tit.  1 

4.  With  excliangc,  whether  at  a  fixed  rate  or  at  the  current  rate ;  or 

5.  With  costs  of  collection  or  an  attorney's  fee,  in  case  payment 

shall  not  be  made  at  maturity. 
Sec.  3.  An  unqualified  order  or  promise  to  pay  is  unconditional  with- 
in the  meaning  of  this  act,  though  coupled  with — 

1.  An  indication  of  a  particular  fund  out  of  which  reimbursement 

is  to  be  made,  or  a  particular  account  to  be  debited  with  the 
amount ;   or 

2.  A  statement  of  the  transaction  which  gives  rise  to  the  instru- 

ment. 
But  an  order  or  promise  to  pay  out  of  a  particular  fund  is  not  un- 
conditional. 
Sec.  4.  An  instrument  is  payable  at  a  determinable  future  time,  with- 
in the  meaning  of  this  act,  which  is  expressed  to  be  payable — 

1.  At  a  fixed  period  after  date  or  sight ;  or 

2.  On  or  before  a  fixed  or  determinable  future  time  specified  there- 

in; or 

3.  On  or  at  a  fixed  period  after  the  occurrence  of  a  specified  event, 

which  is  certain  to  happen,  though  the  time  of  happening  be 
uncertain. 
An  instrument  payable  upon  a  contingency  is  not  negotiable,  anc 

the  happening  of  the  event  does  not  cure  the  defect. 
Sec.  5.  An  instrument  which  contains  an  order  or  promise  to   do 
any  act  in  addition  to  the  payment  of  money  is  not  negotiable.     But 
the  negotiable  character  of  an  instrument  otherwise  negotiable  is  not 
aflfected  by  a  provision  which — 

1.  Authorizes  the  sale  of  collateral  securities  in  case  the  instrument 

be  not  paid  at  maturity ;   or 

2.  Authorizes  a  confession  of  judgment  if  the  instrument  be  not 

paid  at  maturity ;   or 
d.  Waives  the  benefit  of  any  law  intended  for  the  advantage  or 
protection  of  the  obligor ;   or 

4.  Gives  the  holder  an  election  to  require  something  to  be  done  in 

lieu  of  payment  of  money. 
But  nothing  in  this  section  shall  validate  any  provision  or  stipula- 
tion otherwise  illegal. 
Sec.  6.  The  validity  and  negotiable  character  of  an  instrument  are 
not  affected  by  the  fact  that — 

1.  It  is  not  dated  ;   or 

2.  Does  not  specify  the  value  given,  or  that  any  value  has  been 

given  therefor ;  or 

3.  Does  not  specify  the  place  where  it  is  drawn  or  the  place  where 

it  is  payable  ;  or 

4.  Bears  a  seal ;    or 

5.  Designates  a  particular  kind  of  current  money  in  which  pay- 

ment is  to  be  made. 


Art.  1)  TUE    NEGOTIABLE    INSTRUMENTS    LAW.  713 

But  nothing-  in  this  section  shall  alter  or  repeal  any  statute  requir- 
ing in  certain  cases  the  nature  of  the  consideration  to  be  stat- 
ed in  the  instrument. 
Sec.  7.  An  instrument  is  payable  on  demand : 

1.  Where  it  is  expressed  to  be  payable  on  demand,  or  at  sight,  or 

on  presentation ;   or 
~0~>"'    8.  In  which  no  time  for  payment  is  expressed. 

IVhere  an  instrument  is  issued,  accepted,  or  indorsed  when  over- 
due, it  is,  as  regards  the  person  so  issuing,  accepting,  or  in- 
dorsing it,  payable  on  demand. 
Sec.  8.  The  instrument  is  payable  to  order  where  it  is  drawn  paya- 
ble to  the  order  of  a  specified  person  or  to  him  or  his  order.    It  may  be 
drawn  payable  to  the  order  of — 

1-  A  payee  who  is  not  maker,  drawer,  or  drawee;   or 

2.  The  drawer  or  maker ;   or 

3.  The  drawee  ;   or 

4.  Two  or  more  payees  jointly  ;   or 

5.  One  or  some  of  several  payees ;   or 

6.  The  holder  of  an  office  for  the  time  being. 

Where  the  instrument  is  payable  to  order  the  payee  must  be  named 
or  otherwise  indicated  therein  with  reasonable  certainty. 
Sec.  9.  The  instrument  is  payable  to  bearer — 

1.  When  it  is  expressed  to  be  so  payable;   or 

2.  When  it  is  payable  to  a  person  named  therein  or  bearer;  or 

3.  When  it  is  payable  to  the  order  of  a  fictitious  or  non-existing 

person,  and  such  fact  was  known  to  the  person  making  it  so 
payable ;   or 

4.  When  the  name  of  the  payee  does  not  purport  to  be  the  name  of 

any  person ;   or 

5.  When  the  only  or  last  indorsement  is  an  indorsement  in  blank. 
Sec.  10.  The  instrument  need  not  follow  the  language  of  this  act, 

but  any  terms  are  sufficient  which  clearly  indicate  an  intention  to  con- 
form to  the  requirements  hereof. 

Sec.  11.  Where  the  instrument  or  an  acceptance  or  any  indorsement 
thereon  is  dated,  such  date  is  deemed  prima  facie  to  be  the  true  date 
of  the  making,  drawing,  acceptance,  or  indorsement  as  the  case  may  be. 

Sec.  12.  The  instrument  is  not  invalid  for  the  reason  only  that  it  is 
ante-dated  or  post-dated,  provided  this  is  not  done  for  an  illegal  or 
fraudulent  purpose.  The  person  to  whom  an  instrument  so  dated  is 
delivered  acquires  the  title  thereto  as  of  the  date  of  delivery. 

Sec.  13.  Where  an  instrument  expressed  to  be  payable  at  a  fixed 
period  after  date  is  issued  undated,  or  where  the  acceptance  of  an  in- 
strument payable  at  a  fixed  period  after  sight  is  undated,  any  holder 
may  insert  therein  the  true  date  (A  issue  or  acceptance,  and  the  instru- 
ment shall  be  payable  accordingly.  The  insertion  of  a  wrong  date 
does  not  avoid  the  instrument  in  the  hands  of  a  subsequent  holder  in 


714  APPENDIX.  (Tit.  J 

due  course ;  but  as  to  him,  the  date  so  inserted  is  to  be  regarded  as  the 
true  date. 

Sec.  14.  Where  the  instrument  is  wantinc:  in  any  material  particu- 
lar, the  person  in  possession  thereof  has  a  prima  facie  authority  to 
complete  it  by  filling  up  the  blanks  therein.  And  a  signature  on  a 
blank  paper  delivered  by  the  person  making  the  signature  in  order  that 
the  paper  may  be  converted  into  a  negotiable  instrument  operates  as  a 
prima  facie  authority  to  fill  it  up  as  such  for  any  amount.  In  order, 
however,  that  any  such  instrument  v/hen  completed  may  be  enforced 
against  any  person  who  became  a  party  thereto  prior  to  its  completion, 
it  must  be  filled  up  strictly  in  accordance  with  the  authority  given  and 
within  a  reasonable  time.  But  if  any  such  instrument,  after  comple- 
tion, is  negotiated  to  a  holder  in  due  course,  it  is  valid  and  effectual 
for  all  purposes  in  his  hands,  and  he  may  enforce  it  as  if  it  had  been 
filled  up  strictly  in  accordance  with  the  authority  given  and  within  a 
reasonable  time. 

Sec.  15.  Where  an  incomplete  instrument  has  not  been  delivered  it 
will  not,  if  completed  and  negotiated,  without  authority,  be  a  valid 
contract  in  the  hands  of  any  holder,  as  against  any  person  whose  sig- 
nature was  placed  thereon  before  delivery. 

Sec.  16.  Every  contract  on  a  negotiable  instrument  is  incomplete 
and  revocable  until  delivery  of  the  instrument  for  the  purpose  of  giv- 
ing effect  thereto.  As  between  immediate  parties,  and  as  regards  a 
remote  party  other  than  a  holder  in  due  course,  the  delivery,  in  order 
to  be  effectual,  must  be  made  either  by  or  under  the  authority  of  the 
party  making,  drawing,  accepting,  or  indorsing,  as  the  case  may  be : 
and  in  such  case  the  delivery  may  be  shown  to  have  been  conditional, 
or  for  a  special  purpose  only,  and  not  for  the  purpose  of  transferring 
the  property  in  the  instrument.  But  where  the  instrument  is  in  the 
hands  of  a  holder  in  due  course,  a  valid  delivery  thereof  by  all  parties 
prior  to  him  so  as  to  make  them  liable  to  him  is  conclusively  presumed. 
And  where  the  instrument  is  no  longer  in  the  possession  of  a  party 
whose  signature  appears  thereon,  a  valid  and  intentional  delivery  by 
him  is  presumed  until  the  contrary  is  proved. 

Sec.  17.  \Miere  the  language  of  the  instrument  is  ambiguous  or 
there  are  omissions  therein,  the  following  rules  of  construction  apply : 

1.  Where  the  sum  payable  is  expressed  in  words  and  also  in  figures 

and  there  is  a  discrepancy  between  the  two,  the  sum  denoted 
by  the  words  is  the  sum  payable;  but  if  the  words  are  am- 
biguous or  uncertain,  reference  may  be  had  to  the  figures  to 
fix  the  amount ; 

2.  Where  the  instrument  provides  for  the  payment  of  interest,  with- 

out specifying  the  date  from  which  interest  is  to  run,  the  in- 
terest runs  from  the  date  of  the  instrument,  and  if  the  in- 
strument is  undated,  from  the  issue  thereof ; 

3.  Where  the  instrument  is  not  dated,  it  will  be  considered  to  be 

dated  as  of  the  time  it  was  issued ; 


Art.  2)  THE    NEGOTIABLE    INSTRUMENTS    LAW.  715 

4.  Where  there  is  a  conflict  between  the  written  and  printed  pro- 

visions of  the  instrument,  the  written  provisions  prevail; 

5.  Where   the    instrument   is    so    ambiguous    that   there   is    doubt 

whether  it  is  a  bill  or  note,  the  holder  may  treat  it  as  either 
at  his  election ; 

6.  Where  a  signature  is  so  placed  upon  the  instrument  that  it  is  not 

clear  in  what  capacity  the  person  making  the  same  intended 
to  sign,  he  is  to  be  deemed  an  indorser ; 

7.  Where  an  instrument  containing  the  words,  "I  promise  to  pay," 

is  signed  by  two  or  more  persons,  they  are  deemed  to  be 
jointly  and  severally  liable  thereon. 

Sec.  18.  No  person  is  liable  on  the  instrument  whose  signature  does 
not  appear  thereon,  except  as  herein  otherwise  expressly  provided. 
But  one  who  signs  in  a  trade  or  assumed  name  will  be  liable  to  the 
same  extent  as  if  he  had  signed  in  his  own  name. 

Sec.  19.  The  signature  of  any  party  may  be  made  by  a  duly  authoriz- 
ed agent.  No  particular  form  of  appointment  is  necessary  for  this 
purpose ;  and  the  authority  of  the  agent  may  be  established  as  in  oth- 
er cases  of  agency. 

Sec.  20.  Where  the  instrument  contains  or  a  person  adds  to  his  sig- 
nature words  indicating  that  he  signs  for  or  on  behalf  of  a  principal, 
or  in  a  representative  capacity,  he  is  not  liable  on  the  instrument  if  he 
was  duly  authorized ;  but  the  mere  addition  of  words  describing  him 
as  an  agent,  or  as  filling  a  representative  character,  without  disclos- 
ing his  principal,  does  not  exempt  him  from  personal  liability. 

Sec.  21.  A  signature  by  "procuration"  operates  as  notice  that  the 
agent  has  but  a  limited  authority  to  sign,  and  the  principal  is  bound 
only  in  case  the  agent  in  so  signing  acted  within  the  actual  limits  of 
his  authority. 

Sec.  22.  The  indorsement  or  assignment  of  the  instrument  by  a  cor- 
poration or  by  an  infant  passes  the  property  therein,  notwithstanding 
that  from  want  of  capacity  the  corporation  or  infant  may  incur  no  lia- 
bility thereon. 

Sec.  23.  When  a  signature  is  forged  or  made  without  the  authority 
of  the  person  whose  signature  it  purports  to  be,  it  is  wholly  inopera- 
tive, and  no  right  to  retain  the  instrument,  or  to  give  a  discharge  there- 
for, or  to  enforce  payment  thereof  against  any  party  thereto,  can  be 
acquired  through  or  under  such  signature,  unless  the  party,  against 
whom  it  is  sought  to  enforce  such  right,  is  precluded  from  setting  up 
the  forgery  or  want  of  authority. 

Article  II. — Consideration 

Sec.  24.  Every  negotiable  instrument  is  deemed  prima  facie  to  have 
been  issued  for  a  valuable  consideration;  and  every  person  whose  sig- 
nature appears  thereon  to  have  become  a  party  thereto  for  value. 

Sec.  25.  Value  is  any  consideration  sufficient  to   support  a   simple 


716  APPENuix.  (Tit.  1 

contract.  An  antecedent  or  pre-existing  debt  constitutes  value;  and 
is  deemed  such  whether  the  instrument  is  payable  on  demand  or  at  a 
future  time. 

Sec.  2G.  Where  value  has  at  any  time  been  given  for  the  instrument, 
the  holder  is  deemed  a  holder  for  value  in  respect  to  all  parties  who 
became  such  prior  to  that  time. 

Sec.  27.  Where  the  holder  has  a  lien  on  the  instrument,  arising  ei- 
ther from  contract  or  by  implication  of  law,  he  is  deemed  a  holder 
for  value  to  the  extent  of  his  lien. 

Sec.  28.  Absence  or  failure  of  consideration  is  matter  of  defence  as 
against  any  person  not  a  holder  in  due  course;  and  partial  failure  of 
consideration  is  a  defence  pro  tanto,  whether  the  failure  is  an  ascer- 
tained and  liquidated  amount  or  otherwise. 

Sec.  29.  An  accommodation  party  is  one  who  has  signed  the  instru- 
ment as  maker,  drawer,  acceptor,  or  indorser,  without  receiving  value 
therefor,  and  for  the  purpose  of  lending  his  name  to  some  other  per- 
son. Such  a  person  is  liable  on  the  instrument  to  a  holder  for  value, 
notwithstanding  such  holder  at  the  time  of  taking  the  instrument  knew 
him  to  be  only  an  accommodation  party. 

Article  III. — Negotiation 

Sec.  30.  An  instrument  is  negotiated  when  it  is  transferred  from 
one  person  to  another  in  such  manner  as  to  constitute  the  transferee 
the  holder  thereof.  If  payable  to  bearer  it  is  negotiated  by  delivery; 
if  payable  to  order  it  is  negotiated  by  the  indorsement  of  the  holder 
completed  by  delivery. 

Sec.  31.  The  indorsement  must  be  written  on  the  instrument  itself 
or  upon  a  paper  attached  thereto.  The  signature  of  the  indorser, 
without  additional  words,  is  a  sufficient  indorsement. 

Sec.  32.  The  indorsement  must  be  an  indorsement  of  the  entire  in- 
strument. An  indorsement,  which  purports  to  transfer  to  the  in- 
dorsee a  part  only  of  the  amount  payable,  or  which  purports  to  trans- 
fer the  instrument  to  two  or  more  indorsees  severally,  does  not  op'ev- 
ate  as  a  negotiation  of  the  instrument.  But  where  the  instrument  has 
been  paid  in  part,  it  may  be  indorsed  as  to  the  residue. 

Sec.  33.  An  indorsement  may  be  either  special  or  in  blank ;  and  it 
may  also  be  either  restrictive  or  qualified,  or  conditional. 

Sec.  34.  A  special  indorsement  specifies  the  person  to  whom,  or  to 
whose  order,  the  instrument  is  to  be  payable ;  and  the  indorsement  of 
such  indorsee  is  necessary  to  the  further  negotiation  of  the  instru- 
ment. An  indorsement  in  blank  specifies  no  indorsee,  and  an  instru- 
ment so  indorsed  is  payable  to  bearer,  and  may  be  negotiated  by  de- 
livery. 

Sec.  35.  The  holder  may  convert  a  blank  indorsement  into  a 
>pecial  indorsement  by  writing  over  the  signature  of  the  indorser  in 
blank  any  contract  consistent  with  the  character  of  the  indorsement. 


Art.  3)  THE    NEGOTIABLE    INSTRUMENTS    LAW.  717 

Sec.  36.  An  indorsement  is  restrictive,  which  either — 

1.  Prohibits  the  further  negotiation  of  the  instrument ;  or 

2.  Constitutes  the  indorsee  the  agent  of  the  indorser ;  or 

3.  Vests  the  title  in  the  indorsee  in  trust  for  or  to  the  use  of  some 

other  person. 
But  the  mere  absence  of  words  implying  power  to  negotiate  does 
not  make  an  indorsement  restrictive. 
Sec.  37.  A   restrictive   indorsement   confers   upon   the   indorsee   the 
right— 

1.  To  receive  payment  of  the  instrument; 

2.  To  bring  any  action  thereon  that  the  indorser  could  bring; 

3.  To  transfer  his  rights  as  such  indorsee,  where  the  form  of  the 

indorsement  authorizes  him  to  do  so. 
But   all   subsequent  indorsees   acquire  only   the   title  of   the   first 
indorsee  under  the  restrictive  indorsement. 

Sec.  38.  A  qualified  indorsement  constitutes  the  indorser  a  mere 
assignor  of  the  title  to  the  instrument.  It  may  be  made  by  adding  to 
the  indorser's  signature  the  words  "without  recourse,"  or  any  words 
of  similar  import.  Such  an  indorsement  does  not  impair  the  ne- 
gotiable character  of  the  instrument. 

Sec.  39.  Where  an  indorsement  is  conditional,  a  party  required  to 
pay  the  instrument  may  disregard  the  condition,  and  make  payment  to 
the  indorsee  or  his  transferee,  whether  the  condition  has  been  fulfilled 
or  not.  But  any  person  to  whom  an  instrument  so  indorsed  is  ne- 
gotiated, will  hold  the  same,  or  the  proceeds  thereof,  subject  to  the 
rights  of  the  person  indorsing  conditionally. 

Sec.  40.  Where  an  instrument,  payable  to  bearer,  is  indorsed  spe- 
cially, it  may  nevertheless  be  further  negotiated  by  delivery;  but  the 
person  indorsing  specially  is  liable  as  indorser  to  only  such  holders  as 
make  title  through  his  indorsement. 

Sec.  41.  Where  an  instrument  is  payable  to  the  order  of  two  or 
more  payees  or  indorsees  who  are  not  partners,  all  must  indorse,  un- 
less the  one  indorsing  has  authority  to  indorse  for  the  others. 

Sec.  42.  Where  an  instrument  is  drawn  or  indorsed  to  a  person  as 
"Cashier"  or  other  fiscal  officer  of  a  bank  or  corporation,  it  is  deemed 
prima  facie  to  be  payable  to  the  bank  or  corporation  of  which  he  is 
such  officer,  and  may  be  negotiated  by  either  the  indorsement  of  the 
bank  or  corporation,  or  the  indorsement  of  the  officer. 

Sec.  43.  Where  the  name  of  a  payee  or  indorsee  is  wrongly  des- 
ignated or  misspelled,  he  may  indorse  the  instrument  as  therein  de- 
scribed, adding,  if  he  think  fit,  his  proper  signature. 

Sec.  44.  Where  any  person  is  under  obligation  to  indorse  in  a  rep- 
resentative capacity,  he  may  indorse  in  such  terms  as  to  negative  per- 
sonal liability. 

Sec.  45.  Except  where  an  indorsement  bears  date  after  the  ma- 
turity of  the  instrument,  every  negotiation  is  deemed  prima  facie  to 
have  been  effected  before  the  instrument  was  overdue. 


718  APPENDIX.  (Tit.  1 

Sec.  46.  Except  where  the  contrary  appears,  every  indorsement 
is  presumed  prima  facie  to  have  been  made  at  the  place  where  the 
instrument  is  dated. 

Sec.  47.  An  instrument  negotiable  in  its  origin  continues  to  be 
negotiable  until  it  has  been  restrictively  indorsed  or  discharged  by 
payment  or  otherwise. 

Sec.  48.  The  holder  may  at  any  time  strike  out  any  indorsement 
which  is  not  necessary  to  his  title.  The  indorser  whose  indorsement 
is  struck  out,  and  all  indorsers  subsequent  to  him,  are  thereby  relieved 
from  liability  on  the  instrument. 

Sec.  49.  \^^here  the  holder  of  an  instrument  payable  to  his  order 
transfers  it  for  value  without  indorsing  it,  the  transfer  vests  in  the 
transferee  such  title  as  the  transferor  had  therein,  and  the  transferee 
acquires,  in  addition,  the  right  to  have  the  indorsement  of  the  trans- 
feror. But  for  the  purpose  of  determining  whether  the  transferee 
is  a  holder  in  due  course,  the  negotiation  takes  effect  as  of  the  time 
when  the  indorsement  is  actually  made. 

Sec.  50.  Where  an  instrument  is  negotiated  back  to  a  prior  party, 
such  party  may,  subject  to  the  provisions  of  this  act,  reissue  and  fur- 
ther negotiate  the  same.  But  he  is  not  entitled  to  enforce  payment 
thereof  against  any  intervening  party  to  whom  he  was  personally 
liable. 

Article  IV. — Rights  of  the  Holder 

Sec.  51.  The  holder  of  a  negotiable  instrument  may  sue  thereon  in. 
his  own  name;  and  payment  to  him  in  due  course  discharges  the  in- 
strument. 

Sec.  52.  A  holder  in  due  course  is  a  holder  who  has  taken  the  in- 
strument under  the  following  conditions: 

1.  That  it  is  complete  and  regular  upon  its  face ; 

2.  That  he  became  the  holder  of  it  before  it  was  overdue,  and 

without  notice  that  it  had  been  previously  dishonored,  if 
such  was  the  fact; 

3.  That  he  took  it  in  good  faith  and  for  value ; 

4.  That  at  the  time  it  was  negotiated  to  him  he  had  no  notice  of 

any  infirmity  in  the  instrument  or  defect  in  the  title  of  the 
person  negotiating  it. 

Sec.  53.  Where  an  instrument  payable  on  demand  is  negotiated  an 
unreasonable  length  of  time  after  its  issue,  the  holder  is  not  deemed 
a  holder  in  due  course. 

Sec.  54.  Where  the  transferee  receives  notice  of  any  infirmity  in 
the  instrument  or  defect  in  the  title  of  the  person  negotiating  the  same 
before  he  has  paid  the  full  amount  agreed  to  be  paid  therefor,  he 
will  be  deemed  a  holder  in  due  course  only  to  the  extent  of  the  amount 
theretofore  paid  by  him. 

Sec.  55.  The  title  of  a  person  who  negotiates  an  instrument  is  de- 
fective within  the  meaning  of  this  act  when  he  obtained  the  instru- 


Art.  5)  THE    NEGOTIABLE    INSTRUMENTS    LAW.  719 

ment,  or  any  signature  thereto,  by  fraud,  duress,  or  force  and  fear, 
or  other  unlawful  means,  or  for  an  illegal  consideration,  or  when  he 
negotiates  it  in  breach  of  faith,  or  under  such  circumstances  as  amount 
to  a  fraud. 

Sec.  5G.  To  constitute  notice  of  an  infirmity  in  the  instrument  or 
defect  in  the  title  of  the  person  negotiating  the  same,  the  person  to 
whom  it  is  negotiated  must  have  had  actual  knowledge  of  the  infirmity 
or  defect,  or  knowledge  of  such  facts  that  his  action  in  taking  the  in- 
strument amounted  to  bad  faith. 

Sec.  57.  A  holder  in  due  course  holds  the  instrument  free  from 
any  defect  of  title  of  prior  parties,  and  free  from  defences  available 
to  prior  parties  among  themselves,  and  may  enforce  payment  of  the 
instrument  for  the  full  amount  thereof  against  all  parties  liable  thereon. 

Sec.  58.  In  the  hands  of  any  holder  other  than  a  holder  in  due 
course,  a  negotiable  instrument  is  subject  to  the  same  defences  as  if 
it  were  non-negotiable.  But  a  holder  who  derives  his  title  through 
a  holder  in  due  course,  and  who  is  not  himself  a  party  to  any  fraud 
or  illegality  affecting  the  instrument,  has  all  the  rights  of  such  former 
holder  in  respect  of  all  parties  prior  to  the  latter. 

Sec.  59.  Every  holder  is  deemed  prima  facie  to  be  a  holder  in  due 
course ;  but  when  it  is  shown  that  the  title  of  any  person  who  has 
negotiated  the  instrument  was  defective,  the  burden  is  on  the  holder 
to  prove  that  he  or  some  person  under  whom  he  claims  acquired  the 
title  as  holder  in  due  course.  But  the  last-mentioned  rule  does  not 
apply  in  favor  of  a  party  who  became  bound  on  the  instrument  prior 
to  the  acquisition  of  such  defective  title. 

Article;  V. — Liabilities  of  Parties 

Sec.  60.  The  maker  of  a  negotiable  instrument  by  making  it  en- 
gages that  he  will  pay  it  according  to  its  tenor,  and  admits  the  exist- 
ence of  the  payee  and  his  then  capacity  to  indorse. 

Sec.  61.  The  drawer  by  drawing  the  instrument  admits  the  ex- 
istence of  the  payee  and  his  then  capacity  to  indorse;  and  engages 
that  on  due  presentment  the  instrument  will  be  accepted  or  paid,  or 
both,  according  to  its  tenor,  and  that  if  it  be  dishonored,  and  the  nec- 
essary proceedings  on  dishonor  be  duly  taken,  he  will  pay  the  amount 
thereof  to  the  holder,  or  to  any  subsequent  indorser  who  may  be 
compelled  to  pay  it.  But  the  drawer  may  insert  in  the  instrument  an 
express  stipulation  negativing  or  limiting  his  own  liability  to  the 
holder. 

Sec.  62.  The  acceptor  by  accepting  the  instrument  engages  that  he 
will  pay  it  according  to  the  tenor  of  his  acceptance ;   and  admits — 

1.  The  existence  of  the  drawer,  the  genuineness  of  his  signature, 

and  his  capacity  and  authority  to  draw  the  instrument;  and 

2.  The  existence  of  the  payee  and  his  then  capacity  to  indorse. 
Sec.  63.  A  person  placing  his  signature  upon  an  instrument  other- 
wise than  as  maker,  drawer  or  acceptor,  is  deemed  to  be  an  indorser, 


720  ArrBNDix.  (Tit.  1 

unless  he  clearly  indicates  by  appropriate  words  his  intention  to  be 
bound  in  some  other  capacity. 

Sec.  64.  Where  a  person,  not  otherwise  a  party  to  an  instrument, 
places  thereon  his  signature  in  blank  before  delivery,  he  is  liable  as 
indorser,  in  accordance  with  the  following  rules : 

1.  If  the  instrument  is  payable  to  the  order  of  a  third  person,  he 

is  liable  to  the  payee  and  to  all  subsequent  parties. 

2.  If  the  instrument  is  payable  to  the  order  of  the  maker  or  draw- 

er, or  is  payable  to  bearer,  he  is  liable  to  all  parties  subse- 
quent to  the  maker  or  drawer. 

3.  If  he  signs  for  the  accommodation  of  the  payee,  he  is  liable  to 

all  parties  subsequent  to  the  payee. 
Sec.  65.  Every   person    negotiating   an    instrument   by    delivery    or 
by  a  qualified  indorsement,  warrants — 

1.  That  the  instrument  is  genuine  and  in  all  respects  what  it  pur- 

ports to  be ; 

2.  That  he  has  a  good  title  to  it ; 

3.  That  all  prior  parties  had  capacity  to  contract ; 

4.  That  he  has  no  knowledge  of  any   fact   which   would   impair 

the  validity  of  the  instrument  or  render  it  valueless. 
But  when  the  negotiation  is  by  delivery  only,  the  warranty  ex- 
tends in  favor  of  no  holder  other  than  the  immediate  trans- 
feree. 
The  provisions  of  subdivision  three  of  this  section  do  not  apply 
to  persons  negotiating  public  or  corporation  securities,  other 
than  bills  and  notes. 
Sec.  66.  Every   indorser   who   indorses   without   qualification,    war- 
I'ants  to  all  subsequent  holders  in  due  course : 

1.  The   matters   and   things   mentioned   in   subdivisions  one,   two, 

and  three  of  the  next  preceding  section ;   and 

2.  That  the   instrument  is  at  the  time   of  his  indorsement  valid 

and  subsisting. 
An"d,  in  addition,  he  engages  that  on  due  presentment,  it  shall  be 
accepted  or  paid,  or  both,  as  the  case  may  be,  according  to 
its  tenor,  and  that   if   it  be  dishonored,   and   the  necessary 
proceedings    on    dishonor   be    duly    taken,    he   will    pay    the 
amount  thereof  to  the  holder,  or  to  any  subsequent  indorser 
who  may  be  compelled  to  pay  it. 
Sec.  6?.  Where  a  person  places  his  indorsement  on  an  instrument 
negotiable  by  delivery  he  incurs  all  the  liabilities  of  an  indorser. 

Sec.  68.  As  respects  one  another,  indorsers  are  liable  prima  facie 
in  the  order  in  which  they  indorse ;  but  evidence  is  admissible  to  show 
that  as  between  or  among  themselves  they  have  agreed  otherwise. 
Joint  payees  or  joint  indorsees  who  indorse  are  deemed  to  indorse 
jointly  and  severally. 

Sec.  69.  Where  a  broker  or  other  agent  negotiates  an  instrument 
'without  indorsement,  he  incurs  all  the  liabilities  prescribed  by  ^ection 


Art.  6)  THE    NEGOTIABLE    INSTRUMENTS    LAW.  721 

sixty-five  of  this  act,  unless  he  discloses  -the  name  of  his  principal, 
and  the  fact  that  he  is  acting  only  as  agent. 


Article  VI. — Presentment  for  Payment 

Sec.  70.  Presentment  for  payment  is  not  necessary  in  order  to 
charge  the  person  primarily  liable  on  the  instrument ;  but  if  the  in- 
strument is,  by  its  terms,  payable  at  a  special  place,  and  he  is  able  and 
willing  to  pay  it  there  at  maturity,  such  ability  and  willingness  are 
equivalent  to  a  tender  of  payment  upon  his  part.  But  except  as 
herein  otherwise  provided,  presentment  for  payment  is  necessary  in 
order  to  charge  the  drawer  and  indorsers. 

Sec.  71.  Where  the  instrument  is  not  payable  on  demand,  present- 
ment must  be  made  on  the  day  it  falls  due.  Where  it  is  payable  on 
demand,  presentment  must  be  made  within  a  reasonable  time  after 
its  issue,  except  that  in  the  case  of  a  bill  of  exchange,  presentment  for 
payment  will  be  sufficient  if  made  within  a  reasonable  time  after  the 
last  negotiation  thereof. 

Sec.  72.  Presentment  for  payment,  to  be  sufficient,  must  be  made — 

1.  By  the  holder,  or  by  some  person  authorized  to  receive  pay- 

ment on  his  behalf ; 

2.  At  a  reasonable  hour  on  a  business  day ; 

3.  At  a  proper  place  as  herein  defined ; 

4.  To  the  person  primarily  liable  on  the  instrument,  or  if  he  is 

absent  or  inaccessible,  to  any  person  found  at  the  place  where 
the  presentment  is  made. 
Sec.  73.  Presentment  for  payment  is  made  at  the  proper  place — 

1.  Where  a  place  of  payment  is  specified  in  the  instrument  and 

it  is  there  presented ; 

2.  Where  no  place  of  payment  is  specified,   but  the   address   of 

the  person  to  make  payment  is  given  in  the  instrument  and 
it  is  there  presented  ; 

3.  WHiere  no  place  of  payment  is  specified  and  no  address  is  given 

and  the  instrument  is  presented  at  the  usual  place  of  busi- 
ness or  residence  of  the  person  to  make  payment ; 

4.  In  any  other  case  if  presented  to  the  person  to  make  payment 

wherever  he  can  be  found,  or  if  presented  at  his  last  known 
place  of  business  or  residence. 
Sec.  74.  The    instrument   must   be    exhibited    to    the    person    from 
whom  payment  is  demanded,  and  when  it  is  paid  must  be  delivered 
up  to  the  party  paying  it. 

Sec.  75.  Where  the  instrument  is  payable  at  a  bank,  presentment 
for  payment  must  be  made  during  banking  hours,  unless  the  person 
to  make  payment  has  no  funds  there  to  meet  it  at  any  time  during 
the  day,  in  which  case  presentment  at  any  hour  before  the  bank  i.^ 
closed  on  that  day  is  sufficient. 
Sm.&M.B.&N.— IG 


722  APPENDIX.  (Tit.  ] 

Sec.  76.  Where  the  person  primarily  Hable  on  the  instrument  is 
dead,  and  no  place  of  payment  is  specified,  presentment  for  payment 
must  be  made  to  his  personal  representative  if  such  there  be,  and  if, 
with  the  exercise  of  reasonable  diligence,  he  can  be  found. 

Sec.  77.  Where  the  persons  primarily  liable  on  the  instrument  are 
liable  as  partners,  and  no  place  of  payment  is  specified,  presentment 
for  payment  may  be  made  to  any  one  of  them,  even  though  there  has 
been  a  dissolution  of  the  firm. 

Sec.  78.  Where  there  are  several  persons,  not  partners,  primarily 
liable  on  the  instrument,  and  no  place  of  payment  is  specified,  pre- 
sentment must  be  made  to  them  all. 

Sec.  79.  Presentment  for  payment  is  not  required  in  order  to  charge 
the  drawer  where  he  has  no  right  to  expect  or  require  that  the  drawee 
or  acceptor  will  pay  the  instrument. 

Sec.  80.  Presentment  for  payment  is  not  required  in  order  to  charge 
an  indorser  where  the  instrument  was  made  or  accepted  for  his  ac- 
commodation and  he  has  no  reason  to  expect  that  the  instrument  will 
be  paid  if  presented. 

Sec.  81.  Delay  in  making  presentment  for  payment  is  excused  when 
the  delay  is  caused  by  circumstances  beyond  the  control  of  the  holder, 
and  not  imputable  to  his  default,  misconduct,  or  negligence.  When 
the  cause  of  delay  ceases  to  operate,  presentment  must  be  made  with 
reasonable  diligence. 

Sec.  82.  Presentment  for  payment  is  dispensed  with: 

1.  Where  after  the  exercise  of  reasonable  diligence  presentment 

as  required  by  this  act  cannot  be  made ; 

2.  \\'here  the  drawee  is  a  fictitious  person  ; 

3.  By  waiver  of  presentment,  express  or  implied. 

Sec.  83.  The  instrument  is  dishonored  by  non-payment  when. — 

1.  It  is  duly  presented   for  payment  and  payment   is  refused  or 

cannot  be  obtained;  or 

2.  Presentment   is   excused   and    the    instrument   is    overdue   and 

unpaid. 

Sec.  84.  Subject  to  the  provisions  of  this  act,  when  the  instrument 
is  dishonored  by  non-payment,  an  immediate  right  of  recourse  to  all 
parties  secondarily  liable  thereon  accrues  to  the  holder. 

Sec.  85.  Every  negotiable  instrument  is  payable  at  the  time  fixed 
therein  without  grace.  When  the  day  of  maturity  falls  upon  Sunday. 
or  a  holiday,  the  instrument  is  payable  on  the  next  succeeding  busi- 
ness day.  Instruments  falling  due  on  Saturday  are  to  be  presented 
for  payment  on  the  next  succeeding  business  day,  except  that  instru- 
ments payable  on  demand  may,  at  the  option  of  the  holder,  be  pre- 
sented for  payment  before  twelve  o'clock  noon  on  Saturday  when 
that  entire  day  is  not  a  holiday. 

Sec.  86.  Where  the  instrument  is  payable  at  a  fixed  period  after 
■date,  after  sight,  or  after  the  happening  of  a  specified  event,  the  time 


Art.  7)  THE    NEGOTIABLE    INSTRUMENTS    LAW,  723 

of  payment  is  determined  by  excluding  the  day  from  which  the  time 
is  to  beg-in  to  run,  and  by  including  the  date  of  payment. 

Sec.  87.  Where  the  instrument  is  made  payable  at  a  bank  it  is 
equivalent  to  an  order  to  the  bank  to  pay  the  same  for  the  account 
of  the  principal  debtor  thereon. 

Sec.  88.  Payment  is  made  in  due  course  when  it  is  made  at  or  after 
the  maturity  of  the  instrument  to  the  holder  thereof  in  good  faith 
and  without  notice  that  his  title  is  defective. 


Article  VII. — Notice  oe  Dishonor 

Sec.  89.  Except  as  herein  otherwise  provided,  when  a  negotiable 
instrument  has  been  dishonored  by  non-acceptance  or  non-payment, 
notice  of  dishonor  must  be  given  to  the  drawer  and  to  each  indorser, 
and  any  drawer  or  indorser  to  whom  such  notice  is  not  given  is  dis- 
charged. 

Sec.  90.  The  notice  may  be  given  by  or  on  behalf  of  the  holder, 
or  by  or  on  behalf  of  any  party  to  the  instrument  who  might  be  com- 
pelled to  pay  it  to  the  holder,  and  who,  upon  taking  it  up  would  have 
a  right  to  reimbursement  from  the  party  to  whom  the  notice  is  given. 

Sec.  91.  Notice  of  dishonor  may  be  given  by  an  agent  either  in 
his  own  name  or  in  the  name  of  any  party  entitled  to  give  notice, 
whether  that  party  be  his  principal  or  not. 

Sec,  92.  Where  notice  is  given  by  or  on  behalf  of  the  holder,  it 
enures  for  the  benefit  of  all  subsequent  holders  and  all  prior  parties 
who  have  a  right  of  recourse  against  the  party  to  whom  it  is  given. 

Sec.  93.  Where  notice  is  given  by  or  on  behalf  of  a  party  entitled 
to  give  notice,  it  enures  for  the  benefit  of  the  holder  and  all  parties 
subsequent  to  the  party  to  whom  notice  is  given. 

Sec.  94.  Where  the  instrument  has  been  dishonored  in  the  hands 
of  an  agent,  he  may  either  himself  give  notice  to  the  parties  liable 
thereon,  or  he  may  give  notice  to  his  principal.  If  he  give  notice  to 
his  principal,  he  must  do  so  within  the  same  time  as  if  he  were  the 
holder,  and  the  principal  upon  the  receipt  of  such  notice  has  himself 
the  same  time  for  giving  notice  as  if  the  agent  had  been  an  independ- 
ent holder. 

Sec.  95.  A  written  notice  need  not  be  signed,  and  an  insufficient 
written  notice  may  be  supplemented  and  validated  by  verbal  com- 
munication. A  misdescription  of  the  instrument  does  not  vitiate  the 
notice  unless  the  party  to  whom  the  notice  is  given  is  in  fact  misled 
thereby. 

Sec.  96.  The  notice  may  be  in  writing  or  merely  oral  and  may  be 
given  in  any  terms  which  sufficiently  identify  the  instrument,  and 
indicate  that  it  has  been  dishonored  by  non-acceptance  or  non-pay- 
ment. It  may  in  all  cases  be  given  by  delivering  it  personally  or 
through  the  mails. 


724  AFPEXDix.  (Tit.  1 

Sec.  97.  Notice  of  dishonor  may  be  given  either  to  ihe  party  himself 
or  to  his  agent  in  that  behalf. 

Sec.  98.  When  any  party  is  dead,  and  his  death  is  known  to  the 
party  giving  notice,  the  notice  must  be  given  to  a  personal  represen- 
tative, if  there  be  one,  and  if  with  reasonable  diligence  he  can  be 
found.  If  there  be  no  personal  representative,  notice  may  be  sent 
to  the  last  residence  or  last  place  of  business  of  the  deceased. 

Sec.  99.  Where  the  parties  to  be  notified  are  partners,  notice  to 
any  one  partner  is  notice  to  the  firm  even  though  there  has  been  a 
dissolution. 

Sec.  100.  Notice  to  joint  parties  who  are  not  partners  must  be  given 
to  each  of  them,  unless  one  of  them  has  authority  to  receive  such 
notice  for  the  others. 

Sec.  101.  Where  a  party  has  been  adjudged  a  bankrupt  or  an  in- 
solvent, or  has  made  an  assignment  for  the  benefit  of  creditors,  notice 
may  be  given  either  to  the  party  himself  or  to  his  trustee  or  assignee. 

Sec.  102.  Notice  may  be  given  as  soon  as  the  instrument  is  dishon- 
ored ;  and  unless  delay  is  excused  as  hereinafter  provided,  must  be 
given  within  the  times  fixed  by  this  act. 

Sec.  103.  Where  the  person  giving  and  the  person  to  receive  notice 
reside  in  the  same  place,  notice  must  be  given  within  the  following 
times : 

1.  If  given  at  the  place  of  business  of  the  person  to  receive  no- 

tice, it  must  be  given  before  the  close  of  business  hours  on 
the  day  following. 

2.  If  given   at   his  residence,  it  must  be  given  before  the  usual 

hours  of  rest  on  the  day  following. 

3.  If  sent  by  mail,  it  must  be  deposited  in  the  post-office  in  time 

to  reach  him  in  usual  course  on  the  day  following. 
Sec.  104.  Where  the  person  giving  and  the  person  to  receive  no- 
tice reside  in  different  places,  the  notice  must  be  given  within  the  fol- 
lowing times : 

1.  If  sent  by  mail,  it  must  be  deposited  in  the  post-office  in  time 

to  go  by  mail  the  day  following  the  day  of  dishonor,  or  if 
there  be  no  mail  at  a  convenient  hour  on  that  day,  by  the 
next  mail  thereafter. 

2.  If  given  otherwise  than  through  the  post-office,  then  within  the 

time  that  notice  would  have  been  received  in  due  course  of 
mail,  if  it  had  been  deposited  in  the  post-office  within  the 
time  specified  in  the  last  subdivision. 
Sec.  105.  Where  notice  of  dishonor  is  duly  addressed  and  deposited 
in  the  post-office,  the  sender  is  deemed  to  have  given  due  notice,  not- 
withstanding any  miscarriage  in  the  mails. 

Sec.  106.  Notice  is  deemed  to  have  been  deposited  in  the  post-office 
when  deposited  in  any  branch  post-office  or  in  any  letter  box  under 
Ihe  control  of  the  post-office  department. 


Art.  7)  THE    NEGOTIABLE    INSTRUMENTS    LAW.  725 

Sec.  107.  Where  a  party  receives  notice  of  dishonor,  he  has,  after 
the  receipt  of  such  notice,  the  same  time  for  giving-  notice  to  ante- 
cedent parties  that  the  holder  has  after  the  dishonor. 

Sec.  108.  Where  a  party  has  added  an  address  to  his  signature, 
notice  of  dishonor  must  be  sent  to  that  address;  but  if  he  has  not 
given  such  address,  then  the  notice  must  be  sent  as  follows : 

1.  Either  to  the  post-office  nearest  to  his  place  of  residence,  or 

to  the  post-office  where  he  is  accustomed  to  receive  his  let- 
ters ;   or 

2.  If  he  live  in  one  place,  and  have  his  place  of  business  in  an- 

other, notice  may  be  sent  to  either  place ;  or 

3.  If  he  is  sojourning  in  another  place,  notice  may  be  sent  to  the 

place  where  he  is  so  sojourning. 
But  where  the  notice  is  actually  received  by  the  party  within  the 
time   specified  in   this  act,  it  will  be   sufficient,   though   not 
sent  in  accordance  with  the  requirements  of  this  section. 

Sec.  109.  Notice  of  dishonor  may  be  waived,  either  before  the  time 
of  giving  notice  has  arrived,  or  after  the  omission  to  give  due  notice, 
and  the  waiver  may  be  express  or  implied. 

Sec.  110.  Where  the  waiver  is  embodied  in  the  instrument  itself, 
it  is  binding  upon  all  parties ;  but  Avhere  it  is  written  above  the  sig- 
nature of  an  indorser,  it  binds  him  only. 

Sec.  111.  A  waiver  of  protest,  whether  in  the  case  of  a  foreign  bill 
of  exchange  or  other  negotiable  instrument,  is  deemed  to  be  a  waiver 
not  only  of  a  formal  protest,  but  also  of  presentment  and  notice 
of  dishonor. 

Sec.  112.  Notice  of  dishonor  is  dispensed  with  when,  after  the  ex- 
ercise of  reasonable  diligence,  it  cannot  be  given  to  or  does  not  reach 
the  parties  sought  to  be  charged. 

Sec.  113.  Delay  in  giving  notice  of  dishonor  is  excused  when  the 
delay  is  caused  by  circumstances  beyond  the  control  of  the  holder, 
and  not  imputable  to  his  default,  misconduct,  or  negligence.  When 
the  cause  of  delay  ceases  to  operate,  notice  must  be  given  with  reason- 
able diligence. 

Sec.  114.  Notice  of  dishonor  is  not  required  to  be  given  to  the 
drawer  in  either  of  the  following  cases : 

1.  Where  the  drawer  and  drawee  are  the  same  person ; 

2.  When  the  drawee  is  a  fictitious  person  or  a  person  not  having 

capacity  to  contract; 

3.  When   the   drawer  is   the   person   to  whom   the   instrument   is 

presented  for  payment ; 

4.  Where  the  drawer  has  no  right  to  expect  or  require  that  the 

drawee  or  acceptor  will  honor  the  instrument ; 

5.  Where  the  drawer  has  countermanded  payment. 

Sec.  115.  Notice  of  dishonor  is  not  required  to  be  given  to  an  in- 
dorser in  either  of  the  following  cases: 


726  APPENDIX.  (Tit.  1 

1.  Wliere  tlie  drawee  is  a  fictitious  person  or  a  person  not  having 

capacity  to  contract,  and  the  indorser  was  aware  of  the  fact 
at  the  time  he  indorsed  the  instrument ; 

2.  Where  the  indorser  is  the  person  to  whom  the  instrument  is 

presented  for  payment ; 

3.  Where  the  instrument  was  made  or  accepted  for  his  accommo- 

dation. 

Sec.  116.  Where  due  notice  of  dishonor  by  non-acceptance  has  been 
given  notice  of  a  subsequent  dishonor  by  non-payment  is  not  neces- 
sary, unless  in  the  meantime  the  instrument  has  been  accepted. 

Sec.  117.  An  omission  to  give  notice  of  dishonor  by  non-acceptance 
does  not  prejudice  the  rights  of  a  holder  in  due  course  subsequent 
to  the  omission. 

Sec.  118.  Where  any  negotiable  instrument  has  been  dishonored  it 
may  be  protested  for  non-acceptance  or  non-payment,  as  the  case  may 
be ;  but  protest  is  not  required  except  in  the  case  of  foreign  bills  of 
exchange. 

Article  VIII. — Discharge  of  Negotiable  Instruments 

Sec.  119.  A  negotiable  instrument  is  discharged: 

1.  By  payment  in   due   course  by  or  on   behalf  of   the  principal 

debtor ; 

2.  By  payment  in  due  course  by  the  party  accommodated,  where 

the  instrument  is  made  or  accepted  for  accommodation ; 

3.  By  the  intentional  cancellation  thereof  by  the  holder ; 

4.  By  any  other  act  which  will  discharge  a  simple  contract   for 

the  payment  of  money; 

5.  When  the  principal  debtor  becomes  the  holder  of  the  instru- 

ment at  or  after  maturity  in  his  own  right. 
Sec.  120.  A    person    secondarily    liable    on    the    instrument    is    dis- 
charged : 

1.  By  any  act  which  discharges  the  instrument; 

2.  By  the  intentional  cancellation  of  his  signature  by  the  holder; 

3.  By  the  discharge  of  a  prior  party ; 

4.  By  a  valid  tender  of  payment  made  by  a  prior  party ; 

5.  By  a  release  of  the  principal  debtor,  unless  the  holder's  right 

of  recourse  against  the  party  secondarily  liable  is  expressly 
reserved ; 

6.  By  any  agreement  binding  upon  the  holder  to  extend  the  time 

of  payment,  or  to  postpone  the  holder's  right  to  enforce  the 
instrument,  unless  made  with  the  assent  of  the  party  seconda- 
rily liable,  or  unless  the  right  of  recourse  against  such  party 
is  expressly  reserved. 
Sec.  121.  Where  the  instrument  is  paid  by  a  party  secondarily  h- 
able  thereon,  it  is  not  discharged;    but  the  party  so  paying  it  is  re- 


Art.  1  )  THE    NEGOTIABLE    INSTRUMENTS    LAW.  727 

mitted  to  his  former  rights  as  regards  all  prior  parties,  and  he  may 
strike  out  his  own  and  all  subsequent  indorsements,  and  again  nego- 
tiate the  instrument,  except : 

1.  Where  it  is  payable  to  the  order  of  a  third  person,  and  has 

been  paid  by  the  drawer ;  and 

2.  Where  it  was  made  or  accepted  for  accommodation,   and  has 

been  paid  by  the  party  accommodated. 

Sec.  122.  The  holder  may  expressly  renounce  his  rights  against 
any  party  to  the  instrument,  before,  at  or  after  its  maturity.  An 
absolute  and  unconditional  renunciation  of  his  rights  against  the  prin- 
cipal debtor  made  at  or  after  the  maturity  of  the  instrument  dis- 
charges the  instrument.  But  a  renunciation  does  not  affect  the  rights 
of  a  holder  in  due  course  without  notice.  A  renunciation  must  be 
in  writing,  unless  the  instrument  is  delivered  up  to  the  person  primari- 
ly liable  thereon. 

Sec.  123.  A  cancellation  made  unintentionally,  or  under  a  mistake 
or  without  the  authority  of  the  holder,  is  inoperative;  but  where  an 
instrument  or  any  signature  thereon  appears  to  have  been  cancelled 
the  burden  of  proof  lies  on  the  party  who  alleges  that  the  cancellation 
was  made  unintentionally,  or  under  a  mistake  or  without  authority. 

Sec.  124.  Where  a  negotiable  instrument  is  materially  altered  with- 
out the  assent  of  all  parties  liable  thereon,  it  is  avoided,  except  as 
against  a  party  who  has  himself  made,  authorized  or  assented  to  the 
alteration,  and  subsequent  indorsers. 

But  when  an  instrument  has  been  materially  altered  and  is  in  the 
hands  of  a  holder  in  due  course,  not  a  party  to  the  alteration,  he  may 
enforce  payment  thereof  according  to  its  original  tenor. 

Sec.  125.  Any  alteration  which  changes: 

1.  The  date ; 

2.  The  sum  payable,  either  for  principal  or  interest;     . 

3.  The  time  or  place  of  payment; 

4:.  The  number  or  the  relations  of  the  parties ; 

5.  The  medium  or  currency  in  which  payment  is  to  be  made ; 

Or  which  adds  a  place  of  payment  where  no  place  of  payment  is 
specified,  or  any  other  change  or  addition  which  alters  the 
effect  of  the  instrument  in  any  respect,  is  a  material  alter- 
ation. 


TITLE  II.— BILLS  OF  EXCHANGE 
Article  I. — Form  and  Interpretation 

Sec.  126.  A  bill  of  exchange  is  an  unconditional  order  in  writing 
addressed  by  one  person  to  another,  signed  by  the  person  giving  it, 
requiring  the  person  to  whom  it  is  addressed  to  pay  on  demand  or  at 


728  ArnoNDix.  (Tit.  2 

a  fixed  or  dcterminalile  future  time  a  sum  certain  in  money  to  order 
or  to  bearer. 

Sec.  127.  A  bill  of  itself  does  not  operate  as  an  assignment  of  the 
funds  in  the  hands  of  the  drawee  available  for  the  payment  thereof, 
and  the  drawee  is  not  liable  on  the  bill  unless  and  until  he  accepts  the 
same. 

Sec.  128.  A  bill  may  be  addressed  to  two  or  more  drawees  jointly, 
whether  they  are  partners  or  not ;  but  not  to  two  or  more  drawees  in 
the  alternative  or  in  succession. 

Sec.  1"^9.  An  inland  bill  of  exchange  is  a  bill  which  is,  or  on  its 
face  purports  to  be,  both  drawn  and  payable  within  this  state.  Any 
other  bill  is  a  foreign  bill.  Unless  the  contrary  appears  on  the  face 
of  the  bill,  the  holder  may  treat  it  as  an  inland  bill. 

Sec.  130.  Where  in  a  bill  drawer  and  drawee  are  the  same  person, 
or  where  the  drawee  is  a  fictitious  person,  or  a  person  not  having 
capacity  to  contract,  the  holder  may  treat  the  instrument,  at  his  op- 
tion, either  as  a  bill  of  exchange  or  a  promissory  note. 

Sec.  131.  The  drawer  of  a  bill  and  any  indorser  may  insert  thereon 
the  name  of  a  person  to  whom  the  holder  may  resort  in  case  of  need, 
that  is  to  say,  in  case  the  bill  is  dishonored  by  non-acceptance  or  non- 
payment. Such  person  is  called  the  referee  in  case  of  need.  It  is  in 
the  option  of  the  holder  to  resort  to  the  referee  in  case  of  need  or  not 
as  he  may  see  fit. 

Article  II. — Accept.\nce 

Sec.  132.  The  acceptance  of  a  bill  is  the  signification  by  the  drawee 
of  his  assent  to  the  order  of  the  drawer.  The  acceptance  must  be  in 
writing  and  signed  by  the  drawee.  It  must  not  express  that  the  drawee 
will  perform  his  promise  by  any  other  means  than  the  payment  of 
money. 

Sec.  133.  The  holder  of  a  bill  presenting  the  same  for  acceptance 
may  require  that  the  acceptance  be  written  on  the  bill,  and,  if  such 
request  is  refused,  may  treat  the  bill  as  dishonored. 

Sec.  134.  Where  an  acceptance  is  written  on  a  paper  other  than 
the  bill  itself,  it  does  not  bind  the  acceptor  except  in  favor  of  a  per- 
><on  to  whom  it  is  shown  and  who,  on  the  faith  thereof,  receives  the 
bill  for  value. 

Sec.  135.  An  unconditional  promise  in  writing  to  accept  a  bill  be- 
fore it  is  drawn  is  deemed  an  actual  acceptance  in  favor  of  every  per- 
son who,  upon  the  faith  thereof,  receives  the  bill  for  value. 

Sec.  13G.  The  drawee  is  allowed  twenty-four  hours  after  present- 
ment, in  which  to  decide  whether  or  not  he  will  accept  the  bill;  but 
the  acceptance,  if  given,  dates  as  of  the  day  of  presentation. 

Sec.  137.  Where  a  drawee  to  whom  a  bill  is  delivered  for  accept- 
ance destroys  the  same,  or  refuses  within   twenty-four  hours   after 


Art.  3)  THE    NEGOTIABLE    INSTRUMENTS    LAW.  729 

such  delivery,  or  within  such  other  period  as  the  holder  may  allow, 
to  return  the  bill  accepted  or  non-accepted  to  the  holder,  he  will  be 
deemed  to  have  accepted  the  same. 

Sec.  138.  A  bill  may  be  accepted  before  it  has  been  signed  by  the 
drawer,  or  while  otherwise  incomplete,  or  when  it  is  overdue,  or  after 
it  has  been  dishonored  by  a  previous  refusal  to  accept,  or  by  non- 
payment. But  when  a  bill  payable  after  sight  is  dishonored  by  non- 
acceptance  and  the  drawee  subsequently  accepts  it,  the  holder,  in  the 
absence  of  any  different  agreement,  is  entitled  to  have  the  bill  accepted 
as  of  the  date  of  the  first  presentment. 

Sec.  139.  An  acceptance  is  either  general  or  qualified.  A  general 
acceptance  assents  without  qualification  to  the  order  of  the  drawer. 
A  qualified  acceptance  in  express  terms  varies  the  effect  of  the  bill 
as  drawn. 

Sec.  140.  An  acceptance  to  pay  at  a  particular  place  is  a  general 
acceptance,  unless  it  expressly  states  that  the  bill  is  to  be  paid  there 
only  and  not  elsewhere. 

Sec.  141.  An  acceptance  is  qualified,  which  is: 

1.  Conditional,   that  is  to  say,  which   makes  payment  by  the  ac- 

ceptor  dependent   on   the   fulfilment  of  a   condition   therein 
stated ; 

2.  Partial,  that  is  to  say,  an  acceptance  to  pay  part  only  of  the 

amount  for  which  the  bill  is  drawn ; 

3.  Local,  that  is  to  say,  an  acceptance  to  pay  only  at  a  particular 

place ; 

4.  Qualified  as  to  time; 

5.  The  acceptance  of  some  one  or  more  of  the  drawees,  but  not 

of  all. 
Sec.  142.  The  holder  may  refuse  to  take  a  qualified  acceptance, 
and  if  he  does  not  obtain  an  unqualified  acceptance,  he  may  treat 
the  bill  as  dishonored  by  non-acceptance.  Where  a  qualified  accept- 
ance is  taken,  the  drawer  and  indorsers  are  discharged  from  liability 
on  the  bill,  unless  they  have  expressly  or  impliedly  authorized  the 
holder  to  take  a  qualified  acceptance,  or  subsequently  assent  thereto. 
When  the  drawer  or  an  indorser  receives  notice  of  a  qualified  accept- 
ance, he  must,  within  a  reasonable  time,  express  his  dissent  to  the 
holder,  or  he  will  be  deemed  to  have  assented  thereto. 

Article  III. — Presentment  for  Acceptance 

Sec.  143.  Presentment  for  acceptance  must  be  made : 

1.  Where  the   bill   is  payable   after   sight,   or  in   any   other  case, 

where  presentment   for  acceptance  is  necessary  in  order  to 
fix  the  maturity  of  the  instrument;   or 

2.  Where  the  bill   expressly   stipulates  that  it  shall  be  presented 

for  acceptance;  or 


730  APPENDIX.  (Tit.  2 

3.  Where  the  bill  is  drawn  payable  elsewhere  than  at  the  residence 

or  place  of  business  of  the  drawee. 
In  no  other  case  is  presentment  for  acceptance  necessary  in  or- 
der to  render  any  party  to  the  bill  liable. 
Sec.  144.  Except  as  herein  otherwise  provided,  the  holder  of  a  bill 
which  is  required  by  the  next  preceding  section  to  be  presented  for 
acceptance  must  either  present  it  for  acceptance  or  negotiate  it  within 
a  reasonable  time.     If  he  fail  to  do  so,  the  drawer  and  all  indorsers 
are  discharged. 

Sec.  145.  Presentment  for  acceptance  must  be  made  by  or  on  be- 
half of  the  holder  at  a  reasonable  hour,  on  a  busiwess  day  and  before 
the  bill  is  overdue,  to  the  drawee  or  some  person  authorized  to  ac- 
cept or  refuse  acceptance  on  his  behalf;    and: 

1.  Where  a  bill  is  addressed  to  two  or  more  drawees  who  are  not 

partners,  presentment  must  be  made  to  them  all,  unless  one 
has  authority  to  accept  or  refuse  acceptance  for  all,  in  which 
case  presentment  may  be  made  to  him  only; 

2.  Where  the  drawee  is  dead,  presentment  may  be  made  to  his 

personal  representative ; 

3.  Where  the  drawee  has  been  adjudged  a  bankrupt  or  an  insolvent 

or  has  made  an  assignment  for  the  benefit  of  creditors,  pre- 
sentment may  be  made  to  him  or  to  his  trustee  or  assignee. 

Sec.  146.  A  bill  may  be  presented  for  acceptance  on  any  day  on 
which  negotiable  instruments  may  be  presented  for  payment  under  the 
provisions  of  sections  seventy-two  and  eighty-five  of  this  act.  When 
Saturday  is  not  otherwise  a  holiday,  presentment  for  acceptance  may 
be  made  before  twelve  o'clock,  noon,  on  that  day. 

Sec.  147.  Where  the  holder  of  a  bill  drawn  payable  elsewhere  than 
at  the  place  of  business  or  the  residence  of  the  drawee  has  not  time 
with  the  exercise  of  reasonable  diligence  to  present  the  bill  for  accept- 
ance before  presenting  it  for  payment  on  the  day  that  it  falls  due, 
the  delay  caused  by  presenting  the  bill  for  acceptance  before  presenting 
it  for  payment  is  excused,  and  does  not  discharge  the  drawers  and  in- 
dorsers. 

Sec.  148.  Presentment  for  acceptance  is  excused,  and  a  bill  may  be 
treated  as  dishonored  by  non-acceptance,  in  either  of  the  following 
cases : 

1.  Where  the  drawee  is  dead,  or  has  absconded,  or  is  a  fictitious 

person  or  a  person  not  having  capacity  to  contract  by  bill. 

2.  Where,  after  the  exercise  of  reasonable  diligence,  presentment 

cannot  be  made. 

3.  Where,   although   presentment   has   been    irregular,   acceptance 

has  been  refused  on  some  other  ground. 
Sec.  1!9.  A  bill  is  dishonored  by  non-acceptance: 
1.  When  it  is  duly  presented  for  acceptance,  and  such  an  accept- 
ance as  is  prescribed  by  this  act  is  refused  or  cannot  be  ob- 
tained; or 


Art.  4)  THE    NEGOTIABLE    INSTRUMENTS    LAW.  731 

2.  When  presentment  for  acceptance  is  excused,  and  the  bill  is  not 

accepted. 
Sec.  150.  Where  a  bill  is  duly  presented  for  acceptance  and  is  not 
accepted  within  the  prescribed   time,  the  person  presenting  it  must 
treat  the  bill  as  dishonored  by  non-acceptance  or  he  loses  the  right  of 
recourse  against  the  drawer  and  indorsers. 

Sec.  151.  When  a  bill  is  dishonored  by  non-acceptance,  an  imme- 
diate right  of  recourse  against  the  drawers  and  indorsers  accrues  to 
the  holder  and  no  presentment  for  payment  is  necessary. 

Article  IV. — Protest 

Sec.  152.  Where  a  foreign  bill  appearing  on  its  face  to  be  such  is 
dishonored  by  non-acceptance,  it  must  be  duly  protested  for  non-ac- 
ceptance, and  where  such  a  bill  which  has  not  previously  been  dishon- 
ored by  non-acceptance  is  dishonored  by  non-payment,  it  must  be  duly 
protested  for  non-payment.  If  it  is  not  so  protested,  the  drawer  and 
indorsers  are  discharged.  Where  a  bill  does  not  appear  on  its  face  to 
be  a  foreign  bill,  protest  thereof  in  case  of  dishonor  is  unnecessary. 

Sec.  153.  The  protest  must  be  annexed  to  the  bill,  or  must  contain 
a  copy  thereof,  and  must  be  under  the  hand  and  seal  of  the  notary 
making  it,  and  must  specify — 

1.  The  time  and  place  of  presentment; 

2.  The  fact  that  presentment  was  made  and  the  manner  thereof; 

3.  The  cause  or  reason  for  protesting  the  bill ; 

4.  The  demand  made  and  the  answer  given,  if  any,  or  the  fact  that 

the  drawee  or  acceptor  could  not  be  found. 
Sec.  154.  Protest  may  be  made  by — 

1.  A  notary  public  ;   or 

2.  By  any  respectable  resident  of  the  place  where  the  bill  is  dis- 

honored, in  the  presence  of  two  or  more  credible  witnesses. 

Sec.  155.  When  a  bill  is  protested,  such  protest  must  be  made  on  the 
day  of  its  dishonor,  unless  delay  is  excused  as  herein  provided.  When 
a  bill  has  been  duly  noted,  the  protest  may  be  subsequently  extended 
as  of  the  date  of  the  noting. 

Sec.  156.  A  bill  must  be  protested  at  the  place  where  it  is  dishon- 
ored, except  that  when  a  bill  drawn  payable  at  the  place  of  business. 
or  residence  of  some  person  other  than  the  drawee,  has  been  dishon- 
ored by  non-acceptance,  it  must  be  protested  for  non-payment  at  the 
place  where  it  is  expressed  to  be  payable,  and  no  further  presentment 
for  payment  to,  or  demand  on,  the  drawee  is  necessary. 

Sec.  157.  A  bill  which  has  been  protested  for  non-acceptance  may  be 
mbsequently  protested  for  non-payment. 

Sec.  158.  Where  the  acceptor  has  been  adjudged  a  bankrupt  or  an 
Insolvent,  or  has  made  an  assignment  for  the  benefit  of  creditors,  be- 


732  APPENDIX.  (Tit.  2 

fore  the  bill  matures,  the  holder  may  cause  the  bill  to  be  protested  for 
better  security  against  the  drawer  and  indorsers. 

Sec.  159,  Protest  is  dispensed  with  by  any  circumstances  which 
.vould  dispense  with  notice  of  dishonor.  Delay  in  noting  or  protesting 
is  excused  when  delay  is  caused  by  circumstances  beyond  the  control 
of  the  holder  and  not  imputable  to  his  default,  misconduct  or  negli- 
gence. When  the  cause  of  delay  ceases  to  operate,  the  bill  must  be 
noted  or  protested  with  reasonable  diligence. 

Sec.  IGU.  When  a  bill  is  lost  or  destroyed  or  is  wrongly  detained 
from  the  person  entitled  to  hold  it,  protest  may  be  made  on  a  copy  or 
written  particulars  thereof. 

Article  V. — Acceptance  for  Honor 

Sec.  161.  Where  a  bill  of  exchange  has  been  protested  for  dishonor 
by  non-acceptance  or  protested  for  better  security,  and  is  not  overdue, 
any  person  not  being  a  party  already  liable  thereon  may,  with  the  con- 
sent of  the  holder,  intervene  and  accept  the  bill  supra  protest  for  the 
honor  of  any  party  liable  thereon,  or  for  the  honor  of  the  person  for 
whose  account  the  bill  is  drawn.  The  acceptance  for  honor  may  be  for 
part  only  of  the  sum  for  which  the  bill  is  drawn ;  and  where  there  has 
been  an  acceptance  for  honor  for  one  party,  there  may  be  a  further 
acceptance  by  a  difterent  person  for  the  honor  of  another  party. 

Sec.  162.  An  acceptance  for  honor  supra  protest  must  be  in  writ- 
ing, and  indicate  that  it  is  an  acceptance  for  honor,  and  must  be  signed 
by  the  acceptor  for  honor. 

Sec.  163.  Where  an  acceptance  for  honor  does  not  expressly  state 
for  whose  honor  it  is  made,  it  is  deemed  to  be  an  acceptance  for  the 
honor  of  the  drawer. 

Sec.  164.  The  acceptor  for  honor  is  liable  to  the  holder  and  to  all 
parties  to  the  bill  subsequent  to  the  party  for  whose  honor  he  has  ac- 
cepted. 

Sec.  165.  The  acceptor  for  honor,  by  such  acceptance  engages  that 
he  will  on  due  presentment  pay  the  bill  according  to  the  terms  of  his 
acceptance,  provided  it  shall  not  have  been  paid  by  the  drawee,  and 
provided  also,  that  it  shall  have  been  duly  presented  for  payment  and 
protested  for  non-payment  and  notice  of  dishonor  given  to  him. 

Sec.  166.  Where  a  bill  payable  after  sight  is  accepted  for  honor,  its 
maturity  is  calculated  from  the  date  of  the  noting  for  non-acceptance 
and  not  from  the  date  of  the  acceptance  for  honor. 

Sec.  167.  Where  a  dishonored  bill  has  been  accepted  for  honor  su- 
pra protest  or  contains  a  reference  in  case  of  need,  it  must  be  protest- 
ed for  non-payment  before  it  is  presented  for  payment  to  the  acceptor 
for  honor  or  referee  in  case  of  need. 

Sec.  168.  Presentment  for  payment  to  the  acceptor  for  honor  must 
be  made  as  follows : 


Art.  7)  THE    NEGOTIABLE    INSTRUMENTS    LAW.  733 

1.  If  it  is  to  be  presented  in  the  place  where  the  protest  for  non- 

payment was  made,  it  must  be  presented  not  later  than  the 
day  following  its  maturity. 

2.  If  it  is  to  be  presented  in  some  other  place  than  the  place  where 

it  was  protested,  then  it  must  be  forwarded  within  the  time 
specified  in  section  one  hundred  and  four. 
Sec.  169.  The  provisions  of  section  eighty-one  apply  where  there  is 
delay  in  making  presentment  to  the  acceptor  for  honor  or  referee  in 
case  of  need. 

Sec.  170.  When  the  bill  is  dishonored  by  the  acceptor  for  honor  it 
must  be  protested  for  non-payment  by  him. 

Article  VI. — Payment  for  Honor 

Sec.  171.  Where  a  bill  has  been  protested  for  non-payment,  any  per- 
son may  intervene  and  pay  it  supra  protest  for  the  honor  of  any  per- 
son liable  thereon  or  for  the  honor  of  the  person  for  whose  account  it 
was  drawn. 

Sec.  172.  The  payment  for  honor  supra  protest  in  order  to  operate 
as  such  and  not  as  a  mere  voluntary  payment  must  be  attested  by  a 
notarial  act  of  honor  which  may  be  appended  to  the  protest  or  form 
an  extension  to  it. 

Sec.  173.  The  notarial  act  of  honor  must  be  founded  on  a  declara- 
tion made  by  the  payer  for  honor  or  by  his  agent  in  that  behalf  declar- 
ing his  intention  to  pay  the  bill  for  honor  and  for  whose  honor  he 
pays. 

Sec.  174.  Where  two  or  more  persons  offer  to  pay  a  bill  for  the 
honor  of  different  parties,  the  person  whose  payment  will  discharge 
most  parties  to  the  bill  is  to  be  given  the  preference. 

Sec.  175.  Where  a  bill  has  been  paid  for  honor,  all  parties  subse- 
quent to  the  party  for  whose  honor  it  is  paid  are  discharged,  but  the 
payer  for  honor  is  subrogated  for,  and  succeeds  to,  both  the  rights  and 
duties  of  the  holder  as  regards  the  party  for  whose  honor  he  pays  and 
all  parties  liable  to  the  latter. 

Sec.  176.  Where  the  holder  of  a  bill  refuses  to  receive  payment  su- 
pra protest,  he  loses  his  right  of  recourse  against  any  party  who  would 
have  been  discharged  by  such  payment. 

Sec.  177.  The  payer  for  honor,  on  pa;  '•^g  to  the  holder  the  amount 
of  the  bill  and  the  notarial  expenses  incidental  to  its  dishonor,  is  en- 
titled to  receive  both  the  bill  itself  and  the  protest. 

Article  VIT. — Bills  in  a  Set 

Sec.  178.  Where  a  bill  is  drawn  in  a  set,  each  part  of  the  set  being 
numbered  and  containing  a  reference  to  the  other  parts,  the  whole  of 
the  parts  constitutes  one  bill. 


734  APPENDIX.  (Tit.  2 

Sec.  179.  Where  two  or  more  parts  of  a  set  are  neg-otiated  to  dif- 
ferent holders  in  due  course,  the  holder  whose  title  first  accrues  is  as 
between  such  holders  the  true  owner  of  the  bill.  But  nothing  in  this 
section  affects  the  rights  of  a  person  who  in  due  course  accepts  or 
pays  the  part  first  presented  to  him. 

Sec.  180.  Where  the  holder  of  a  set  indorses  two  or  more  parts  to 
different  persons  he  is  liable  on  every  such  part,  and  every  indorser 
subsequent  to  him  is  liable  on  the  part  he  has  himself  indorsed,  as  if 
such  parts  were  separate  bills. 

Sec.  ISl.  The  acceptance  may  be  written  on  any  part  and  it  must 
be  written  on  one  part  only.  If  the  drawee  accepts  more  than  one 
part,  and  such  accepted  parts  are  negotiated  to  different  holders  in  due 
course,  he  is  liable  on  every  such  part  as  if  it  were  a  separate  bill. 

Sec.  182.  When  the  acceptor  of  a  bill  drawn  in  a  set  pays  it  without 
requiring  the  part  bearing  his  acceptance  to  be  delivered  up  to  him, 
and  that  part  at  maturity  is  outstanding  in  the  hands  of  a  holder  in 
due  course,  he  is  liable  to  the  holder  thereon. 

Sec.  183.  Except  as  herein  otherwise  provided  where  any  one  part 
of  a  bill  drawn  in  a  set  is  discharged  by  payment  or  otherwise  the 
whole  bill  is  discharged. 


TITLE  III.— PROMISSORY  NOTES  AND  CHECKS 
Article  I 

Sec.  184.  A  negotiable  promissory  note  within  the  meaning  of  this 
act  is  an  unconditional  promise  in  writing  made  by  one  person  to  an- 
other signed  by  the  maker  engaging  to  pay  on  demand,  or  at  a  fixed  or 
determinable  future  time,  a  sum  certain  in  money  to  order  or  to  bear- 
er. Where  a  note  is  drawn  to  the  maker's  own  order,  it  is  not  com- 
plete until  indorsed  by  him. 

Sec.  185.  A  check  is  a  bill  of  exchange  drawn  on  a  bank  payable  on 
demand.  Except  as  herein  otherwise  provided,  the  provisions  of  this 
act  applicable  to  a  bill  of  exchange  payable  on  demand  apply  to  a 
check. 

Sec.  186.  A  check  must  be  presented  for  payment  within  a  reason- 
able time  after  its  issue  or  the  drawer  will  be  discharged  from  liabili- 
ty thereon  to  the  extent  of  the  loss  caused  by  the  delay. 

Sec.  187.  Where  a  check  is  certified  by  the  bank  on  which  it  is 
drawn,  the  certification  is  equivalent  to  an  acceptance. 

Sec.  188.  Where  the  holder  of  a  check  procures  it  to  be  accepted 
or  certified  the  drawer  and  all  indorsers  are  discharged  from  liability 
thereon. 

Sec.  189.  A  check  of  itself  does  not  operate  as  an  assignment  of  any 
part  of  the  funds  to  the  credit  of  the  drawer  with  the  bank,  and  the 
bank  is  not  liable  to  the  holder,  unless  and  until  it  accepts  or  certifies 
the  check. 


Art.  1)  THE    NEGOTIABLE    INSTRUMENTS    LAW.  735 

TITLE  IV.— GENERAL  PROVISIONS 

Article  I 

Sec.  190.  This  act  shall  be  known  as  the  Negotiable  Instruments 
Law. 

Sec.  191.  In  this  act,  unless  the  context  otherwise  requires — 

"Acceptance"  means  an  acceptance  completed  by  delivery  or  notifi- 
cation. 
"Action"  includes  counterclaim  and  set-off. 
"Bank"  includes  any  person  or  association  of  persons  carrying  on 

the  business  of  banking,  whether  incorporated  or  not. 
"Bearer"  means  the  person  in  possession  of  a  bill  or  note  which  is 

payable  to  bearer. 
"Bill"  means  bill  of  exchange,  and  "note"  means  negotiable  prom- 
issory note. 
"Delivery"  means  transfer  of  possession,  actual  or  constructive, 

from  one  person  to  another. 
"Holder"  means  the  payee  or  indorsee  of  a  bill  or  note,  who  is  in 

possession  of  it,  or  the  bearer  thereof. 
"Indorsement"  means  an  indorsement  completed  by  delivery. 
"Instrument"  means  negotiable  instrument. 
"Issue"  means  the  first  delivery  of  the  instrument,  complete  in 

form,  to  a  person  who  takes  it  as  a  holder. 
"Person"  includes  a  body  of  persons,  whether  incorporated  or  not. 
"Value"  means  valuable  consideration. 
"Written"  includes  printed,  and  "writing"  includes  print. 
Sec.  192.  The  person  "primarily"  liable  on  an  instrument  is  the  per- 
son who  by  the  terms  of  the  instrument  is  absolutely  required  to  pay 
the  same.    All  other  parties  are  "secondarily"  liable. 

Sec.  193.  In  determining  what  is  a  "reasonable  time"  or  an  "unrea- 
sonable time,"  regard  is  to  be  had  to  the  nature  of  the  instrument,  the 
usage  of  trade  or  business  (if  any)  with  respect  to  such  instruments, 
and  the  facts  of  the  particular  case. 

Sec.  194.  Where  the  day,  or  the  last  day,  for  doing  any  act  herein 
required  or  permitted  to  be  done  falls  on  Sunday  or  on  a  holiday,  the 
act  may  be  done  on  the  next  succeeding  secular  or  business  day. 

Sec.  195.  The  provisions  of  this  act  do  not  apply  to  negotiable  in- 
struments made  and  delivered  prior  to  the  passage  hereof. 

Sec.  196.  In  any  case  not  provided  for  in  this  act  the  rules  of  the 
law  merchant  shall  govern. 

Sec.  197.  Of  the  laws  enumerated  in  the  schedules  hereto  annexed 
that  portion  specified  in  the  last  column  is  repealed. 
Sec.  198.  This  chapter  shall  take  effect  on 


INDEX 


[the  figures  refer  to  pages] 


ACCEPTANCE, 

consideration  for,  29,  257,  259. 
delivery  of,  206. 
form,  187-213. 

parol,  29  (2a  case),  187  (1st  case),  198,  199,  201. 

written,  195. 

extrinsic,  187  (2d  case),  196. 

virtual,  190. 

constructive,  203-213. 

by  retention  of  bill,  203,  206,  208. 
by  conversion  of  bill, 

refusal   to  return,  209  (1st  case),  211. 
destruction,  203  (2d  case). 
loss,  209  (2d  case), 
kinds,  180-187. 

general,  180-187. 
qualified,  180-187. 

as  to  amount,  180. 
as  to  time,   182. 
as  to  place,  181. 
by  conditions,  183. 

acceptance  by  less  tlian  all  dravrees,  184,  186. 
acceptance  by  one  partner  in  his  own  name,  184,^186,  186,  note. 
obligation  resulting  from,  see  l\Iaker  and  Acceptor, 
of  checks,  see  Checks,  certification. 

ACCEPTOR, 

see  Maker  and  Acceptor. 

ACCOMMODATION  PARTIES, 
who  may  he, 

acceptor.  29  (2d  case),  201,  257.  259. 

maker,  267,   note,   270,   273. 

Indoi-ser,  274,  361. 

irregular  indorser,  see  Irregular  Indorser. 
liability  of, 

to  accommodated  party,  257. 

to  holder  for  value  \A'ith  notice,  259,  259,  note  6. 

to  purchaser  for  value  after  maturity,  450,  452,  note. 

to  purchaser  for  less  than  face,  369. 

to  pledgee  for  less  than  face,  374. 
how  liability  discharged, 

by  discharge  of  instrument,  see  Discharge. 

by  payment  of  accommodation  party,  680,  686. 
notice  of  accommodation  character,  effect  on  rights  of  holder  for  value 

259,  259,  note  6. 
constructive    notice    of    acconunodation    character    of    indorsement    from 

disc-ount  by  maker,  401,  404. 
proof  of  aceonmiodation   character,   effect  on   burden  of  going  forward 
with  evidence,  420. 

Sm  &  M.B.&  N.— 47  (737) 


738  "  INDEX. 

[Th«  figures  refer  to  pages.] 

ADMISSIONS, 

of  maker  and  acceptor,  see  Maker  and  .\ceeptor. 

AGDNT. 

Instrument  signed  by,  who  is  bound,  125-143. 
instrument  payable  to.   who  is  proper  plaintifif,    154-167. 
presentment  by,  GOO,  602,  note. 

ALTERATION, 
see  Discharge. 

alternative; 

payees,  154,  158. 

obligation  to  pay  money  or  to  deliver  property,  109  (2d  case). 

-AMBIGUOUS  instruments. 

unsigned  bill  which  has  been  accepted,  123  (both  cases),  123,  note, 
unaddressed  bill. 

before  acceptance,  172.  177. 

after  acceptance,  173.  175,  note, 
where  drawee  of  bill  is  agent  of  drawer,  176. 
where  drawer,  drawee,  aiid  payee  are  same  person.  150. 

AMBIGUOUS  SIGNATURES.  125-143. 

AMOUNT. 

payable  on  negotiable  instrument  must  be  certain,  74-81. 

when  blank,  see  Incomplete  Instruments. 

recoverable  by  holder  in  due  course,  see  Holder  in  Due  Course,  value, 
notice. 

ANOMAIX)US   INDORSER, 
see  Irregular  Indorser. 

ANTECEDENT  DEBT, 

see  Holder  in  Due  Course,  value, 
see  Consideration. 

ANTEDATED  INSTRUMB^SfT, 

see  Date. 
ASSIGNABILITY. 

distinction  -between  assignability  and  negotiability,  see  Negotiability. 
of  choses  in  action,  1  (both  cases),  3. 

ASSIGNMENT, 

whether  an  indorsement.  104.  287.  290.  292.  299. 

of  instruments   payable  to  order  by   delivery   without  indorsement,   see 
Transfer,  by  delivery  of  instruments    payable  to  order. 

ATTORNEY'S  FEES,  77. 

AVAL, 

see  Irregular  Indorser. 

BANK, 

hour  of  presentment,  when  instrument  payable  at,  586. 
manner  of  presentment,  when  instrument  payable  at,  588. 

BANTi:  NOTES, 

though  payable  on  demand  do  not  mature  until  presentment,  386,  note. 

BEARER, 

instrument  payable  to, 

what  are,  20-35,  144,  144,  note,  651  (1st  case). 

negotiability  of,  20-35. 

transfer  of,  see  Transfer,  by  delivery. 

BILL  OF  EXCHANGE. 

see  Form  of  Negotiable  Instrument. 

BILL  OF  L^iDING, 

negotiability  of,  15. 


INDEX.  T39 

[The  figures  refer  to  pages.] 

BLANKS, 

see  Incomplete   Instruments. 

BLANK  INDORSEMENT, 

see  Transfer,  by  indorsement,  kinds. 
BONA  FIDE  HOLDER, 

see  Holder  in  Due  Course. 
BURDEN  OF  PROOF, 

see  Holder  in  Due  Ojurse,  presumptions. 

CANCELLATION, 
see  Discharge. 

CAPACITY, 

admissions  as  to  capacity  of  drawer,   461,  463,   note. 

admissions  as  to  capacity  of  payee,  466.  468. 

warranties  of  indorser  as  to  caimcity  of  prior  parties,  649. 

warranties  of  indorser  without  recourse  as  to  capacity  of  prior  parties, 
642. 

warranties  of  transferor  by  delivery  as  to  capacity  of  prior  parties,  641. 
CASHIER. 

instruments  payable  to  are  payable  prima  facie  to  bank,  165,  167,  note  84. 
CERTIFICATE  OF  PROTEST.  600. 

CERTIFICATES  OF  DEPOSIT, 

though  payable  on  demand  do  not  mature  until  presentment,  386,  note, 
are  notes,  31. 

CERTIFICATION, 
see  Checks. 

CHECKS. 

certification  of, 

obligation  of  bank,  547,  549. 

effect  on   liability   of   drawer   and   Indorsers  when   certified   at   re- 
quest of, 
drawer,  .540. 
holder,  547. 
obligation  of  drawer  and  Indorser, 

necessity  of  timeJy  presentment  to  charge, 

drawer,  where  drawee  bank  fails,  565,  567,  569,  note,  572,  573. 
indorser,   570,  576. 
mode  of  presentment,  see  Presentment  for  Payment 
CHOSE  IN  ACTION, 

see  Negotiability ;    Assignability. 
CLEARING  HOUSE, 

hour  of  presentment  when  instrument  payable  through.  579. 
COLLECTION, 

indorsement  for,  307,  313. 

CONDITION, 

instruments  conditional  on  face,  see  Form  of  Negotiable  Instrument,  char 
acter  of  order  or  promise. 

CONDITIONAL  INDORSEMENT,  317. 

CONSIDERATION, 

necessity  of,  for  obligation  of, 
maker,  254  (both  cases), 
indorser,  2.">G. 
acceptor,  29,  257,  259. 
what  is, 

in  general,  267,  note. 

implied  promise  to  forbear  suit  upon  receipt  of  debtor's  obligation 
on  negotiable  instrument  on  account  of  debt,  where  the  in- 
strument is  payable 


740  INDEX. 

[The  figures  refer  to  page«.] 

CONSIDERATION— Continued, 

in  the  future.  262,  266. 
on  demand.  270,  271. 
presumption  of,  274. 
failure  of,  435. 

see  Accommodation  Parties. 

CONTINGENCY, 

instruments  payable  on,  see  Form  of  Negotlflble  Instrument,  character 
of  order  or  promise. 

CONVERSION, 

of  Mil  by  drawee,  a  constructive  acceptance,  203  (2d  case),  209  (1st  case), 
209  (2d  case),  211. 

COUPONS, 

detached  from  negotiable  bonds,  653,  note. 

CURRENCY, 

instruments  payable  In,  120. 

CURRENT  FUNDS, 

instruments  payable  in,  119. 

DATE, 

undated  instrument, 

when  it  matures,  385.  note. 

authority  to  fill  in.  see  Incomplete  Instruments, 
antedated  instrument,  384,  note, 
postdated  instrument,  384. 

DAYS  OF  GRACE,  28,  553,  556. 
I>EATH, 

instrument  payable  at  or  after.  83  (1st  case). 
notice  of  dishonor  in  case  of  death  of, 

holder,  6.34. 

drawer  or  iudorser,  636,  note, 
presentment  for  payment  in  case  of  death  of, 

holder,  634. 

maker  or  acceptor,  634. 
of  holder,  who  may  transfer  after,  276. 

DEFENSES, 

real  or  legal, 

alteration,  see  Discharge, 
coverture,  432,  433. 
cancellation,  see  Discharge, 
delivery,  no  voluntary,  see  Delivery, 
discharge  in  bankruptcy,  434. 
discbarge,  see  Discbarge, 
forgery,  433. 

illegality,  369,  432,  447,  449,  note, 
infancy,  431,  433,  441,  note, 
insanity,  432,  433. 
trustee  process,  434. 
personal  or  equitable, 

accommodation  character  of  defendant's  obligation,  257,  259.  4.50. 
accommodation  instrument  negotiated  by  accommodation  party  after 

maturity,  450,  452,  note, 
consideration, 

absence  of,  see  Consideration. 

failure  of,  435. 
delivery,  no  voluntary,  see  Delivery, 
drunkenness,  6,  432. 
duress,  430. 

equitable   rights   of   transferor   or   third  person   against   holder   be- 
c-ause  of, 

collateral  agreement,  445. 


INDEX.  741 

[The  figures  refer  to  pages.] 

DEFENSES — Continued, 

fraud  practiced  by  holder,  428,  441. 

breach  of  trust  by  holder,  417. 

insanity  of  holder,  429. 

theft  by  holder,  321. 
fraud,  G,  433. 

illegality,  369,  432,  447,  449,  note, 
payment,  see  Discharge, 
renunciation,  see  Discharge, 
set-offs,  when  available,  327,  424,  426. 

DELAY, 

in  making  presentment,  see  Presentment  for  Payment 
in  giving  notice  of  dishonor,  see  Notice  of  Dishonor, 
in  drawing  certificates  of  protest,  602. 

DELIVERY, 

necessity  of,  for  inception  of  obligation  of, 

drawer  and  maker,  216,  221. 

indorser,  229. 

acceptor,  206. 
In  escrow,  214,  215,  233. 
induced  by  fraud,  223,  225. 
subject  to  collateral  agreement,  235. 
of  incomplete  instruments,  see  Incomplete  Instruments, 
as  a  mode  of  transfer,  see  Transfer. 

without  indorsement  of  instrument  payable  to  order,  see  Transfer, 
transferor  by,  liability  of,  see  Transferor  by  Delivery. 

DEMAND, 

instruments  payable  on, 
what  are, 

no  time  for  payment  stated,  89. 
as  soon  as  convenient,  84. 
at  such  times  as  payee  requires,  86. 
overdue  instruments,  561. 
when  overdue,  383,  385. 

are  payable  without  demand,  453,  453,  note, 
presentment  for  acceptance  of,  necessity,  547,  549,  556. 
presentment  for  payment  of,  see  Presentment  for  Payment 
days  of  grace  on.  556. 

checks,  see  Checks.  ..,.,,     ^  i.    „^o 

necessity  and  mode  of  demanding  payment  of  negotiable  instrument  see 
Presentment  for  Payment 

\n  making  presentment  for  acceptance,  see  Presentmejit  for  Acceptance, 
in  making  presentment  for  payment  see  Presentment  for  Payment 
In  giving  notice  of  dishonor,  see  Notice  of  Dishonor. 

DISCHARGE, 

surrender  of  instrument  to  maker  or  acceptor, 
by   whom, 

holder,  651. 

thief  of  bearer  instrument,  661. 

possessor  under  forged  indorsement,  653. 

holder  who  obtained  instrument  through  fraud,  663. 
when, 

before  date  of  demand  instrument,  651  (1st  ease). 

before  maturity,  652  (1st  case). 

after  maturity,  652  (2d  case),  653,  note, 
payment  in  exchange  for, 

part  payment  with  promise  to  pay  balance,  667. 

part  payment  in   satisfaction,  6G0,  note. 

discount  by  maker  or  acceptor,  659. 
gift,  as  a,  669,  note. 


742  INDEX. 

[The  figures  refer  to  pages.] 

DISCHARGE— Continued, 

payment  by  maimer  or  acceptor  without  surrender  of  Instrument,  not  a. 
discbarge,  663. 

but  personal  defense  against  holder  receiving  payment,  652. 
payment  by  drawer, 

of  bill  payable  to  drawer's  order,  not  a  discharge,  67S. 
of  bill  payable  to  a  third  person's  order,  677. 
when  drawer  party  accommodated,  GSO,  6S6. 
payment  by  Indorser. 

not   a   discharge,  676,  678. 
part  payment  by,  682. 

when  indorser  party  accommodated,  680,  686. 
renunciation,  670,  672. 
cancellation, 

intentional,  691,  note, 
by   mistake,   689. 
what  is  sufficient,  691. 
alteration, 

effect  of,  when  made  by, 
party, 

intentionally,  694,  697,   700. 
by  mistake,  694.  697. 
stranger,  694.  700. 
purchaser  without  notice  of,  amount  of  recovery,  702. 

DISHONOR, 

proceedings  upon, 

notice  of  dishonor,   see  Notice  of  Dishonor, 
protest,  600,  602,  note, 
purchaser  after  dishonor  by  nonpayment  not  holder  in  due  course,  380- 

389. 
purchaser  without  notice  of  dishonor  by  nonacceptance,  a  holder  in  due 
course,  540. 

DRAFT. 

a  negotiable  instrument,  see  Form  of  Negotiable  Instrument 
DRAWEE, 

see  Form  of  Negotiable  Instrument,  parties. 

DRAWER, 

see  FoiTu  of  Negotiable  Instrument,  parties. 

DRAWER    AND    INT)ORSER, 

obligation   of,   to  pay  upon  dishonor  by   maker  or  acceptor  conditional 
upon, 

presentment  for  acceptance,  see  Presentment  for  Acceptance. 

presentment  for  payment,  see  Presentment  for  Payment. 

protest,  see  Protest. 

notice  of  dishonor,  see  Notice  of  Dishonor, 
form  and  kinds  of  indorsement,  see  Transfer, 
order  of  liability  of  indorsers  among  themselves. 

depends  upon   order  in  time  in  which  they   indorse.   510,  511. 

unless  they  vary  order  of  liability  by  agreement.  .'512.  516. 
irregular  indorser.  see  Irregular  Indorser. 
warranties  of  indorser  as  vendor.  641,  649. 
warranties  of  indorser  without  recourse,  298  (1st  case)  642. 

DRUNKENNESS, 

as  a  defense,  6,  432. 

DUEBILLS,  38,   47. 

see  Form  of  Negotiable  Instrument,  promise  In  note. 

DUE  COT'RSE. 

what  is,  see  Holder  in  Due  Course. 

DURESS, 

a  personal  or  equitable  defense,  430. 


INDEX.  743 

[The  figures  refer  to  pages.] 

EQUITABLE  DEFENSES, 

see  Defenses. 

EQUITIES, 

of  maker  or  acceptor  as  defenses,  see  Defenses. 

of  transferor  or  third  person  against  bolder,  when  available  as  defenses, 

collateral  agreements  between  holder  and  third  person,  445. 

fraud  practiced  by  holder,  428,  441. 

breach  of  trust  by  holder,  417. 

insanity  of  holder,  429. 

theft  by  holder,  321. 

ESCROW, 

delivery  in,  see  Delivery. 

ESSENTIAL  REQUISITES, 

of  negotiable  instruments,  see  Form  of  Negotiable  Instrument. 
ESTATE, 

named  as  payee,  164,  note  82. 
EVIDENCE, 

see  Holder  in  Due  Course,  presumptions. 

EXCHANGE, 

instrument  payable  in,  112,  note, 
instrument  payable  with,  75. 

FAILURE   OF  CONSIDERATION, 

a  personal  or  equitable  defense,  435. 

FICTITIOUS   PAYEE, 

to  whom  instrument  drawn  payaible  to,  is  payable,  464,  470,  481,  484, 
494,  501,  505. 

FISCAL  OFFICER, 

to  whom   instrument  drawn  payable  to,   is  payable,   165,   167,  note  84. 

FORBEARANCE, 

as  a  consideration,  see  Consideration. 

as  value,  see  Holder  in  Due  Course,  value. 
FOREIGN  BILLS, 

necessity  of  protest,  600. 

FOREIGN  MONEY, 

instruments  payable  in,  negotiability  of,  112,  116. 

FORGERY, 

as  a  defense,  433. 

admissions  of  acceptor  as  to  genuineness  of  drawer's  signature,  461,  463. 

note, 
admissions  of  acceptor  as  to  genuineness  of  body  of  instrument,  498. 
warranty  of  indorser  as  to  genuineness  of  signatures  of  prior  parties, 

649. 
warranty  of  indorser  without  recourse  as  to  genuineness  of  signatures 

of  prior  parties,  293  (1st  case),  642. 
warranty  of  transferor   by   delivery  as   to  genuineness  of  signatures   of 

prior  parties,  641. 

FORM  OF   NEGOTIABLE   INSTRUMENT, 
writing, 

instrument  must  be  in,  36. 
what  with, 
pencil,  36. 
stamp,  37,   note, 
printing,  37,  note 
on  what,  36. 
promise  in  note, 

must  be  on  face  of  Instrument,  38-48. 
duebills,  38. 
I.  O.  U.,  38,  47. 


744  INDEX. 

[The  figures  refer  to  pages.] 

FORM  OF  NEGOTIABLE  INSTRUMENIN-Continued, 
order  in  bill, 

must  lie  on  face  of  instrument,  49-54. 

request  and  order,  distinction  bet^veen,  50  (1st  case), 
authority  and  order,  distinction  between,   50   (both  cases), 
words  of  politeness  coupled  with  order,  49. 
character  of  promise  or  order, 

must  not  be  conditional  on  its  face,  55-73. 
promise  or  order  to  pay, 

out  of  proceeds  of  property  to  be  sold.  56. 

out  of  debt  due  from  drawee  to  drawer,  60. 

out  of  obligation  running  from  third  person  to  drawee  on 

account  of  drawer,  55. 
out  of  debt  due  maker  from  third  person,  64. 
"as  per  memorandum  of  agreement,"   59. 
"subject  to   certain   conditions"    in   collateral   document,   G2. 
"on  account  of  contract,"  68. 
"if  receipt  at  foot  hereof  is  signed,"  73,  note. 
"in  consideration  of,"  61,  65. 
must  be  certain, 

as  to  amount,  instruments  payable  with, 
attorney's  fee,  77. 
exchange,  75. 

interest,  larger  rate  after  maturity,  81. 
penalty,  in  case  of  default,  81. 

option  to  maker  to  pay  in  uncertain  installments,  105. 
as  to  time,  instruments  payable, 
after  death,  83  (1st  case). 
after  ship's  crew  paid  off,  83  (2d  case). 

after  money  received  from  government,  or  as  soon  as  con- 
venient, 84. 
when  21  years  old,  84.  note. 
at  such  times  as  payee  requires,  86. 
on  or  before  a  day  named.  106. 
within  a  named  period,  106. 
no  time  specified,  89. 

at  specified  future  day  with   option  to  payee   or  holder, 
to  apply  funds  of  maker  in  payment  before  maturity,  91. 
to  confess  judgment  for  maker  before  maturity.  94. 
to  declare  whole  sum  due, 

upon  breach   of  conditions  of  mortgage,  96. 
upon  failure  to  pay   interest.  96. 
upon  failure  to  pay  installment.  105. 
to  extend  time  of  payment  indefinitely,  88,  89.  note. 
In  installments,  105. 

in  uncertain  installments  at  option  of  maker,  105. 
must  be  to  pay  in  money,  instruments  payable, 
in  chattels, 
gold.  111. 

tobacco,  109  (1st  case). 
In  checks  or  exchange,  112,  note. 
in  money  or  securities,  109  (2d  case), 
in  current  funds,  119. 
in  currency.  120. 

in  money  of  country  other  than  c<^nntry  where  payable,  112,  116. 
in  money  of  country  where  payable.  115,  note,  117. 
must  be  payable  to  order  or  bearer,  20-35. 
instruments  payable  to, 
payee  or  bearer, 

bills,  20,  24.  27,  note, 
notes,  21,  23. 
payee  or  order, 
bills,  20. 
notes.  21,  23. 


INDEX.  745 

[The  figures  refer  to  pages.] 

FORM  OF  NEGOTIABLE  INSTRUMENT— Continued, 
"holder,"  29  (1st  case), 
"assigns,"  31,  33,  note, 
"bearer  A.,"  27,  note. 
"A.  or  bearer,"  27,  note, 
instruments  payable  to  payee  without  more,  28,  29  (^2d  case),  31. 
note,  33. 
effect  of  phrase,  "this  instrument  shall  be  negotiable,"  29. 
note. 
parties, 

maker  and  drawer, 

must  appear  on  face  of  instrument  by  signature,  125,  128. 

subscription  not  necessary,  122. 

acceptance  of  unsigned  bill  equivalent  to  signing  note,  123  (both 

cases),  123.  note, 
signature,  what  is  sufficient, 
in  trade  name,  129. 
by  agent, 

in  principal's  name,   127,  note,   129. 
in  agent's  name, 

without  more,  125,  120. 

with  words  describing  signer  as  agent,  128,  132-143. 
payee, 

must  be  designation  of,  on  face  of  instrument, 
no  payee  named,  143,  147,  note, 
designation   by, 

name  other  than  payee's  customary  name,   168. 
naming  impersonal  things, 
"Bills  Payable,"    144. 
"Cash,"  144.  note. 
"No.  437."  651. 
designation  of,  must  he  certain, 
instruments  payable  to, 

two  or  more  in  alternative,  154. 
corporation  or  its  treasurer,  158. 

oflBcer  for  time  being  of  unincorporated  association,  155. 
officer  or  his  successor  in  office.  161. 
administrators,  162,   164,  note  81. 
"X's  estate,"  164,  note  82. 

officer,  agent,  or  trustee  by  name,  with  words  Indicating 
lirtuciarv  relation.  159,  163,  note  80,  164,  165,  167,  note 
84. 
fiscal  officers  of  a  bank  or  corporation,  l('.."i,  167,  note  84. 
who  may  be  designated, 
drawee,  148,  149. 
maker,  151. 
drawer,  150. 

payee,   drawer,  and  drawee,  same  person,   150. 
drawee, 

must  be  designated  on  face  of  instrument, 
no  drawee  designated,  171,  172,  173,  177. 
designation  must  be  certain,  171,  172,  note, 
who  may  be  designated, 

drawer  or  his  agent,  176. 
payee,  148,  149. 

FRAUD, 

a  personal  or  equitable  defense,  6.  433. 

FRAUDS,  STATUTE  OF, 

whether  parol  acceptance  within,  29,  201. 

FUND, 

instrument  payable  out  of  particular,   see  Form   of  Negotiable   Instru- 
ment, character  of  order  or  promise,  must  not  be  conditional  on  face. 


746  INDEX. 

fThe  figures  refer  to  pages.] 

GAMING, 

as  a  defense  to  Instrument  given  for,  432,  447,  449,  note. 

GARNISHMENT. 

of  maker  or  acceptor  as  a  defense,  484. 

GENUINENESS, 
see  Forgery. 

GIFT, 

surrender  by  holder  to  maker  or  acceptor  as  a,  669,  note- 
by  maker  to  payee,  254  (both  cases),  254,  note, 
by  Indorser  to  indorsee,  256. 

GOLD, 

instrument  payable  in.  111. 

GOOD   FAITH. 

see  Holder  in  Due  Course,  notice. 

GRACE.  DAYS  OF, 
see  Days  of  Grace. 

GUARANTY, 

whether  an  indorsement,  288,  290.  note  10. 

GUARANTOR, 

irregular  indorser,  whether  a,  533.  .1:18.  note. 

HOLDER   IN  DUE  COURSE, 

value,  must  part  with,  341-379. 
amount  of,  376. 
what  is. 

extinguishment  of  pre-existing  debt.  344. 
making  of  advances,  380.  note, 
promise  to  make  advances,  378,  380,  note, 
assumption  of  liability  to  third  party,  380,  note. 
express  promise  to  forbear  suit  345. 

implied  promise  to  forbear   suit  upon   receipt   of  Instrument, 
on  account  of  pre-existing  debt,  347,  note.  348,  350. 
as  collateral  security  fqr  pre-existing  debt,  273,  341,  355,  861. 
holder  for,  amount  of  recovery. 

purchaser  for  less  than  face  of  instrument  issued  for, 
value.  376. 
accommodation,  369. 
pledgee  for  debt  less  than  face  of  instrument, 
which  had  been  issued  for  value,  371. 
which  had  been  issued  for  accommodation,  374. 
which  had  been  misappropriated.  SQ6. 
transferee  of  holder  for,  succeeds  to  rights  of  transferor,  371,  373, 
note, 
maturity,  must  purchase  before,  380-389. 
when  instruments  mature  which  are, 

payable  at  stated  future  time,  380,  553. 
with  stipulation  accelerating  maturity  upon  default,  386. 
on  demand,  383,  385,  453. 
after  demand,  456. 
at  sight.  454.  note, 
after  sight,  454   (1st  case), 
undated,  385,  note, 
antedated,  3S4,  note, 
postdated,  384. 
days  of  grace,  28,  553,  556. 

extension  of  time  written  on  instrument,  385.  note, 
notice,  must  purchase  without,  380-419. 
actual, 

negligent  omission  to  ascertain  facts,  390.  393. 
intentional  omission  to  ascertain  facts,  396. 
gross  negligence,  396-397. 


INDEX.  747 

[The  figures  refer  to  pages.] 

HOLDER  IN  DUE  COURSL:— Continued, 
constructive, 

purchase  after  dishonor,  380-389. 

of  discharge,  from  possession  of  instrument  by  maker,  401 

of   accommodation   character   of   indorsement   from   discount   by 

malver,  401,  404. 
of  abuse  of  authority, 

by  corporate  officers,  406-416. 
by  trustees,  417. 
"trustee,"  after  name  of  payee  or  indorsee,  417. 
presumption  that  holder  is  one  in  due  course,  420-424. 
prima  facie  case,  how  established,  423. 
burden  of  proof,  how  effected  Iiv  evidence  of, 
fraud,  421,  437. 
absence  of  consideration.  420. 
payment  of  value,  421. 

transfer  from  holder  in  due  course,  423.  note, 
defenses,   what  are  available  against, 

personal  or  equitable  defenses,  see  Defenses, 
real  or  legal  defenses,  see  Defenses. 

HOUR, 

of  presentment,  see  Presentment  for  Payment. 

ILLEGALITY. 

as  a  defense,  369,  432,  447,  449.  note. 

INCAPACITY, 

to  contract,  as  a  defense  to  party  under  disability,  see  Defenses. 

of  drawer,  no  defense  to  acceptor,  461,  463,  note. 

of  payee,  no  defense  to  acceptor,  466,  468. 

of  prior  parties,  no  defense  to  indorser,  649. 

warranty  of  indorser  without  recourse  as  to  capacity  of  prior  parties,. 

293  (1st  case),  6^2. 
warranty  of  transferor  by  delivery  as  to  capacity  of  prior  parties.  642. 
see  Capacity. 

INCOMPLETE  INSTRUMENTS, 

necessity  for  delivery  to  inception  of  potential  obligation  of  party  sign- 
ing. 240,  241. 

delivery  of,  in  escrow,  237. 

delivery  of,  induced  by  fraud,  240. 

holder  may  complete  in  accordance  with  actual  authority,  247.  251. 

prima  facie  authority  of  holder  to  complete,  244. 

effect  of  knowledge  of  fact  of  completion  on  rights  of  innocent  purchaser 
after  unauthorized  completion,  245,  247,  248. 

INDORSEMENT, 

as  a  mode  of  transfer,  see  Transfer,  by  indorsement, 
liability  resulting  from,  see  Drawer  and  Indorser. 

INDORSEMENT  WITHOUT  RECOURSE, 

liability  resulting  from,  293  (1st  case),  642. 

is  not  constructive  notice  of  defenses,  292,  316. 

INDORSER, 

.see  Drawer  and  Indorser. 

INFANCY, 

a  real  or  legal  defense,  431,  433,  441,  note. 

of  maker,  acceptor,  drawer,  or  indorser,  as  a  defense  to  subsequent  par- 
ties, see  Capacity;  Incapacity;  Drawer  and  Indorser,  warranties: 
Maker  and  Acceptor,  admissions. 

INSANITY, 

a  real  or  legal  defense,  432,  433. 

of  maker,  acceptor,  drawer,  or  indorser,  as  a  defense  to  subsequent  par- 
ties, see  Capacity;  Incapacity;  Drawer  and  Indorser,  warranties; 
Maker  and  Acceptor,  admissions 


~^^  INDEX. 

[The  figures  refer  to  pages.] 

INSOLVENCY, 

does  not  excuse  presentment  and  notice  of  dishonor,  626,  628. 
no  waiTanty  of  transferor  by  delivery  as  to,  639. 

INSTALLMENTS, 

instruments  payable  In,  105. 

INTEGRATION, 

rule  of  (iiarol  evidence  rule),  232. 

I.  O.  U.,  38,  47. 

see  Form  of  Nejrotiable  Instrument,  promise  in  note. 

IRREGULAR  INDORSER. 

liability  of  one  who  indorses  irregularly. 

after  delivery  to,  but  before  indorsement  by  payee  as  surety  for  him, 

-.20. 
after  delivery  to  payee  as  surety  for  maker,  521. 
before  delivery  to  payee  as  surety  for  maker, 
as  guarantor,  533. 

as  indorser,  527,  529,  535,  536,  538,  note, 
as  maker,  523. 
before  delivery  to  payee  as  surety  for  acceptor,  539,  note, 
'before  delivery  to  payee  as  surety  for  him,  520. 

ISSUE, 

see  Delivery. 

JOINT  i^:dorser. 

when  indorsers  are, 

joint  payees,  281. 

accommodation  indorsers  by  agreement  between  themselves,  511,  512 
contribution  between  joint  accommodation  indorsers,  512. 

JOINT  PAYEES, 

both  must  indorse,  281. 

KNOWLEDGE, 

of  defense,  see  Holder  in  Due  Course,  notice. 

of  dishonor  does  not  render  notice  of  dishonor  unnecessary,  622,  624. 

LIEN, 

see  Pledgee. 

LIMITATIONS,  STATUTE  OF, 

when  begins  to  run,  see  Maker  and  Acceptor,  obligation  to  pay,  when  in- 
struments mature. 

LUNATIC, 

see  Insanity. 

MAIL, 

a  means  of  conveying  notice  of  dishonor,  603,  604,  605,  610,  615,  note, 

619. 
miscarriage  of,   notice  of  dishonor  sufficient,  though  not  received,   610, 

G15,  note, 
delay  in,  an  excuse  for  delay  in  making  presentment  for  payment,  560, 

note. 

MAKER  AND  ACCEI'TOR, 

obligation  to  pay  on  day  of  maturity, 

when  instruments  mature  which  are  payable, 
at  stated  future  time,  3S0,  553. 

witli  stipulations  ac-celeratiug  maturity  upon  default,  386. 
on   demand,  383,   385,  453,  459. 
after  demand,  450. 
at  sight,  454.  note, 
after  sight.  454  (1st  case), 
days  of  grace.  28,  553,  556. 


INDEX.  749- 

[The  figures  refer  to  pages.] 

MAKER  AND  ACCEPTOR— Continued, 

necessity  of  presentment  to  mature  instruments  payable, 
at  stated  future  time  at  particular  place,  181,  454,  457. 
on  demand,  453. 

on  demand  at  particular  place,  458,  459. 
after  demand,  456. 
at  sight,  454,  note, 
after  sight,  454  (1st  case), 
whether  action  against,  begun  on  day  of  maturity  after  presentment 

is  i)remature,  584,  585,  note, 
protest  and  notice  of  dishonor  on  day  of  maturity  after  presentment, 
051. 
admissions  of, 

existence,    capacity,    and   genuineness   of   signature   of   drawer,   461. 

463,  note, 
existence  of  payee,  fictitious  payees,  464,  470,  481,  494,  501,  505. 
capacity  of  payee  to  Indorse  when  a, 
bankrupt,  466. 
corporation,  468. 
genuineness  of  indorsement,  4S4,  489.  491,  note. 
genuineness  of  body  of  instrument,  498. 

MARRIED  WOMEN, 

coverture  a  real  or  legal  defense,  432,  433. 

coverture  of  maker,  acceptor,  drawer,  or  indorser.  as  a  defense  to  subse- 
quent parties,  see  Capacity ;  Incapacity ;  Drawer  and  Indorser,  war- 
ranties ;    Maker  and  Acceptor,  admissions. 

MATERIALS, 

for  writing  negotiable  Instruments,  36,  37,  note. 

MATURITY, 

of  negotiable  instruments,  see  Maker  and  Acceptor,  obligation  to  pay, 
when  instruments  mature. 

MISTAKE, 

alteration  by  mistake,  see  Discharge,  alteration. 

cancellation  by  mistake,  see  Discharge,  cancellation. 

in  date,  384,  note. 
MONEY, 

negotiable  instrument  must  be  payable  in,  see  Form  of  Negotiable  In- 
strument. 

NAME, 

designation  of  parties  by,  see  Form  of  Negotiable  Instrument,  parties. 

indorsement  in  what,  278. 
NEGLIGENCE. 

not  equivalent  to  notice  of  defenses,  390.  393. 

in  facilitating  alteration  by  leaving  blanks,  702. 

NEGOTIABILITY, 

chattels,  though  transferable,  have  not  quality  of,  4,  8. 
cho.ses  in  action,  though  ".-issignaljie,"  have  not  quality  of,  1  (both  cases),  3. 
what  in.«;trunients   have  .<iuality  of,  see  Form  of  Negotiable   Instrument, 
what  is  quality  of,  9-15. 

NEGOTIABILITY.  WORDS  OF, 

see  Form  of  Negotiable  Instrument,  must  fee  payable  to  order  or  bearer. 
NEGOTIABLE   INSTRUMENTS, 

what  are,  see  Form  of  Negotiable  Instrument 
NEGOTIABLE  INSTRUMENTS  LAW, 

text  of,  710. 

NEGOTI.VTION, 

see  Transfer. 
NONEXISTENT  PAYEES, 

see  Fictitious  Payees. 


730  INDEX. 

[The  figures  refer  to  pages] 

X0NNEX50TIABLE  BITJ^S  AND  NOTES, 

acceptance  of  nonnegotiable  bill,  29  {2d  case),  209. 
days  of  grace,  28. 

NOTARY, 

presentment  by,  when  necessary,  600,  602,  note. 
protest,  600. 

NOTICE. 

see  Holder  in  Due  Course,  notice. 

NOTICE  OF  DISHONOR, 
necessity  of,  G24. 
mode  of  giving, 
by  whom. 

holder  or  his  agent,  605,  606.  609,  622. 
agent  of  holder  in  name  of  indorser,  606. 
indorser  chargeable  on  bill,  606. 
maker,   608,   note, 
acceptor.  008. 
form. 

parol,   024. 
written.  G24. 

indication  of  dishonor,  where  instrument  payable, 
at  bank,  621. 
elsewhere,  620.  622,  624. 
time. 

on  day  of  maturity.  651  (2d  case). 

when  parties  giving  and  receiving  notice  reside  In  same  placo. 

603. 
when    parties    giving   and    receiving    notice    reside   in   different 

places,  604. 
holder  notifying  remote  and  not  immediate  indorser,  609. 
successive  notices,  610. 
means  of  conveying. 

mail,  603.  6(H,  605,  610,  615,  note,  619. 
in  i>erson  or  by  messenger,  618.  note,  618,  622,  635. 
place, 

residence  or  place  of  business  known, 
place  of  business  or   residence,   616. 
place  of  sojourn,  616. 
elsewhere,  618,  note, 
residence  or  place  of  business  unknown, 
address  given  in  instrument,  G05. 

address  ascertained  after  diligent  inquiry,  612,  615.  note. 
effect  of, 

when  given  by  holder  or  indorser  to  remote  indorser  as  to  inter- 
mediate indorsers,  and  parties  subsequent  to  party  giving  no- 
tice, 606,  611. 
delay,  when  excused. 

illegible  signature,  605. 
Ignorance  of  address,  606,  note, 
war.  606.  note. 

death  of  drawer  or  indorser,  636,  note, 
unnecessiiry,  when, 
death  of, 

maker  or  acceptor,  634. 
drawer  or  indorser.  630.  note, 
drawer  no  reason  to  expect  or  require  payment,  630,  632.  note, 
funds  placed  in  hands  of  indorser  to  pay  instrument,  628. 
insolvency  of  maker  or  acceptor,  626,  628. 
Indorser  no  reason  to  expect  payment,  632,  note, 
knowledge  of  dishonor,  622.  624. 
miscarriage  of  mail,  610,  615,  note, 
waiver,  (-.26.  628,  633.  a37. 


INDEX.  751 

(The  figures  refer  to  pages.] 


NOTING, 

of  protest,  603. 


OFFICER, 

instrument  payable  to,  see  Form  of  Negotiable  Instrument,  parties,  payee. 

OPTION, 

to  declare  instrument  due  upon  default,  386. 

to  pay  in  money  or  commodities,  effect  on  negotiability  of  instrument, 
109. 

ORAL  ACCEPTANCE, 

see  Acceptance,  form. 

ORAL  NOTICE, 

of  dishonor,  624. 

ORDER, 

in  a  bill  of  exchange,  see  Form  of  Negotiable  Instrument,  order  in  bill. 
a  word  of  negotiability,  see  Form  of  Negotiable  Instrument,  must  be  pay- 
able to  order  or  bearer. 

OVERDUE   INSTRUMENTS, 

instruments  issued  or  negotiated  when  overdue,  when  payable,  561. 
purchaser  of,  position  of,  see  Holder  in  Due  Course. 

PAROL  AOCEfPTANOm, 
see  Acceptance,  form. 

PAROL   EVIDENCE  RULE, 
see  Integration,  rule  of. 

PAROL  NOTICE. 
of  dishonor,  624. 

PARTIES, 

see  Form  of  Negotiable  Instrument,  parties. 

PARTNERSHIP, 

acceptance  by,  184,  186,  note. 

indorsement  by.  279. 

signature  of,  to  negotiable  instrument,  186.  note. 

PAYEE, 

see  Form  of  Negotiable  Instrument,  parties. 

PAYMENT, 

as  a  discharge,  see  Discharge. 

PENALTY. 

provision  for  attorney's  fee,  or  additional  interest  after  maturity,  80. 

PENCIL, 

signature  by,  36. 

PERSONAL  REPRESENTATIVE, 

presentment  and  notice  to  or  by,  634. 
transfer  by,  276. 

PLACE, 

of  presentment,  see  Presentment  for  Payment. 

at  which  to  give  notice  of  dishonor,  see  Notice  of  Dishonor. 

PLEDGEE, 

may  be  a  holder  for  value,  see  Holder  in  Due  Conrse,  value, 
amount  of  recovery  by,  see  Holder  in  Due  Course,  value. 

POSTDATED  INSTRUMENT, 
see  Date. 

PRE-EXISTING  DEBT, 

as  a  consideration,  see  Consideration. 

as  value,  see  Holder  in  Due  Course,  value. 


752  INDEX. 

[The  figures  refer  to  pages.] 

PRESENTMENT  FOR  ACCEPTANCE, 
Dccessity  of,  bills  payable, 

at  stated  future  time.  540,  541. 
on  demand,  547,  549,  556. 
after  demand,  456. 
at  sight,  4.>4.  note.  546,  556. 
after  sight,  454  (1st  case),  543. 
within  what  time,  543. 
mode  of,  see  Presentment  for  Payment, 
effect  of  nonaceeptance, 

immediate  dishonor,  539,  540. 

immediate  recourse  against  drawer  and  indorser,  539  (1st  case), 
effect  of  qualified  acceptance,  see  Acceptance, 
of  checks,  see  Checks,  certification. 
PRESENTMENT  FOR  PAYMENT, 
neces-^ity  of,  562,  631. 
mode  of. 

by  whom. 

notary,  when  necessary,  600.  602,  note, 
personal  representative  of  holder  when  holder  dead,  634. 
to  whom, 

I)ersonal  representative,  when  maker  dead,  634. 
when  maker  or  acceptor  absent  from  place  of  presentment,  593, 
596.  634. 
day,  instrument  payable. 

at  stated  future  time,  553. 
at  sight.  5.^. 
on  demand, 
notes.  579. 
bills, 

to  charge  drawer,  573.  569,  note.  567. 
to  charge  indorser,  570,  576. 
checks, 

to  charge  drawer  when  bank  fails,  565,  567,  569,  note, 

572,  573. 
to  charge  indorser.  570,  576. 
instrument  indorsed  after  maturity,  561. 
hour,  instrument  payable  at, 
place  of  business.  585. 
residence.  585. 
bank.  586. 

clearing  house,  579  (1st  case), 
manner.  588. 
place. 

when  no  place  specified  in  Instrument, 

residence  or  place  of  business  known  to  holder, 

at  residence  of  maker  or  acceptor,  whether  within   or 

without  the  state,  .591. 
where  maker  or  acceptor  has  removed  to  another  state, 

593  (1st  case). 
on   street,   r^ersonally.   596. 
residence  or  place  of  business  unknown  to  holder. 

at  last  known  place  of  business  or  residence,  593. 
when  payable  at  city  or  village.  589.  591.  note. 
when  payable  at  particular    place,    591,    note. 
delay  in  making,  when  excused, 
war,  558. 

sickness,  560.  note, 
delay  in  mails,  560,  note, 
unnecessary,  when, 

after  due  diligence  cannot  be  made.  593. 
waived.  628.  033.  637. 

to  charge  drawer  when  he  has  no  reason  to  expect  or  require  pay- 
ment, 632,  note. 


INDEX.  753 

[The  figures  refer  to  pages.] 

PRESENTMENT  FOR  PAYMENT— Continued, 

to  charge  indorser  when  he  has  no  reason  to  expect  payment,  632. 

note, 
maker  or  acceptor  dead,  and  no  personal  representative,  634. 
PRESUMPTION, 

of  consideration,  274. 

that  holder  is  holder  in  due  course,  see  Holder  in  Due  Course. 
PRINCIPAL  AND  AGENT, 
see  Ageut. 

PRINTING, 

signatures  printed,  37.  note. 

PROCURATION, 

signature  by,  see  Agent. 

PROMISE, 

in  a  promissory  note,  see  Form  of  Negotiable  Instrument,  promise  In  note. 

PROMISSORY  NOTES. 

see  Form  of  Negotiable  Instrument. 

PROTEST, 

when  necessary,  600. 
mode  of,  600.  602,  note, 
noting  of,  602. 

PURCHASER  FOR  VALUE, 
see  Holder  in  Due  Course. 

QUALIFIED  ACCEPTANCE, 

see  Acceptance,  kinds. 

QUALIFIED  INDORSEMENT. 

see  Indorsement  Without  Recourse. 

REAL  PARTY  IN  INTEREST. 

holder  for  collection  of  instrument  is,  321. 

transferee  of  unindorsed  instrument  payable  to  order  is,  335,  note. 

REASONABLE  TIME, 

of  day  to  make  presentment,  see  Presentment  for  Payment,  hour, 
within  which  to  present  instrument  payable, 

on  demand,  see  Presentment  for  Payment,  day,  hour. 

after  sight,  543. 
demand  instruments  overdue  after,  383,  385. 

RENUNCIATION, 

discharge  by,  G70,  672. 

RELEASE, 

see  Renunciation. 

RESIDENCE. 

change  of.  as  an  excuse  for  not  making  presentment,  593  (1st  case). 

hour  of  presentment,  when  made  at,  585. 

when   a   proper  place  for  presentment,   see   Presentment  for   Payment, 

place, 
w^hen  a  proper  place  to  give  notice  of  dishonor,  see  Notice  of  Dishonor, 
place. 
RESTRICTIVE  INDORSEMENT. 

see  Transfer,  by  indorsement,  kinds  of. 

RETRANSFER, 

indorsement  not  necessary  upon  a,  302. 

to  maker  or  acceptor,  see  Discharge,  surrender. 

before  date  of  demand  instrument,  651   (1st  case), 
before  maturity,  not  a  discharge.  651  (2d  case), 
after  maturity,  discharge,  652  (1st  case). 
Sm.&  M.B.&  N.— 48 


764  INDEX. 

[The  figures  refer  to  pages.] 

RETR.-VNSFER— Continued, 
to  indorser  or  drawer, 

not  a  discharge  unless  he  is  accommodation  party,  G7G,  680. 

but  he  may  further  negotiate  instrument,  677. 

unless  iqftrument  payable  to  third  person's  order,  677. 

SET-OFF, 

when  available,  327,  424,  426. 
SIGHT, 

Instruments  payable  at, 

necessity  of  presentment  for  acceptance,  454,  note,  546,  556. 
time  within  which  must  he  presented  for  payment,  454,  note, 
see  Presentment  for  Payment,  day. 

SIGNATURE, 

ambiguous,  see  Ambiguous  Signatures. 

with  what,  instrniiient  may  be  made,  36,  37,  note. 

SPECIAL  INDORSEMENT. 

see  Transfer,  by  indorsement,  kinds. 

STATUTES, 

3  and  4  Anne,  c.  9,  f  1,  23. 

statute  of  frauds,  see  Fraud**.  Statute  of, 

negotiable  Instruments  law,  710. 

SUCCESSIVE  NOTICES, 
of  dishonor,  610. 

SURRENDER, 

as  a  discharge  of  instrument,  see  Discharge,  surrender. 

TELEGRAPH, 

acceptance  by,  197,  note. 
TENDER, 

when  instrument  payable  at  particular  place,  readiness  and  willingness 
to  pay  at  that  place  is  equivalent  to  tender,  458. 

TIMF^ 

of  presentment  for  acceptance,  see  Presentment  for  Acceptance, 
of  presentment  for  payment,  see  Presentment  for  Payment,  time, 
of  giving  notice  of  dishonor,  see  Notice  of  Dishonor,  time, 
of  drawing  certificate  of  protest,  602. 

TRANSFER, 
by  whom, 

holder.  276,  278. 

legal  representative  of  holder,  276. 
joint  payees,  281. 
partners,  279. 
by  indorsement, 

form  of  indorsement, 

should  be  an  order,  283  (2d  case). 

effect  of  "I  hereby  assign,"  104.   287,  290,  292,  299. 
effect  of  "I  hereby  guarantee."  288. 
must  be  of  whole  sum  payable,  283  (1st  case). 
must  be  in  writing  on  instrument,  284. 
on  face  of  instrument,  285,  293. 
in  what  name,  278. 

necessity  of  delivery  to  complete,  229,  297. 
need  not  contain  words  of  negotiability,  305. 
kinds  of  indonement, 
blank. 

necessity  of  completion,  298  (1st  case), 
when  must  be  completed,  298  (2d  case), 
effect  of,  before  completion,  U  (1st  cage),  298. 
when  fcdlowed  by  special  indorg«ment,  289,  300. 


INDEX.  755 

[The  figures  refer  to  pages.] 

TRANSFEE^-Continued, 
special, 

special  indorsee  must  indorse  to  transfer,  299. 

but  not  to  re-transfer,  302. 

when    special    indorsement  follows   blank    indorsement,   299. 

300. 
special  indorsement  of  instrument  payable  to  bearer,  304. 
restrictive, 

absence  of   words   of  negotiability  does  not  make  indorse- 
ment restrictive,  805. 
constitutes  indorsee  trustee, 
for  the  indorser,  307.  313. 
for  third  person.  310. 
renunciation  by  indorser,  313. 
for  collection.  307. 

followed  by  blank  or  special  indorsement,  307. 
rights  of  indorsee  against  indorser,  310. 
qualified,  292.  316. 
conditional.  317. 
by  delivery  (without  Indorsement), 
of  instruments  payable  to  bearer. 

what  is  delivery,  9,  11,  12.  229,  .318,  320,  321. 
transferee  for  collection  merely  is, 
bearer,  318. 

real  party  in  interest,  321. 
where  hearer  secures  possession, 
by  trespass,  321. 

by  consent  induced  by  fraud,  428. 
from  insane  person,  429. 
Of  instruments  payable  to  order, 

does  not  transfer  obligation,  324  (1st  case), 
but  transfers  title  to  paper.  1  (1st  case).  327.  note, 
and  an  irrevocable  power  of  attorney  to  sue. 
in  name  of  transferror,  324  (2d  case).  335. 
in  his  own  name  under  the  codes.  335,  note, 
transferee  must  prove  consideration.  336. 
transferee  takes  subject  to, 

what  equities,  331,  336,  337,  339. 
what  set-offs.  327. 
transferee  entitled  to  indorsement,  334,  337. 
effect  of  securing  indorsement  after  notice  or  after  maturity, 
327,  330. 

TRANSFEREE, 

without    indorsement   of  instrument  payable  to  order,   position  of,  see 
Transfer,  by  delivery. 

TRANSFEROR  BY  DELIVERY, 
warranties  of,  as  to, 

solvency  of  parties,  639. 
defenses, 

capacity  of  parties,  642. 
forgery,  642. 
usury,  641,  648,  note. 
TRUST, 

created  by  restrictive  indorsement,  see  Transfer  by  Indorsement,  kinds, 
see  Equities. 

TRUSTEE, 

effect  of  "trustee"  added  to  name  of  payee,  or  indorsee,  417,  4ia 

TRUSTEE  PROCESS, 
see  Garnishment. 

USURY, 

attorney's  fee,  agreement  to  pay,  80. 
as  a  defense,  369,  432,  449,  note. 


756  INDEX. 

[The  figures  refer  to  pages.] 

VALUE, 

see  Holder  In  Due  Course,  value. 

WAIVER, 

of  presentment.  628,  633.  637. 

of  notice  of  dishonor,  626,  628,  633,  637. 

WANT  OF  CONSIDERATION, 

see  Consideration. 

WAR, 

as  an  excuse  for  delay  in  making  presentment,  558. 

as  an  excuse  for  delay  in  giving  notice  of  dishonor,  606,  not©. 

WARRANTIES, 

of  indorser,  641,  649. 

of  indorser  without  recourse,  293  (1st  case),  642. 

of  transferor  by  delivery,  see  Transferor  by  Delivery. 
WITHOUT  RECOURSE, 

see  Indorser  without  Recourse. 
WRITING, 

what  is  sufficient,  36,  37,  note. 


WIBT  PUBLISHINS  CO.,  PBINTEBS,  ST.  PAT7I.,  UTHH. 


LAW  LIBRARY 

tlNTVERSlTY  OF  CALIFORNIA 

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